Date: Fri, 7 Jul 2006 15:33:35 -0400

From: John Swan

Subject: Intangible Injuries for Breach of Contract (Fidler v. Sun Life)

Andrew,

Leaving aside the question of where, i.e., in what kinds of contractual relations, damages for intangible injuries will be awarded under the Supreme Court of Canada’s new approach, I think that a plaintiff will still have to show that he or she suffered some kind of non-pecuniary loss. Lord Denning’s catalogue of the deprivations, not to mention the sore feet, which Mr. Jarvis suffered, provides a basis for saying that it was at least reasonable for Mr. Jarvis to have suffered lost enjoyment. The more interesting argument is that of Lord Mustill in Ruxley who says that ignoring the disappointment and annoyance that Mr. Forsyth suffered is simply not acceptable and the £2,500 awarded is just some balm for the wound. Presumably courts are well-equipped to judge whether the loss suffered is sufficiently serious to warrant compensation. (When a friend of mine asked what she could expect as damages for lost enjoyment arising from the fact that the DJ she had hired failed to show up for her wedding, I asked her, "How well can you weep in the witness box?". She said that she could do a most impressive job. I encouraged her to sue and she ended up with $1,500; about three times what she would have paid the DJ. (Would it have mattered if her husband had engaged the DJ.?)

Having thought about Fidler v. Sun Life a bit more, one of my concerns is that it individualizes or risks the individualization of too many contractual relations. If damages are indeed based on what the defendant can foresee, then sellers can’t treat their buyers as a group. Sellers who sell to a multitude of buyers cannot easily, if at all, be expected to have the terms of their contracts or the consequences of breach vary in accordance with the mental balance of their customers. It’s better to tell the psychologically fragile or choleric, unincorporated business person that his idiosyncratic feelings will not be recognized by the law than to face the costs — ultimately huge costs — of giving him balm for his wounded feelings. Of course, it’s a policy decision, just as it is a policy decision not to allow pre- or post-judgment interest rates to reach the rate that would actually compensate the plaintiff for being denied the money due to it: We do it because (i) uniformity saves costs and (ii) it all works out in the end—today’s disappointed plaintiff may be tomorrow’s defendant caught between a rock and hard place and forced to breach a contract. Throwing more money into the pool and having it sloshing around between people competing to demonstrate hurt feelings does not seem to be likely to improve anything.

The point that I made about the so-called second rule in Hadley v. Baxendale has to be seen in the context of the concern that contracts not be too individualized — I’m not liable for your loss, regardless of what you tell me (and what I may now foresee if I breach our deal), because I won’t accept that risk. This is why cases which allow the mere communication of the consequences of the loss to increase the defendant’s damages are so bad: they permit the almost complete individualization of the defendant’s contracts in circumstances over which the defendant has no control and moreover, individualization in circumstances in which, had the defendant had the chance to deal with the plaintiff’s particular circumstances, it would have asked for more money or told the plaintiff to deal with that problem itself. It’s not clear to me what the Supreme Court’s views on this issue are.

The beauty of the Jarvis v. Swan Tours, Ruxley and Farley v. Skinner approaches was that they had built-in limits on both the scope of aggravated damages and the amount. Tour operators now simply treat claims for lost enjoyment as a cost of doing business and they will only engage their insurers when the amount exceeds their self-insurance limit or the deductible. If those damages become potentially huge, the whole structure of the industry will have to change and it’s hard to see how giving huge damages to a small number of people will help in the long-run. It’s not good public policy to increase the incentives to sue.

The problem that those of us who have to think about damages for breach of contract now is "How do you integrate into a discussion of damages for breach of contract based on the compensation principle (and thousands of cases) the Supreme Court’s idea that Hadley v. Baxendale is the source of the defendant’s liability?" It’s an over-statement, but not by as much as it should be, to say that it’s a bit like working with two incompatible theories, never knowing which one will be applied in the particular case.

John

-----Original Message-----
From: Andrew Tettenborn
Sent: July 3, 2006 4:50 AM
Subject: [Fwd: RE: ODG: Intangible Injuries for Breach of Contract (Fidler v. Sun Life)]

Thanks to John for pointing out a number of the problems in the reasoning in Fidler, and why the best school report we can give it is "could do much better." John's spot-on when he says that we can't just reduce non-pecuniary damages to a Hadley question.

Indeed, the Fidler difficulties on this score go further. The SCC had to deal with the general acceptance that you can't get non-pecuniaries in commercial cases, and did it by saying "Oh well, distress etc won't be foreseeable there." The trouble is, it sometimes will be (e.g. the facts in Hayes v James & Charles Dodd [1990] 2 All ER 815, where solicitors cock up a lease of commercial premises to a sole trader so he can't use them and understandably gets depressed). What do we do here? Unless we want to give non-pecuniaries, which seems counterintuitive, it seems that what the SCC is really saying is that distress is regarded as, or deemed to be, non-foreseeable. But it's not hard to see that this begs the question and takes us back to the "pleasure contracts - other contracts" distinction they've just been at pains to trash.

Just one small problem does strike me about John's view, however. John candidly, and absolutely correctly, says that non-pecuniaries are conventional: as witness cases like Ruxley, the court is not concerned with the actual amount of distress, anger, etc that the plaintiff suffers (or, for that matter, doesn't suffer). But if so, and if here (unlike compensation for all other kinds of afflictions) the plaintiff doesn't have to show he's personally suffered anything, then the "putting the plaintiff in the position he/she would have been in" analysis begins to look a bit threadbare. That's why I'm reaching the view that damages of this sort are a matter of a more abstract process of valuing the interest of the plaintiff that's been infringed, rather than compensating for distress in the same way we compensate for a lost sale or broken leg.

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