As I understand the case, it says identifies as the breach of contract,
the failure to fulfil the promise to grant security. The purpose of such
a promise is to improve the position of the lender in circumstances of
insolvency. If the security was not provided and the circumstance against
which such a promise protected - insolvency - arose, the plaintiff would
not have been able to recover the damages which a traditional analysis
would grant (that being the amount of the money lent). There is no doubt
that the contemplated security was commercially valuable. One
consideration in valuing a loan book would be the kinds of security the
lender had obtained for its various loans.

On this basis, I can see an argument for saying that the failure to grant
security is a breach which should be compensable as opposed merely to
entitling the plaintiff to nominal damages. The question then becomes how
to value the loss arising from the breach. My instinct is that the
quantification would have to be based on the increase in risk. I would
guess accountants have ways of quantifying this.

In a way, the situation is comparable to the case where a lady sued for
loss of the amenity of her holiday on a cruise ship. The ship got her
from A to B, but the object of the contract was to provide her with
enjoyment along the way. The amenity of her holiday was something
valuable which, when lost, was compensable in damages: Baltic Shipping v
Dillon (1993) 176 CLR 344. In the instant case, the object of the
contract was to provide protection against insolvency and that protection
was valuable and it was not provided.

I don't think I like the idea of a similar award on the tort basis.
Moreover, its unnecessary. The contractual relationship supercedes any
tortious relationship and provides more effective protection.

-----Original Message-----
From: Russell Brown <rsbrown@ualberta.ca>
Date: Mon, 7 Mar 2011 22:08:56 +1000
To: Stephen Pitel <spitel@uwo.ca>
Cc: "obligations@uwo.ca" <obligations@uwo.ca>
Subject: Re: ODG: Measure of Damages - Tort and Contract

>Stephen,
>
>The reasoning (such as it is) on the negligence claim doesn't support
>this award. Finch CJBC correctly states that damages for a negligent
>misrepresentation are "reliance damages, that is putting the plaintiff
>in their original position". Absent evidence that the plaintiff's
>"original position" in this case would have included the option -
>that, but for the defendant's inducement, she would have exercised -
>of making an unsecured loan for the higher interest rate, there seems
>to be no basis for this award on the negligence side of the claim.
>The only rationale (in his analysis of the negligent misrepresentation
>claim) given for awarding more than is his passing reference to La
>Forest and McLachlin JJ's reliance in BG Checo upon "particular
>circumstances or policy", but (again, in the context of the negligence
>claim) Finch CJBC does not identify any "circumstances" as significant
>or any "policy" as being implicated.
>
>If, as it appears in his analysis of the breach of contract claim, his
>decision is motivated by what he sees as an unjust enrichment of the
>defendant, he should probably have just said so and disposed of the
>claim on that basis without the additional strain on the negligent
>misrepresentation side.
>
>That's my two-bits at 5 am.
>
>Cheers,
>
>Russ
>
>
>Quoting "Stephen Pitel" <spitel@uwo.ca>:
>
> In /Smith v. Landstar Properties Inc./, 2011 BCCA 44 the
>plaintiff loaned the defendant $100K. She was promised a return of 8%
>and that her investment would be secured against certain properties.
>The defendant did not, in fact, secure the loan, so it was unsecured.
>The defendant paid the money back and paid the interest. The
>plaintiff sued the defendant in contract and tort (misrepresentation)
>for additional interest, arguing that the interest rate on an
>unsecured loan would have been significantly higher (over 24%). The
>defendant argued that the plaintiff had not suffered any loss: from a
>financial perspective she got what she was promised.
>
>The trial court awarded the plaintiff additional interest, based on
>the spread between the unsecured interest rate and the 8% actually
>paid. The British Columbia Court of Appeal affirmed, but on somewhat
>different reasoning.
>
>My sense, on only a preliminary assessment, is that the case provides
>some interesting damage calculation issues. Is the answer right? Is
>the reasoning right, in contract or tort? The main case relied on is
>/Experience Hendrix LLC v. PPX Enterprises Inc./, [2003] EWCA Civ 323.
>
>The case is at
>http://www.canlii.org/en/bc/bcca/doc/2011/2011bcca44/2011bcca44.html
>
>Stephen
>
>--Dr. Stephen G.A. Pitel Associate Professor Goodmans LLP Faculty
>Fellow in Legal Ethics 2010-11 Faculty of Law, The University of
>Western Ontario