Basic Process for Assessing Damages: 97 Select  interest that deserves vindication 97 a. Restitution 97

I. Damages

Basic Process for Assessing Damages:

1. 
   Select  interest that deserves vindication
   
   1. 
      Restitution
      
      1. 
         Idea that people should live up to bargains. A victim of a breached bargain should at least get their money back.
         
      2. 
         Restitution is measured by benefit to ∆  designed to deprive wrongdoer of ill-gotten gains
         
   2. 
      Reliance
      
      1. 
         Compensates  for expenditures made in reliance on promise by ∆
         
      2. 
         Restores status quo prior to promise being made
         
   3. 
      Expectation
      
      1. 
         Puts  in position they would have been in had the bargain been fulfilled
         
      2. 
         ∆ must either keep promise (specific performance) or provide monetary equivalent of keeping promise (damages)
         
2. 
   How do you apply the measure of damages?
   
3. 
   Are there any relevant principles that moderate/limit the damages award, to balance out ∆ legitimate interests?
   
   1. 
      Mitigation
      
   2. 
      Remoteness
      

Expectation Damages

General Principles & Lost Profits

Theory and Background (from Fuller & Perdue)

The idea is that people shouldn’t make promises then break them, especially when you know someone will waste time and effort as a result.

Expectation damages are different: not restoring the harm, but giving  the value of the promise. This is a moral concept, but perhaps one not so commonly shared.

Expectation damages didn’t originally exist in K law

They become important in the planning done by individuals through private interactions.

To achieve stability in a complex capitalist economy, we need certainty, future planning, credit.

It’s about giving planners in the marketplace the security to trade.

Reliance and restitution don’t sufficiently facilitate these interests.

Restitution doesn’t give you anything extra

Reliance would require  to prove all the minute ways in which  had relied on ∆ promise, which are just generally included in expectation damages.

Note: if you include opportunity costs in reliance damages, and went through the whole minute assessment, people could essentially get expectation damages through reliance damages anyway.

Economic and Juristic Rationales

Administrative: facilitating reliance

Economic: allows trading on present value of the K.

Claiming Lost Profits

Canlin Ltd v. Thiokol Fibres Canada [1983, ONCA]

Default: you get the difference b/w goods paid for and goods received; but this is predicated on a duty/ability to mitigate. Where that can’t be done, the presumption is rebutted.

Facts:  bought product from ∆ to manufacture swimming pool covers. Material defective, shreds into customers’ pools.

Issue/Arguments:

∆ argues, per presumption stated in s. 56(3) of the Sale of Goods Act, that the proper measure of damages should be limited to the difference between actual value and value goods would have had if ≠ defective.

 claims for lost profits in addition, because their business suffered as a result of the damage to their reputation.

Held: for . Entitled to lost profits as well as difference in value.

Reasons: s. 56(3) of SoG Act doesn’t apply here.

An assumption behind the provision: if defect is discovered early enough and buyer acts quickly enough (as obligated to mitigate), then the buyer can find new materials, replace the defective product and move on with their business.

Under this assumption, ∆s are normally only liable for the notional cost that would have been incurred to buy new materials. However, in this case the defect wasn’t discovered soon enough and s were shut out of the market for a few years as a result of the fiasco.

This is sufficient “evidence to the contrary” as required to avoid the application of s. 56(3)  that provision wouldn’t give them what they lost.

Problems of Determining the Value of a Bargain: Avoiding Double Recovery

R. G. McLean Ltd. v. Canadian Vickers Ltd. [1971, ONCA]

Facts:  printing co bought new printing press from ∆, didn’t work properly. TJ awarded damages for lost profits and the cost of the press.

Issues/Arguments:

(1) ∆ argued that TJ award was double compensation.

(2) What happens when  doesn’t have sufficient funds to mitigate?

Held: TJ overruled; sent back for new trial

Re  inability to mitigate:

∆ shouldn’t be saddled with burden; the level of risk of a vendor of machinery should not vary depending on who they sell to.

It’s different from the thin skull rule in tort, likely because of the commercial context.

The true measure of expectation damages is putting  in position they would have been in had the K been performed.

 would have earned profit, but would have had to incur an expenditure to acquire the press.

CA refers back to new trial to determine the amount of profit after expenditure

BUT: this isn’t enough  would have spent $ on the press, but then also would have had a working press.

So, consider the depreciation value of the press in the two year delay, then calculate profit by deducting that depreciation. Alternately, consider the cost of buying a new press.

Note: realistically,  had paid $15,000 already, which is likely roughly equivalent to the depreciated cost, so really the TJ did award net profits in the end.

The CA was right about the rule generally, but you shouldn’t deduct 100% of the value of equipment from a claim of lost profits over only two years.

Mitigation: ∆ offered to take back press and refund, but  declined. Obligation to mitigate.

M.G. Baer, “The Assessment of Damages for Breach of Contract – Loss and Profit”

Doctrine of Election

Profit or Capital

In McLean, the press didn’t work so they claimed lost profits. But hadn’t paid for the press, and TJ didn’t deduct cost of press from lost profits.

Doctrine of Election means you can’t get both. That would be double-counting, because if  had actually earned the profits, they would also have paid for the press. It’s about putting  in the position as if K had actually been performed.

Note: CA applied the doctrine too broadly in McLean.

Yes,  would have to pay for press to earn the profit, but had K been performed they would also have had a valuable press.

So, can’t deduct the whole cost of the press  just deduct the depreciated value.

Assess the proportion of the working life of the press that is attributable to the time period for which profits are being claimed, and deduct that proportion of the press’ value from the profits.

Overlap of Expenditures and Lost Profits

General principle: you can either claim the money wasted or sue for the profit you should have had. Can’t have both – that would be overlap.

Also, you can’t claim wasted expenditures in excess of the amount you would have had to spend to make the profit.

In McLean, the TJ awarded net profit, not gross profit. So, really, even though he included profit and expenditures, his calculation was actually in keeping with the doctrine of election. So, they SHOULD have been allowed to claim lost profit and expenditures.

Waddams: profit must be net profits, not gross potential income

Problems of Proof

Don’t calculate profit solely on the theoretical productive capacity of the machine  must also consider the actual likely work that was available and/or would have been done.

This puts a significant burden of proof on the , but courts won’t hold ∆s to the assumption that every party they deal with is running the best possible business (most competitive, most profitable) in that industry.

Rather, a court will consider industry averages and projections, and compare with ’s actual track record to try to establish some kind of ratio.

Ticketnet Corp v. Air Canada [1998, ONCA] – Laskin JA

The burden of proof is on  to prove damages, but where ∆ wrong has prevented precise proof,  can rely on projections (discounted to reflect certain contingencies)

Facts

 created an online ticket-booking software, made a deal w/ ∆ to jointly develop it and share revenues for a set period.

 entered into new K with American Airlines. Different terms, but involved payment to  of 750k for the software. When it became clear they weren’t getting the software back,  had to renegotiate their K with American Airlines, and lost out on the 750k.

Issue/Arguments:  sued ∆ for lost profits and lost business opportunity.

(1)  claimed $12 million in lost profits. ∆ accepted breach but argued damages should be limited to 750k, the difference between the first and second AA agreements.

(2)  also sought additional expenses not allowed at trial

Held: Damages NOT limited to 750K; TJ ruling on additional expenses upheld.

Reasons

Issue (1) – Damages limited to 750k?

Arguments:

∆ argued the only value lost was the value of the asset. Had managed to parlay the repudiated agreement into a new agreement with AA, but then the lost software meant they lost $750k.

Argued that lost capital is better representative of the lost profit  ∆ said that since AA was willing to buy and  was willing to sell for $750k, that is an accurate measure of the damages suffered.

The concern is against double-recovery: lost profits are logically contained in the value of the assets. The value of a business asset is the discounted stream of revenue that will be earned by that asset.

In principle, this argument is sound. If there is a radical difference between the value an asset is sold for and the damages claimed for it, something is amiss.

But in this case, there is a difference: the price of a share sale conducted by shareholders under financial pressure (due to ∆ actions) and eager to mitigate is NOT a proper measure of the value of the company.

∆ shouldn’t profit from the poor bargaining position it left  in.

Plus,  wasn’t seeking damages for the past/present value of the software, only for the lost business opportunity due to ∆ breach of agreement and subsequent injunction.

Issue (2) – calculation of lost profits: inclusion of expenses in damages

• 
  Arguments
  
  • 
     argued they should be awarded damages for expenses incurred before the repudiation, and for all (not just some) expenses incurred after the repudiation. Not to do so,  argued, would double count the expenses in favour of ∆, and would fail to put  back in original position.
    
• 
  Numbers:
  
  • 
    Expected Revenue: 15 million
    
  • 
    Actual expenditures: $2 million
    
  • 
    Additional anticipated expenditures (if there hadn’t been a breach): $3 million
    
• 
  So, expectation damages should be $12 million  would have had $10m had everything worked out, but lost $2 million was wasted expenditure.
  
• 
  TJ interpreted the report as calculating  lost profits separately from expenses, by deducting projected expenses and taxes from projected revenues (not including the out-of-pocket expenses), then added the actual expenses (pre- and post-repudiation) to the lost profit projections.  argued that the actual expenditures were wasted expenditures, because they didn’t generate offsetting revenue and b/c software had no residual value.  argued these expenses must be added to damage award to avoid double counting against them.
  
  • 
    TJ declined to add the claimed amount back in, because it was included in the projected revenues per his interpretation of the report. CA said ≠ included in projected revenues, because close reading of the expert report shows they deducted it then added it back in afterward.
    
• 
  Generally, a party seeking damages for breach of K must elect between claiming lost profits or wasted expenditures – cannot claim both, as this would be overlap [Anglia v. Reed (1971, Eng. CA)]. However, in this case the actual expenses are not included in the projected profits, and thus are two separate forms of damage, not overlapping.
  
  • 
    Have to add back in the amount that was actually spent, since it had no corresponding revenue as was expected.
    
  • 
    TJ basically just phrased things differently  he interpreted the report such that the projected expenses referred to the remaining expenses projected (i.e. those that hadn’t been spent yet), when in reality it left those out of the initial calculation then added them back in. But he still came to the conclusion that $12 million was the right number.
    
• 
  So, TJ should have considered the actual and projected expenses separately. But his award was ok anyway, so nothing was changed.
  

Damages for Breach of K w/ Alternative Modes of Performance

What if a party could have performed K duties in more than one way, but failed to perform at all?

It has been argued that we should measure the damages based on how ∆ would most likely have performed the K.

However, in 2004 the SCC unanimously rejected that argument:

Hamilton v. Open Window Bakery [2004, SCC]

Facts:

• 
  K for 3 years, but termination provision to allow either party to terminate with 3 months notice
  
• 
  ∆ terminated with no notice due to a misunderstanding (so, wrongful repudiation).
  
• 
  TJ awarded damages for full 36 months of K, less 25% to reflect the possibility that ∆ might have validly exercised the termination right at some point.
  

• 
  General principle is that you adopt the mode of performance that is least profitable to  and least burdensome to ∆, and calculate damages on that basis.
  
• 
  SCC upheld CA: Early termination clause with three months’ notice constituted the minimum guaranteed benefits under the K. As such, this was considered to be the maximum liability to which ∆ could be exposed, and the appropriate measure of damages.
  
• 
  Note: much of the litigation in this area is trying to confine the rule and find exceptions to it.
  
• 
  Policy
  
  • 
    Can allocate risk in K  if they have set up their reasonable expectations in the K, it’s fair to enforce that.
    

Durham Tees Valley Airport Ltd. v. bmibaby Ltd. [2010, Eng. CA]

Issue: ∆ wants to take advantage of minimum performance rule – say they agreed to fly two airplanes but never specified how many times/day they would fly. Thus, argues damages are zero under the minimum performance rule  you assume the minimum possible.

TJ said this wasn’t even a K and declined to enforce it.

Held: CA did enforce the K, but rejected zero minimum.

Where parties have not specified, court says the K must still have meaning.

Since parties have not specified a range of possible performance, no room for operation of the minimum performance rule  it would be absurd to assume the  understood zero flights to be an option, because that is commercially ridiculous.

So, back to the old rule: what would the parties have actually done?

Reasonable amount of damages.

Ditmars v. Ross Drug Co. [1971, NBQB]

Issues/Arguments: Employer argued that K said maybe bonus, but did not obligate them to pay a bonus.

K specifies that it is discretionary, which implicitly assumes zero as a possibility.

Held: Court awarded  a bonus

Adds requirement of a bonus as a term of the K (says “virtual” but that word isn’t really necessary  it’s a straight up term of the K now)

Through practice and continual renewals, it’s not unrealistic to say that the K has been changed by the parties over time.

All other pharmacists in industry had been getting salary increases, but in this case they were just getting bonuses instead, to keep them up to industry practice.

So: courts can avoid the minimum performance principle, and then a judge can put in whatever figure he thinks is reasonable.

Lewis v. Lehigh Northwest Cement Ltd. [2009, BCCA]

Held: Increased salary ≠ awarded.

Reasons:

Judge ≠ bound to find that  would have received a discretionary salary increase during the notice period.

 had been on extended medical leave during which he had no job performance to assess and had made no contribution to ∆ financial performance.

Cost of Performance or Lost Market Value

Posner – Economic Analysis of Law

Efficiency

Holmes’ view: the law simply requires a party to choose between performing the K and compensating the other party for any injury resulting from failure to perform.

A remedy that induces the wronged party to complete the K after the breach may be wasteful

Hence the doctrine of mitigation, and the preference for damages as a remedy over specific performance.

What if the cost to ∆ of making good the wrong exceeds the value to  of doing so?

Sometimes there is an incentive to breach  where the profit expected from breaching is greater than the profit expected from performance, even considering the losses of the other party that will be taken out in damages.

So, the law, and remedies, are structured to facilitate the efficient allocation of resources.

Efficiency is defined as arrangements of resources to their most highly valued use.

“Value”: measured by parties’ willingness to pay

“Trade”: maximizes welfare and efficiency  moves items to more highly valued uses as measured by a party’s willingness to pay.

“Contract”: allows for complex trades

Economic Analysis and Damages

When is performance of a K inefficient?

(a) When cost to ∆ of performance exceeds the losses from non-performance

(b) When alternate opportunities to ∆ are more valuable than  loss

Efficiency explains the requirement of mitigation: reduction of joint costs of breach

Efficiency explains why courts should not award less than expectation damages.

E.g. reliance damages won’t give an incentive to carry our K even if it is efficient.

Efficiency explains why courts should not award more than expectation damages, and should generally avoid specific performance:

We don’t want to encourage the performance of inefficient Ks

BUT, efficiency also shows why specific performance is sometimes available: because it is the only way to measure the value of the K.

Where goods are fungible, SP won’t be available.

SP may be available if there is no functioning market in the goods, or if for some reason the market isn’t the right indicator of value

E.g. consumer surplus, sale of unique property

Note: even if the law gets it wrong on this, a post-judgment bargain may bring things back into balance.

Lost Value vs. Cost of Performance

Don’t encourage performance of Ks where cost exceeds benefit, and don’t penalize K-breaker for avoiding waste.

The Old Approach: Wigsell v. School for the Indigent Blind, as cited in Radford v. DeFroberville, and McGregor on Damages

Held: court awarded lost value.

Note: Posner would say that building the fence was an inefficient use of the resources.

Megarry V-C in Tito v. Waddell, Four Propositions on Cost of Performance Awards:

1. The principle is to compensate  by putting him as much as possible in same pos’n as had he not suffered the wrong. It’s not about making the ∆ pay what he has saved, but about compensating the .

2. If  has suffered monetary loss, then that is obviously recoverable. If ∆ has saved $ by not doing what he K’d to do, that is irrelevant to the calculation of damages, as it was not a loss by the .

3. If  can establish that his loss includes the cost of doing work ∆ failed to do (in breach of K), then that sum is recoverable. Onus is on  to establish what his loss was.

4.  has a number of ways to establish that loss includes cost of work:

Work was done before action brought.

OR, work will/must be done. This Can be indicated through:

An action for specific performance,

Or by the fact that  is obligated to a 3^rd party to complete the work,

Or perhaps by the existence of a statutory obligation;

Could also be indicated simply by  proving he wants/intends to complete the work.

Radford v. DeFroberville [1977]

 sued for breach of K to erect a wall on ∆ property.

 sold adjoining property to ∆ in consideration for an agreement to build a wall between them. But, ∆ never completed the wall.

Absence of physical barrier didn’t devalue the land; in fact, ∆ argued higher value than if wall were completed.

Held:  gets cost of performance.

Reasons:

The principle is to put  (as far as money can) in the same pos’n he would have been in had the K been fulfilled.

Note: this is not necessarily the same as putting  in as good a financial position.

Distinguishes Wigsell: in this case, there was convincing evidence that  did have a real interest in having a fence.

To assess whether a  wants to complete the work:

1. Does  have genuine/serious intention of doing the work?

2. Is carrying out the work reasonable for the  to do?

In this case:

1. Court found the requisite ‘fixity of intention’. Plus  gave undertaking anyway. Court accepted that  wanted to do work and found that the appropriate measure of damages was the cost of completion.

2. Reasonable to carry out work?

This is really a question of mitigation. ∆ argued prefab fence would be just as effective and less expensive.

But, court did not accept this argument:

Prefab fence ≠ permanent and  would have to maintain it

Prefab fence ≠ what the  asked for.

Although ∆ argued future owner might not want a fence there, so they could build another house in a corner of the lot, court said there was no indication of that, and in fact thought it might not be possible to get planning permission anyway.

“A plaintiff may be willing to accept a less expensive method of performance, but I see nothing unreasonable in his wishing to adhere to the contract specification.”

Note: Court asked a third question: Does it matter that  is not personally living on the land but wants to do the work for benefit of his tenants?

Apparently not.

Cotter

Held: In cases like this,  can only get proven economic loss suffered, not cost of performance.

The only loss proven was $1000 for not having well.  claimed $25k for cost to drill the well, but court said this would be oppressive.

Sunshine Exploration Ltd. v. Dolly Varden Mines Ltd. [1970, SCC]

Facts

 claims the cost of completing the work.

∆ argues Cotter, you only get proven economic losses.

Held:  gets cost of completion. Cotter ≠ hard rule – it depends.

Reasons

The rule is expectation damages. What those amount to varies depending on the circumstances.

In this case, ∆ had done almost nothing under the K, and full consideration had passed from .

∆ now owned half the property – took all the benefit from , and then didn’t do what they promised. Sense of unjust enrichment.

The decision looks to the true expectation: the loss was actually the information on whether or not to mine, and  didn’t get that, so they didn’t get the value sought from the K.

Groves v. John Wunder Co. [1939, Minn. SC]

Damages were awarded for cost of performance, even though that was grossly disproportionate to the value of the land.

Posner critiques Groves:

Real preference was to maintain land value, not have flat land. Thus, Posner says the decision is wrong.

Majority said if  wants a certain situation, court shouldn’t enforce the price of the land as a cap on that preference. BUT, these were commercial operators;  owned land for an investment, and it’s highly unlikely that the  would actually spend $60k to level the land if he knew it would only sell for $12k.

If  pockets the $60k then turns around and sells the property, the court hasn’t protected expectation  just conferred a massive windfall. But if  lives on the land and has personal/family connection etc., then maybe it can be argued that $12k isn’t the appropriate valuation.

SO...we examine the nature of  interest in the K: is it economic or personal?

In Groves, there was basically a windfall built into the K for one side or the other:

Even if the outcome was inefficient, ∆ shouldn’t be unjustly enriched by failing to perform, and should be punished for their egregious behaviour.

So, where a windfall must be given to one party, for moral reasons the judge decided it should be the  who benefited in this case.

Peevyhouse v. Garland Coal Mining Co. [1963, Oklahoma SC]

Farmers, lived on farm for generations. Leased land to coal mining company to strip-mine their land, with promise to restore farm.

But they didn’t restore.

Cost of restoration: $25k. Diminished value: $300.

Held: Court awarded diminished value.

Cost of performance uneconomic, would be windfall to .

Comments:

But in this case, the s were family people and probably had legitimate reasons for wanting the land restored. Plus, they built that requirement into the K.

So...maybe both Groves and Peevyhouse are wrong.

Probably the court and jury in Peevyhouse were bothered by the serious disparity between cost of performance and the value of the property  you could buy several farms for that price.

Ruxley Electronics and Construction Ltd. v. Forsyth [1996, HL]

Facts

≠ effect on value of pool, or utility (can still dive into it)  no functional difference.

Zero lost value in commercial terms. Fixing the problem means rebuilding the whole pool, at a cost of ~£30k.

Held: Award of £2000 for loss of amenity  higher than nothing, but less than full cost of performance

Reasons

Court believes  wanted a deeper pool, but won’t award the full cost of performance.

Doubtful that the award would actually be used to build a deeper pool, and thinks it’s unreasonable.

Policy concern: protect  interest w/o imposing undue liability on ∆ (who was pretty much innocent in this case.)

Court acknowledges loss of amenity  the personal satisfaction  would have had if pool were made to spec.

In most cases of this sort, neither alternative is really satisfactory  there’s always going to be a significant windfall or punishment if you choose absolutely between cost of performance and lost market value. SO...we don’t stop with market value. Can consider an individual’s personal valuation.

Consumer surplus  the amount by which a party values a transaction over and above the market price.

It’s usually hidden or irrelevant because a consumer can mitigate, thus making the loss measurable by market price (difference in what’s paid)

But, sometimes, the market won’t work.

E.g. no replacement available.

In these cases, court awards the value of lost amenity as an estimate of what the true loss to  is.

Wilson v. Sooter [1988, BCCA]

K for wedding photos.

K price = $399, but we can assume wedding pictures have a much higher consumer surplus value.

Photographer showed up drunk, took terrible pictures, and s didn’t find out until the pictures were developed.

∆ argued measure of damages should be the market value, $399  give them their money back.

s wanted the cost of redoing the whole wedding – $7000.

Held: s awarded ~$2000

Reasons

The goal: find an amount that compensates  without unduly penalizing ∆.

Courts want to enforce performance of Ks, when they are efficient, but not to penalize people for breaching a K when performance doesn’t make sense  idea of waste.

Miles v. Marshall [1975, ON]

Held: Awarded diminution in market value

Reasons

Cited Joyner v. Weeks [1891]: two ways to measure cost of damages for repair

(1) cost of doing repair

(2) cost of diminution in market value

Court says that generally, the rule is #2: we look at diminution of market value.

Basically, the rule in Radford exists, but we’re going back to Wigsell.

Comment: this was decided after Sunshine, but that was an SCC case so maybe we should trust that.

Summary of Factors re Cost of Performance v. Lost Market Value

Starting Points

Balance of interests

Enforcement of Ks

Avoidance of waste and inefficiency (Jacobs)

Factors

Nature of K  commercial or consumer [Ruxley]

Centrality of the obligation (e.g. building K or incidental provision)

Problem of “waste” [Jacobs; Ruxley]

Problem of unjust enrichment of ∆ vs. windfall to  [Groves, Peevyhouse]

Claim to specific performance?

Owner’s intent to do work

Reasonableness of work  size disparity b/w cost of performance and benefit achieved

Non-Pecuniary (Aggravated) Damages for Breach of K

Basics

In K law, the starting point is the exclusionary rule: non-pecuniary losses are presumptively not recoverable in breach of K (unless it’s also a tort/causes physical injury).

Addis v. Gramophone [1909, HL]

Held: damages for breach of K are limited to financial losses, absent ability to prove an independent actionable wrong

This set the general rule.

Vorvis v. ICBC [1989, SCC]

Held: SCC reaffirmed the rule: absent an independent tort or other cause of action, the mere breach of K does not attract non-pecuniary damages.

Policy Concerns

Non-economic values and risks are not normally part of the trade.

There is an administrative/evidentiary concern as we move away from pecuniary losses, dealing w/ subjective harms that are difficult to prove and likely prone to overstatement/exaggeration.

Issue of causation:

Particularly in employment cases

Primary distress suffered by an employee is caused by an employer exercising their contractual rights. The breach of K, if any, arises solely from the way the employer exercises those rights. Usually it’s because the employer fails to properly calculate the notice period.

The loss of notice is generally not the reason for the mental distress.  Have to establish a causal connection between a breach and the distress suffered.

Exceptions to the General Rule: Situations in Which Courts WILL Award Non-Pecuniary Damages

1. Where Breach of K Causes Significant Physical Inconvenience

For a long time, courts have allowed a slightly wider scope of stress and physical inconvenience.

Hobbs v. Southeastern Railway [1875]

Held: court awarded monetary damages for the physical inconvenience.

Warton [BCCA]

Facts:  bought a Cadillac, but it made a buzzing noise. Kept trying and failing to fix it.

Held: Compensated for the breach and the distressing buzzing, as well as for inconvenience of repeatedly taking the car in to the dealer to have it fixed.

Comments: probably the fancy nature of the car enhanced the foreseeability of the buzzing being a problem for .

2. Psychological Deliverables

Brings the question back to a consumer surplus analysis.

Recall Wilson v. Sooter: central to the K for wedding photos was a promise to deliver an intangible benefit (wedding memories etc.)

Jarvis v. Swan Tours [1972, Eng. CA]

Facts: disappointed vacationer sues for loss of enjoyment of vacation. ∆ offers to reimburse payment, but  claims above that.

Held: the compensation/expectation principle requires more than just reimbursement, because he expected the psychological benefit of a vacation.

Farley v. Skinner [2002, HL]

Held: no compensation for economic difference in value, but psychological deliverable is compensable - $10k.

Reasons:

Airplane noise was there when he bought the house.

Note: in the market, even if  can prove he would have bargained for a lower price, the owner would have sold it to someone else at the market price.

No economic loss in this case. So, the only loss he can get would be disappointment/mental distress.

Psychological deliverable: specifically negotiated w/ surveyor for the information on airplane noise, which made it specifically deliverable as part of the K.

Goes beyond previous cases: object of K no longer has to be primarily a psychological deliverable  it can be a secondary aspect of the K.

Court gives $10k, and says that’s the top end of an award of this type.

Fidler v. Sun Life [2006, SCC]

Held: $20k awarded.

Reasons:

Subtext/secondary purpose of insurance Ks is peace of mind.

Not just to protect against the financial risk, but so you don’t have to worry about that risk in the meantime.

Psychological benefit of having peace of mind while the K is in place.

Basically adopts Hadley v. Baxendale foreseeability requirements for determining whether psychological harm is compensable.

But, to apply the foreseeability rule, you look at the object of the K/what was promised.  so, it’s not really a huge step forward.

Comments: note that the award is roughly equivalent to that in Farley  still relatively modest.

And it was supported by medical evidence in this case.

It’s not just about missing the psychological security of having an insurance K, but getting more sick by having to live without disability benefits.

Aggravated Damages

1. Damages over and above your pecuniary damages  aggravated in the sense that they are more than pecuniary.

2. Damages where the loss is greater than it otherwise would have been because of aggravating behaviour by the ∆

Most common in wrongful dismissal cases, where damages are caused by aggravating behaviour. E.g. not only did employer fail to give notice, but abused employee on the way out.

Turczinski v. Dupont Heating and Air Conditioning [2004, ONCA]

Heating contractor didn’t do the job right.

All parties agreed that it cost $10k to fix the problem/clean up the mess.

But  also claimed loss of rent for three years, and mental distress. Argues special negotiations.

Had previously undiagnosed depression, bi-polar disorder, OCD  the experience w/ the heating contractor triggered an episode that lasted for three years.

Held: no mental distress award. Lost rent for 1 year awarded as reasonable mitigation period.

Reasons

Mental distress claim rejected:

∆ didn’t have special knowledge to the threshold necessary to put them on notice.  may not have fully known, as it was undiagnosed at the time.

Policy: fairness. Unfair to hold a heating contractor to that level of risk in entering into Ks with customers.

Policy: economic efficiency  people should be able to conduct business on the basis of some settled expectations of what their risk will be.

Policy: don’t want contractors to avoid dealing with people who have disabilities due to added risk

Lost rent:

Normally, would expect a person in this situation to mitigate within one year, so that’s the amount given.

She couldn’t mitigate, but the court says that risk shouldn’t be borne by ∆.

Having a psychological thin skull is not an excuse for failure to mitigate in a contract context.

Note: in tort, pre-existing thin skull condition will make ∆ responsible if  fails to mitigate.

Rationale: in tort,  hasn’t agreed to deal with ∆, and needs more protection as a result.

Wallace v. United Grain Growers [1997, SCC]

Breach of an obligation of good faith allows court not to award damages for mental distress, but to “bump up” the notice period.

Since Wallace, courts have said:

1. No damages without IAW

2. Obligation of good faith in employment contracts. No damages for mental distress as a result of breach, but increased notice period available.

It really looks like they’re compensating mental distress under the cover of increased notice.

Honda v. Keays [2010, SCC]

Damages will be awarded not through an arbitrary extension of the notice period, but through an assessment of the actual damages arising from the wrongful act.

Bringing employment Ks into conformity with the Fidler model: where a component of the K clearly promises a benefit, can add to damages, measured in the ordinary way.

Fidler said IAW ≠ required; Honda reaffirmed this.

Hadley v. Baxendale principle: all recoverable where reasonably foreseeable. BUT, you still need something in the K that makes it foreseeable – e.g. peace of mind Ks, etc.