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

Misc Rules on Reliance Damages

Court characterized ’s lost profits as reliance damages: if he had not invested in the gas station, he would have gotten a different job/source of income. So, he was entitled to his opportunity costs  the amount he would have earned had he never entered into the K.

Note: reliance damages may also include amounts thrown away trying to make the K work. These attempts to mitigate are a legitimate inclusion in wasted expenditures, but they are capped by reasonableness.

Reliance Damages for Negligent Misrepresentation

Negligent Misrepresentation Damages: Requirements (Hedley Byrne Principle)

2. Breach of that duty  statement made without taking due care

3. Statement is untrue

4.  relies on the statement to his/her detriment

5. Reliance is reasonable

In context – e.g. correlative expertise between parties.

Application

The basis of damages is the difference between a promise/guarantee and a negligent statement  reliance, rather than expectation

SCC in BG Checo:

“[T]he main reason to expect a difference between tort and contract damages is the exclusion of the bargain elements in standard tort compensation.”

This is why K law defaults to expectation damages and tort defaults to reliance.

Beaver Lumber v. McLenaghan

 bought prefab house from ∆, who recommended a third party to construct it.

Turns out that guy had never assembled a prefab home before, and it was a disaster.

Had things worked out as  hoped, would have had a house worth $37,709; actual value: $17,000.

Expenses: $21,400 for land and materials; $3200 to ∆.

Projected position = $13,109 profit; actual position = $7600 shortfall.

So  sued for the expectation damages of $20,709.

Held: reliance damages are the appropriate measure.

Reasons

Shouldn’t treat the suggestion as a guarantee, just a careless statement. So,  gets back the wasted money and is put in a break-even position. Status quo ante.

∆ induced  to enter the K, didn’t breach a term of their K. So, court puts him in pos’n as if ≠ entered K.

VK Mason v. Bank of Nova Scotia [SCC]

Negligent misrepresentation re financing. Bank tells builder everything is fine and project is properly financed.

Builder doesn’t get paid.

 claimed for lost cost of doing the building, and the amount still owing on the K.

TJ awarded both the lost expenditures and lost NET profit (so no double compensation problem)

Issue: But can  only get reliance damages, per Beaver Lumber and other cases?

Held: Trial judge award upheld.

Court says they aren’t awarding lost profit on the K  awarding opportunity costs (following Esso v. Marden)

But...they gave actual profit for this job, not some other job.

It’s a -favourable assumption: if they could do this well in this situation, court assumes  would do equally well elsewhere in the market.

Note, though, that it’s only a presumption – can be rebutted, but onus is on ∆ to do so.

Rainbow Caterers v. CNR

 caterer was given incorrect information about the number of meals to be provided.

Entered K on the incorrect information, and in carrying it out lost $1 million, which it claimed in damages.

Issue: everyone agreed that reliance damages applied, but the question is how to calculate them.

∆ argued there are two roots of reliance:

1. If ∆ hadn’t made statement/had made true statement,  wouldn’t have entered K, wouldn’t have lost money

2. If ∆ hadn’t made statement/had made true statement,  would still have entered K, but on different terms.

∆ says, therefore, that the question isn’t what ’s total losses are, but rather what the difference is between the loss actually suffered and the loss  would always have suffered on the alternative K it would have entered into.

Held: for . Typical reliance damages apply.

Reasons – Sopinka:

∆ argument is not invalid overall, it just doesn’t apply in this case.

Principle: where there has been a negligent misrepresentation inducing a K, a court will presume that had the negligent misrepresentation not been made,  wouldn’t have entered into the K.

It’s a presumption – onus on ∆ to disprove. ∆ bears the risk.

Note: in BG Checo v. BC Hydro, ∆ was able to prove that  still would have entered a contract.

In that case, damages are the net difference b/w loss actually suffered on the actual contract (contract A) and the loss that would have been suffered anyway, had  entered into contract B.

Note: in tort, reliance damages CAN exceed expectation   recovers all of its losses even if it might have suffered some anyway in a different situation.

Dissent – McLachlin

Even if we assume that  wouldn’t have entered into the K, that doesn’t mean they should be entitled to all of the losses suffered as a result of entering the K  have to consider principles of remoteness and causation.

McLachlin senses that  lost such a high amount not just because ∆ gave bad estimate, but because  was incompetent  work crews were eating too much,  wasn’t properly controlling the business.

McLachlin says some portion of the loss suffered is attributable to  bad mgmt/poor business practices.

Sopinka for the majority says it doesn’t matter, because  would never have had the chance to be incompetent if they hadn’t entered the K.

McLachlin says ∆ should only suffer the consequences of  reliance, as opposed to the damages that arise as a result of their own incompetence.

This argument has not yet been resolved in Canadian law.

Negligence and Reliance in Professional Services

Issue: reliance vs. expectation

The answer is generally found by following causation: what did ∆ promise, and what loss is caused as a result of that promise?

Posesorski

Due to ∆ solicitor’s negligence,  entered into deal for a property w/ unperfected title (encumbrance).

Purchase price: $325k. Actual value w/ encumbrance: $225k.

 held the property for many years, then came to an agreement with the option-holder. Cost of eliminating: $260k.

Lost rents & expenses: $39,400

Legal expenses: ~$40k

Issue:  wanted expectation damages

Held: reliance only. Expenses, plus $80k for the lost use of the $100k (difference in value.)

Reasons:  could never have entered into the deal they wanted, so they couldn’t get expectation.

Messineo v. Beale [1978, ONCA]

Issue:  sought expectation – expected $100k profit

Held: Can’t have expectation damages.

Reasons:

There was no chance that  could have actually obtained a property worth $500k.

Promise is that lawyer would take care in identifying title defects  had promise been performed, title defect would have been found, but  still never would have obtained a property worth $500k.

Kienzle v. Stringer

Facts:

Lawyer prepares a K to sell the farm from the estate, because he thought the estate still owned the farm. SO, K b/w estate and son, and cash from that goes into the estate to be distributed to the siblings.

The lawyer was the administrator, so he should have known, but the estate had been sitting for so long that by operation of a rule of law the property had passed to the sisters.

So,  goes through with K, estate is paid full price, but then it turns out the estate can’t give him the farm, because the sisters each have a third.

One sister just gives him her third, because she knows he paid the price and she’ll get her cut from the estate.

The other sister, though, makes him buy her third afresh, since the agreement with the estate was invalid.

So  sues solicitor.

Held: Damages = cost of perfecting title

Cost of buying the farm from the mean sister.

Reasons:

Causation   hired lawyer to arrange purchase of farm. Had ∆ not been negligent, he would have prepared a K with the sisters, not the estate. In this case, the amount of money to put  in the position he would have been in = his additional costs. The focus is on what was promised.

So, negligent performance of a service may or may not result in expectation damages, depending on an analysis of what was promised, what the K called for, and what loss the breach caused.