Contracts Case Briefs + Notes for Midterm #1: Wed, Feb 14, 2018 Remedies p 791
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- Fidler v Sun Life Assurance Co. of Canada [2006] SCC
| Punitive damages require (1) some exercise of bad faith, as well as (2) an independent actionable wrong (and in Whiten v Pilot insurance the SCC said it did not have to be a tort). They upheld the 1 million dollar punitive damages – CITE THIS CASE – they utterly and completely failed to deal in good faith by persisting their position that the insured torched their own house, despite overwhelming evidence against them)
Fidler v Sun Life Assurance Co. of Canada [2006] SCC Facts: Fidler worked as a bank receptionist and was covered by a group policy that included long-term disability benefits. At the age of 36, she became ill and was eventually diagnosed with chronic fatigue syndrome and fibromyalgia and began receiving long-term disability benefits in January 1991. Under the terms of the policy, Fidler was entitled to continued benefits after two years only if she was unable to do any job. In May 1997, Sun Life informed Fidler that her benefit payments would be terminated and indicated that it had conducted video surveillance of Fidler detailing activities inconsistent with Fidler’s claim that she was incapable of performing light or sedentary work. Sun Life’s denial of benefits was followed by almost two years of correspondence with Fidler and medical professionals. Sun Life received medical evidence to the effect that Fidler was not yet capable of doing any work. However, Sun Life elected to rely on its own consultants and experts and confirmed its decision to terminate benefits in December 1998. Fidler then commenced an action and, one week before trial, Sun Life offered to reinstate Fidler’s benefits and to pay all arrears with interest. The only issue to proceed at trial was Fidler’s entitlement to damages. Issues: What damages can Fidler recover? Holding: SCC held that Fidler can recover aggravated damages, but not punitive damages. Reasons: The SCC felt that Sun Life’s conduct was troubling, but not sufficiently so as to interfere with the trial judge’s conclusion that there was no bad faith. The trial judge’s reasons disclosed no error of law, and his eventual conclusion that Sun Life did not act in bad faith was inextricable from his findings of fact and his consideration of the evidence. SCC held that there is no need to show an independent actionable wrong to recover damages for mental distress. The plaintiff must prove that there was a substantial degree of mental suffering and that this suffering was reasonably foreseeable at the time the contract was made. An insurance contract is often made [and frequently advertised!] as bringing peace of mind. Thus F’s distress in the event of non-performance was reasonably foreseeable at the time the contract was made. Punitive damages are not appropriate though because Sun Life acted overzealously but in good faith. Upheld aggravated damages, but could not find any independent actionable wrong (therefore no breach of good faith) and thus no punitive damages. Need clear bad faith in order to award punitive damages] Rule: (1) “Aggravated damages can be awarded when the object of the contract was the secure a psychological benefit that brings mental distress upon breach that is within the reasonable contemplation of the parties” and the degree of suffering was sufficient so as to warrant compensation; (2) Punitive damages should only be awarded exceptionally and in cases of clear bad faith. (Pg. 882) Hadley v Baxendale [1854] Facts: This case is still the leading authority on the role that remoteness plays when calculating damages (established the rules on remoteness of damages): The plaintiff was a miller. His mill had stopped because of a breakage of the mill’s crankshaft. The plaintiff had contracted with the defendant, a common carrier, to take his broken crankshaft to a manufacturer to be used as a template to cast a new crankshaft. The defendant had delayed in shipping the crankshaft. As a result the plaintiff had lost profits caused by the delay in having his mill made operational. The defendant argued that the plaintiff’s losses were too remote in that at the time of entering the contract the lost profits could not have been contemplated by the parties. The court held that the damages were too remote. Rule / Key Takeaway: the court established two rules for the determination of remoteness of damages in contract: [1] A defendant will be liable for damages that may reasonably be supposed to have been in the contemplation of the parties arising in the normal course of events. [2] Where special circumstances are communicated, a defendant will be liable for damages that may have been reasonably contemplated by the parties acquainted with that special knowledge. These two rules can be reduced to 1 rule: it is only those losses that are reasonably foreseeable that the plaintiff will be able to recover from the defendant (reasonably foreseeable as either arising naturally from the breach, or arising from special circumstances that the defendant is aware of). In the text they word it as follows: “Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it.” In this case, the common carrier could not have presumed that this was the only plaintiff’s machine, and so on. The plaintiff has to make this information clear to the defendant when making the contract, and cannot simply assume that the defendant knows or ought to know. They need to explain the necessity of getting it done promptly, otherwise is might be found to be too remote to sue successfully for damages. Download 61.79 Kb. Share with your friends:
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