Non-Pecuniary Damages (CML)

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  Fundamental goal is compensation, thus no loss = no damages to be awarded
  

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  The present depth was safe for diving. So, the fact of the stipulated depth did not reduce the value of the pool. Also, the judge found it was unreasonable to demolish and rebuild pool, as the cost would be wholly disproportionate to the advantage to be achieved. Also, the judge was sceptical that the work would be undertaken.
  
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  Cost of reinstatement must only be awarded if it is reasonable. If not reasonable, award is for diminution of value (if no diminution, no loss = no compensation)
  
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  The fact that the diminution in value of the works is nil (as in this case) does NOT make reinstatement any more reasonable.
  
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  Lord Jauncey explained that the reasonableness of doing the work could be taken into account in determining the true nature of the loss suffered. As it was unreasonable to do the work in question, the pf’s loss did not extend to the cost of reinstatement.
  
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  At the same time, Jauncey indicated that if one were to award merely the diminution in value, this would enable the contractor (promisor) to not comply with the wishes of the promisee, which, as embodied in the K, form part of the consideration for the price.
  
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  Court doesn’t care about what the dft does with his award of damages BUT intention is relevant to the reasonableness of the particular damage award – the reasonableness of awarding reinstatement depends on the genuineness of the intention to actually carry out the reinstatement work. In this case, judge found as a fact that ptf had no intention to rebuild the pool.
  
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  Court was unanimous in view that these two measure of relief are not exhaustive and that the modest award at trial for loss of amenities was a satisfactory device for compensating pf for his actual loss.
  
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  Loss of amenity: when the contract is for the provision of a pleasurable amenity, the ptf is entitled to damages for loss of pleasure/amenity (for disappointed expectations).
  

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  If the court had awarded expectancy damages (the cost for rebuilding the whole new pool) – there was no guarantee that the plaintiff would use it to demolish and build a whole new pool. The chances of the plaintiff keeping the money and living with the pool was so great that they decided just to award damages for loss of amenity.
  
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  What was really in issue? Was it the missing inch?
  
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  Cost of cure: unreasonable  but the value difference is zero, and that would be a “gross injustice”. Not awarding anything would also let contractors get away with building things that were not to their customers’ satisfaction. (Reasonability and Intention to use damages to get what originally wanted)
  
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  Alternative measure? Reasons?  damages for loss of amenity
  
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  This raises questions of measuring loss that is intangible – does it depend on the specific type of contract?
  

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  Traditionally there are no damages awarded for mental distress. Such limitations are however out of date.
  
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  J has only a 2 weeks of holiday in a year, he booked it far in advance, he went to enjoy himself with all the facilities which D said he would have. He is entitled to damages for lack of those facilities and loss of enjoyment.
  
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  It is difficult to assess loss of enjoyment in monetary but it is no more difficult than the assessment the court makes in personal injury cases in rewarding damages for loss of amenities.
  

JUDICIAL HISTORY:

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  “Where the very object of a contract is to provide pleasure, relaxation, peace of mind or freedom from molestation, damages will be awarded if the fruit of the contract is not provided or if the contrary result is procured instead.” (para. 14)
  
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  Since F reasonably expected that S would thoroughly investigate airport noise, S is liable for loss of amenities
  
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  F made it crystal clear to S that the impact of aircraft noise was a matter of importance to him.
  
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  “It is sufficient if a major or important object of the contract is to give pleasure, relaxation, or peace of mind.”
  
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  Issue 2: “There is no reason in principle or policy why the scope of recovery …should depend on the object of the contract as ascertained from all its constituent parts.  It is sufficient if a major or important object of the contract is to give pleasure, relaxation or peace of mind.”
  
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  Issue 3: “It is a singularly unattractive result that a professional man, who undertakes a specific obligation to exercise reasonable care to investigate a matter judged and communictated by his customer to be important can “please himself whether or not to comply with the wishes of the promise which, as embodied in the contract, formed part of the consideration for the price.”
  
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  Issue 4: F’s not moving out did not divest him from making a claim for non-pecuniary damages.  S failed to show that F cannot claim non-pecuniary damage
  

JUDICIAL HISTORY:

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  Respondent had established a pension plan for its employees with a vesting period of 10 years. The appellant was not in the employment for the required 10-year period. The appellant was dismissed 2 years and 7 months before the time for vesting, when reasonable notice could not have exceeded one year. His right was to have a refund of his contributions with interest to the date of termination.
  
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  The law has long been settled that in assessing damages for wrongful dismissal the principle consideration is the notice given for the dismissal. A contract of employment does not in law have an indefinite existence.
  

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  Appellant claims for mental distress as the result of the termination of his contract of employment in those terms: distress, anxiety, vexation and frustration.
  
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  Distinction between punitive and aggravated damages:
  

2) Aggravated: frequently cover conduct which could also be the subject of punitive damages, but the role of aggravated damages remains compensatory, but take full account of the intangible injuries, such as distress and humiliation, that may have been caused by the defendant’s insulting behaviour.

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  Reference to the case Addis v. Gramophone Co. in which the plaintiff was wrongfully dismissed from his employment and although the employer gave him appropriate notice, his replacement arrived right away and prevented him from performing and earning his full remuneration. This termination was deemed to be injurious to the plaintiff’s business reputation and caused distress.
  

 Contrast this judgment with cases such as Jarvis v. Swans Tours Ltd. in which damages for distress have been allowed.

 In the present case, we should follow the rule established by Addis v. Gramophone Co. However, Court is cautious when dealing with aggravated damages: they can be awarded in some cases, particularly when the acts complained of are also independently actionable (not the case here).

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  If a course of conduct by one party causes loss or injury to another, but it is not actionable, that course of conduct may not be a separate head of damages in a claim in respect of an actionable wrong. Damages, to be recoverable, must flow from an actionable wrong.
  
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  Conduct of the employer was offensive and unjustified, any injury it may have caused the appellant cannot be said to have arisen out of the dismissal itself.
  
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  Conduct complained of preceded the wrongful dismissal and therefore cannot be said to have aggravated the damage incurred as a result of the dismissal.
  

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  Scope of punitive damages was restricted in the CML namely to abuse of power and torts committed for profit. In Canada, jurisdiction to award punitive damages is not so limited (ex: defamation).
  
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  Cannot be awarded for conduct that the Court strongly disapproves: need for a justification in law.
  
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  The only basis: a finding of the commission of an actionable wrong which caused the injury complained of by the plaintiff.
  
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  Punitive damages are not recoverable for a breach of contract unless the conduct constituting the breach is also a tort for which punitive damages are recoverable (ex: conduct refusing medical care is abusive and tortuous in nature because of a negligent disregard to provide care).
  
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  Was the trial judge right in concluding that no punitive damages can be granted?
  
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  Conduct must be extreme (harsh, vindictive, reprehensible and malicious), but cannot be found in the defendant.
  

Conclusion: appeal should be dismissed with costs.

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  Differ in result with McIntyre only on the issue of punitive damages.
  
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  If exemplary damages can be awarded in a wrongful dismissal case, Wilson J would award them here.
  
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  Mr Reid (Vorvis’ superior) was indifferent to the plaintiff’s feelings, set up productivity meetings, which became an inquisition. Pressure on the plaintiff who became tense, agitated and distressed and resorted to medical treatment 2 months before his dismissal.
  
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  Long standing prohibition against punitive damages in contract based on the sole notion that contract damage is to compensate the plaintiff  Uncertainty in the jurisprudence.
  
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  Therefore the general rule that punitive damages are forbidden in claims in contract should be reserved.
  
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  Canadian courts, as well as courts in Australia and New Zealand have not adopted the restrictive approach to punitive damages in tort.
  
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  Wilson does not share the view that punitive damages can only be awarded when the misconduct is in itself an “actionable wrong”. Instead: assess the conduct in the context of all the circumstances and determine whether it is deserving of punishment because it is shockingly harsh, vindictive, reprehensible or malicious nature.
  
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  Closeness engendered by some contractual relationships in which there is a marked disparity of power between the parties seems to give added point to the duty of civilized behaviour.
  
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  In this case: reprehensible conduct form the part of the respondent toward a sensitive and dedicated employee: inquisitorial practices, duress, attempt to damage the plaintiff’s reputation, persistent allegations of incompetence.
  
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  Trial judge’s decision to award $5,000 is a reasonable one. It reflects the court’s awareness and condemnation of flagrant wrongdoing and indifference to the legal rights of other people.
  

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  Agree that in distinction to punitive damages, they are essentially compensatory.
  
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  Different reasoning to determine whether they can be awarded in this case.
  
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  Believes that although it has been established that damages for mental suffering are not available in breach of contract because damages in contracts must be tangible and estimable, this approach is “no longer the law”.
  
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  Notion that the parties should reasonably have foreseen mental suffering as a consequence of a breach of the contract at the time the contract was entered into: test based on Denning’s judgement for the Jarvis case: difficulty of assessment should not deter the courts when the plaintiff has a just cause.
  

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  Such damages are properly awardable in contract provided they conformed to the normal rules of remoteness of damage in contract.
  

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  Rule from Restatement of the Law of Contracts:
  
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  “Damages will be awarded for mental suffering caused by the wanton or reckless breach of a contract to render a performance of such a character that the promisor had reason to know when the contract was made that breach would cause such suffering, for reasons other than pecuniary loss”
  
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  Most important type of contract in which damages for mental distress have been awarded is the employment contract.
  
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  Wilson disagrees that conduct advanced in support of a claim for damages for mental suffering must constitute a separate “actionable wrong”.
  
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  She also disagrees that because the conduct complained of preceded the wrongful dismissal it cannot aggravate the damages resulting from that dismissal.
  
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  Instead, we should apply basic principles relating to remoteness of damage: in this case, mental suffering would not have been in the reasonable contemplation of the parties at the time of employment contract was entered into as flowing from the appellant’s unjust dismissal.  such damages should be denied.
  

JUDICIAL HISTORY:

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  Classically, no compensation for mental distress/suffering as a result of contractual breach
  
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  Hadley test: was the damage “such as may be reasonably supposed to have been in the contemplation of both parties at the time they made the contract as the possible breach of it”
  
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  This is a general principle, so there is no distinction between mental damage and economic damage.
  
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  If a contract is for pleasure, relaxation, peace of mind, and it is not delivered, then the court will award damages for aggravated damages.
  
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  Jarvis: “peace of mind exception”
  
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  Farley: lowered the standard from “the very object of a contract” to “a major or important part of a contract.”
  
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  Vorvis: peace of mind contracts should be seen as an expression of the general principle of compensatory damages in Hadley rather than as an exception to that principle.
  
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  The court should ask “What did the contract promise?”  Peace of mind case.
  
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  NOT ALL mental distress is compensable.  Only if the object of the contract was to secure psychological benefit
  

Classically, courts reluctant to grant damages for mental distress for two reasons:

(1) Mental suffering is not in the contemplation of the parties at time of contract.

(2) Mental anguish can come from things OTHER than the breach of contract.

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  Hadley: Unites all forms of damage under a single principle.
  

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  This was not a mere commercial contract
  
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  It was to ensure intangible benefit: income security (money peace of mind)
  
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  Peace of mind was reasonably foreseeable as a result of performing
  
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  Mental distress flowed from the breach
  

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  Fidler suffered a substantial loss over a period of five years.
  
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  While arrears were paid, it did not compensate for the anguish of those five years spent in financial uncertainty.
  

Punitive Damages

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  Sun Life did not act in bad faith
  
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  Punitive damages are for retribution, deterrence, and denunciation
  
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  In order to qualify as bad faith, the actions must depart from ordinary standards of decency
  
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  Incorrectly denying an insurance claim is not bad faith
  
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  Sun Life’s conduct was troubling, but not sufficiently so to justify granting punitive damages.
  

1966 (2nd) contract:

(1) Omitted references to the territory and to the 3 year period. It simply stated that HF Clarke promised not to sell any competitive products during the currency of the contract.

(2) HF Clarke was liable for liquidated damages in the amount of gross trading profit realized from the sale of competitive products if he terminated or breached the contract, and promised not to compete with Thermidaire for three years after the date of cancellation. Thermidaire terminated the contract and HF Clarke sued for wrongful termination. Thermidaire counter-claimed for damages under the non-competition clauses. HF Clarke had continued to sell competitive products contrary to the terms of the contract, and dropped his claim for wrongful termination.

JUDICIAL HISTORY

Trial and CA: both contracts and the formula for awarding damages were found reasonable. At trial and appeal, Clarke was found to have broken the contract by selling competitive products during the term of the contract, and by selling competitive products after termination.

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  CA had rectified the absence of territorial limitation due to mutual mistake, and the covenant was amended by including the words “in the territory”.
  
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  Majority did not find any reason to interfere with the rectification, and found the covenants valid and reasonable.
  

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  HF Clarke broke the contract during its currency by selling competitive products and had also sold competitive products in the 3 year period after termination of the contract. Thermidaire was found to have been entitled to terminate the contract.
  
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  Thermidaire had not asked for an injunction to stop HF Clarke from selling competitive products during the 3 year anti-competition period. It might have avoided some of the damages it is now claiming for.
  
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  HF Clarke continued to sell competitive products, and thus put itself at the risk of being called to account under the formula for post-contract damages.
  
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  Thermidaire is entitled to damages for breach during the currency of the contract  loss suffered by Thermidaire by reason of sales by HF Clarke of competitive products and not bought from Thermidaire.
  
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  The appeal was whether or not the formula used represeneted “a genuine attempt by the parties to pre-estimate the loss as best as they could within their special knowledge of the circumstances.
  

 formula of gross trading profit (about $240,000) is not reasonable because it does not take into account elements of costs and expenses which would be taken into account to arrive at net profit (calculated at about $92,000).

 In this case, the exaction of gross trading profits is considered a penalty because it is a “grossly excessive and punitive response to the problem to which it was addressed; and the fact that the appellant subscribed to it, and may have been foolish to do so, does not mean that it should be left to rue its unwisdom”.

Martland and Dickson JJ, dissenting

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  Agree with the holding of the Court of Appeal – would dismiss the appeal with costs.
  

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  The tenants are not beginners and know what’s up with a commercial lease
  
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  It’s enough for the creditor to allege and prove that the debtor has not fulfilled his obligation to give rise to the agree-upon penalty. He is not held to prove that he has suffered losses.
  
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  The contract is law between the parties except if they can show that it is against public order or partially or wholly invalid. However, in order to be valid, the penalty clause must stipulate a clear object or sum of money.
  
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  Articles 1622 to 1625 CCQ
  
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  1623 CCQ
  
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  Jean-Louis Beaudouin: “il restera à la jurisprudence à definer et préciser ce que l’on doit entendre ici par abus.”
  
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  3 sorts of abusive clauses:
  

1. 
   Lesion – disproportion between the penalty and the damage actually suffered
   
2. 
   Abuse resulting from exploitation or bad faith
   
3. 
   Abuse resulting from an unreasonable stipulation at the moment of breach
   

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  In this case, the third kind of abuse is happening.
  
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  Has the landlord lost money? He was supposed to rent a bigger space for more money to a third party who has taken over the lease of the defendants  loss
  
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  In this context, the penalty clause was for the equivalent of 4 years and 2 months of rent  at the moment of breach, this amount was clearly unreasonable
  
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  The court awards the landlord 14 months of rent in damages, plus 6 months as a penalty.
  

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  Reduction of a penalty clause might make more (economic) sense than a blanket ban of all “in terrorem” clauses, period.
  
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  There is no “sophisticated doctrine” about this – it comes down to good reasoning and judicial discretion based on persuasion.