The Global Damages Review: Canada
In Canada, damages are awarded to successful parties for their pecuniary and non-pecuniary losses. Non-pecuniary losses generally include pain and suffering or mental distress. A pecuniary loss generally includes losses that can be measured in a monetary sum, arising from loss of property, loss of services, personal injuries, loss of reputation or money, and damage to economic interest. This chapter will primarily focus on Canadian compensatory damages for pecuniary losses that are caused by breaches in Canadian contract or tort law.
The fundamental principle underlying Canadian private law remedies is restitutio in integrum, meaning 'restoration to original condition'.2 Private law damages arising from tort or contractual breaches are meant to be compensatory in nature. The award aims to restore a successful plaintiff to the position it occupied before the legal wrong occurred.3 Further, compensatory damages do not seek to punish the defendant.4 There is also an emphasis in Canadian law that damages awards should always be consistent, fair and rational.5 These principles have informed many, if not all, of the aspects comprising the law of damages in Canada.
Non-compensatory damages, while available in Canada, apply only in certain circumstances where the facts of the case and the defendant's conduct require it.6 For example, exemplary, nominal, punitive and restitutionary damages fall under the umbrella of non-compensatory damages. If equitable principles are found to apply, then monetary relief may be available by way of equitable damages that compensate for losses where a legal common law award would be insufficient.7
Quantification of financial loss
Generally, Canadian courts quantify financial loss and assess damages by valuing what the plaintiff's position would have been 'but for' the defendant's wrong.8 A successful plaintiff is awarded monetary damages to replace its loss; and, if applicable, its lost opportunity, income, or profit that it would have otherwise earned.9
In some cases, it is not always clear what the value of the plaintiff's loss is. Once liability is established, a plaintiff has the onus of proving its damage with cogent facts and expert evidence where necessary.
Canadian law recognises that the evidence available in a particular case may not precisely quantify the damages award. In these cases, although the plaintiff still bears the onus to prove the facts upon which damages are estimated, the difficulty in quantifying damages does not bar the court from assessing and, if appropriate, awarding damages. A liable defendant is never excused from paying damages because of evidentiary flaws, so long as there is some evidence upon which a court can draw facts to appropriately quantify the loss.10
In cases involving breach of contract, the contract may provide the best evidence of the plaintiff's financial loss. Where a contract has not provided for the value of the agreement as a whole or certain terms, the court will determine value by the market price of the goods or services offered.11
iii Date of assessment
The date of assessment for damages is context specific and depends on the wrong that has been perpetrated. The following is an overview of the general principles that guide how the date of assessment is determined in certain instances.
Absent special circumstances, the appropriate date to assess damages for breach of contract or a tort is at the date of the breach.12 Although there are exceptions to this where fairness requires it, the presumption is not easily displaced.13 Canadian law focuses on the early crystallisation for dates of assessment, for the following reasons.
An early crystallisation of the plaintiff's damages promotes efficient behaviour: the litigants become as free as possible to conduct their affairs as they see fit. Early crystallisation also avoids speculation: the plaintiff is precluded from speculating at the defendant's expense by reaping the benefits of an increase in the value of the goods in question without bearing any risk of loss.14
The date of assessment is most commonly disputed when the property that the plaintiff was deprived of has changed in value between the date of the breach and the date of the judgment. This commonly occurs in the context of speculative property, such as shares or other ownership interests in corporations or real estate. If the value of the property in issue has declined during the period leading to trial, the plaintiff is advantaged by the damages being assessed at the date of the breach. For example, consider that a plaintiff enters into an agreement to purchase property for C$1,000, and the defendant then breaches the contract. At the trial, the property is worth only C$500. If damages are awarded as assessed on the date of the breach, the plaintiff will receive double the present value of the property. Such an outcome is often criticised as violating the fundamental principle of damages that the plaintiff is not to be put in a better position.15 On the other hand, if the value of the property increases between the date of the wrong and the date of the judgment, the defendant benefits.
If the fluctuation in value would violate principles of equity or would work an unfairness on either party, Canadian courts may exercise their discretion and alter the date of assessment. Canadian courts have done so where no market exists to replace undelivered shares at the date of breach16 or in relation to speculative property, including shares, whose value is subject to sudden and constant fluctuations of unpredictable amplitude.17
iv Financial projections
Financial projections are often used to assist the court in quantifying the correct damages award for a prospective loss. For example, financial projections are often used in the context of quantifying future losses from income or profit from a business. Although financial projections may be used to assist in quantifying a plaintiff's loss, Canadian courts recognise that calculating damages is not a precise science.18 The court has wide discretion to draw its own inferences from the facts to determine what a reasonable projection of the future loss is.
Expert evidence is typically required to prepare a financial projection. The methodology used to provide the financial projection is of critical importance. Soundly calculated projections will be given more weight by the court.19
Although it is ultimately up to the expert and the party's counsel to determine what methodology is to be used, it should aim to be as realistic as possible.20 For example, where a contract has alternative modes of performance, the financial projection should ensure that it adopts the Canadian presumption that the defendant would have performed the contract in the manner that is least burdensome to it.21 Second, the financial projection should be based on objective facts known at the time of the loss, rather than hypotheticals or information that was obtained with the benefit of hindsight.22 This is in line with the general Canadian principle that damages ought to be reasonable and not overcompensate the plaintiff.
In a similar vein to financial projections, assumptions are a necessary and important element in the quantification of prospective losses such as future income, future care, financial loss and business loss.
It is common in Canada for a party to clearly outline the key assumptions a valuator has made in its written expert report. The basis of the valuator's conclusions ought to be clearly understood if the court is to base its damages award on the report.23
Parties can offer damages reports containing different assumptions and calculations to allow the court to assess a number of options.24 Canadian courts are free to accept or reject the assumptions that underlie the party's submission quantifying their damages. To challenge the quantification of a damages assessment, the party may critique the assumptions made by another party in their submitted damages calculation. The assumption that is to be accepted by the court ought to be reasonably supported by the evidence and the facts of the case.25
vi Discount rates
Discount rates are applied to Canadian judgments to account for the fact that money may be paid in advance of when it otherwise would have been received, thus generating interest that would otherwise not have been earned.26 The discount rate reflects the rate of interest that the award of damages will earn, the effect of inflation and the effect of income taxes on the award, known as the time value of money.
In Canada, the regimes in various provinces and territories differ on whether the discount rate is legislated or if the rate is determined by the court having heard the evidence. Where imposed by legislation, evidence may be led to rebut the statutory discount rate.
The following table outlines the current discount rates that apply to each province or territory.
|Discount rates applicable for tort cases across the country||Item of pecuniary loss||Source||Discount rate|
|British Columbia||Future care||Law and Equity Act, at Section 56(2)(b), BC Reg 352/81||2 per cent|
|Future wage loss||Law and Equity Act, at Section 56(2)(a), BC Reg 352/81||1.5 per cent|
|Alberta||Future care and wage loss||No mandatory discount rate|
|Saskatchewan||Future care and wage loss||Queen's Bench Rules, at Section 284B(1)(b)||3 per cent|
|Manitoba||Future care and wage loss||Court of Queen's Bench Act, at Sections 83(1) and 83(2)||3 per cent|
|Ontario||Future pecuniary loss||Rules of Civil Procedure, RSO 1990, Chapter C-43 at Section 53.09 (Ontario Rules of Civil Procedure)||Zero per cent for first 15 years (assuming a 2020 trial), 2.5 per cent thereafter for any later period covered by the award|
|Quebec||Future wage loss||Civil Code , Regulation under Article 1614||2 per cent|
|Other future pecuniary loss||3.25 per cent|
|New Brunswick||Future pecuniary loss||Rules of Court, NB Reg. 82-73, at Section 54.10(2)||2.5 per cent|
|Nova Scotia||Future pecuniary loss, other than loss of business income||Civil Procedure Rules, at Section 70.06(1)||2.5 per cent|
|Future loss of business income||Civil Procedure Rules, at Section 70.06(2)||A party may prove a discount rate to be used in calculating the difference between estimated investment and price inflation rates for calculating the value of damages for future loss of business income|
|Prince Edward Island||Future pecuniary loss||Rules of Civil Procedure, at Section 53.09(1)||2.5 per cent|
|Newfoundland and Labrador||Future pecuniary loss||No mandatory discount rate|
|Northwest Territories||Future pecuniary loss||Judicature Act, RSNWT 1988, Chapter J-1, at Section 57(1)||2.5 per cent|
|Nunavut||Future pecuniary loss||Judicature Act, SNWT 1998, Chapter J-1, at Section 56(1)||2.5 per cent|
|Yukon||Future pecuniary loss||No mandatory discount rate|
vii Currency conversion
The Canadian Currency Act27 requires that any monetary award in a legal proceeding in Canada be stated in Canadian currency. As a result, many Canadian courts convert awards for loss into Canadian dollars, even if the loss stems from a foreign currency.
Because the date of the assessment of damages is typically the date of breach, fluctuations in foreign exchange rates between the date of the breach and the trial date can become an issue in cross-border litigation. For example, if a plaintiff is wronged and commences an action to recover judgment to satisfy a debt denomination in US currency, and the value of the Canadian dollar decreases between the date of the wrong and the date of the trial, the defendant benefits as fewer US dollars will be required to satisfy the judgment. In the past, Canadian jurisprudence has stubbornly clung to the date of the breach for the currency conversion.28 However, some provincial jurisdictions, such as Ontario and British Columbia, have statutorily prescribed that the currency conversion occurs on the date of judgment.
Courts typically recognise that a plaintiff should be subjected to the risk of a fluctuating exchange rate.29 For example, in the British Columbia Supreme Court decision of Naturex Inc v. United Naturals Inc, United Naturals had contracted to have Naturex deliver plant extract products.30 The shipments were payable in US dollars. When United Naturals stopped paying Naturex, Naturex sued to recover US$248,000 from United Naturals. Between the date the tort occurred and the claim was commenced, the value of the Canadian dollar fell against the US dollar. Unless adjusted, on the date of judgment, United Naturals would have received a 'windfall', as it would require far fewer US dollars to pay the judgment in Canadian dollars.31 The court held that the most appropriate date upon which to order the conversion calculation was the date the claim was actually commenced.
viii Interest on damages
In Canada, pre-judgment interest is typically added to a damages award to acknowledge that if a cause of action arises, and the wronged party waits for years to receive its judgment, the wronged party has been dealt two wrongs.32 Accordingly, pre-judgment interest is typically calculated from the day the cause of action arose to the date of the judgment.
Post-judgment interest may also apply to damages awards to account for the period of time between the date of the judgment and the date of actual payment.33
The application and calculation of interest rates may be provided by the agreement between the parties, which the court will likely uphold.34 For example, the Ontario Superior Court of Justice recently upheld a post-judgment interest rate of 24 per cent.35 Although the Court noted this appeared to be 'excessive', it held it was necessary to enforce this clause to uphold the principle of freedom of contract between parties.36
The applicable statutory regimes govern where there is no agreement, or where the agreement is silent as to interest rates. Legislation from each provincial or territorial jurisdiction within Canada permits or requires the court to award interest on monetary judgments, and provides the applicable rates.37 Some provinces specify the rate to be applied, but the court is free in all provinces to award interest at commercial rates.38 Although the courts retain their discretionary power to adjust the amount of interest that is payable under statute, the legislation in each jurisdiction contains different language, which may limit how a court exercises its discretion.39
Parties should therefore be mindful of the legislation in each province or territory that both specifies a party's entitlement to interest and may impose limits on whether a court will deviate from the interest award under statute.
The well-established principle in Canadian law is that costs of the litigation follow the result.40 This means that, generally, the successful party to the litigation is awarded its costs of the action for damages, subject to exceptional circumstances that require the court to exercise its discretion.41
Costs are typically awarded on a partial indemnity scale, which typically amounts to 55 to 60 per cent of a reasonable actual rate.42 Costs may be awarded on an elevated scale in exceptional circumstances. For example, if a party has engaged in conduct during the course of litigation that is worthy of rebuke from the court, such as tactical motions to delay the disposition of the matter, the scale of costs may be adjusted.43 In proceedings where an offer to settle has been made by a party, and that offer is not accepted, and the action is disposed of by the Court in an amount equal to or worse than the settlement offer, the offering parties is entitled to its costs from the date the settlement offer was made, typically on an elevated scale.
In all cases, costs awards must be fair and reasonable in the circumstances.44 To give effect to this principle, the court may find that a different costs award is appropriate from what is specified in the legislation.45
The quantification of the damages award
In Canadian law, there is no deduction to the plaintiff's damages award for the income tax that would have been paid on a compensatory award for lost income, earnings, or profit.46 Canadian law rejects that the defendant can reduce the amount of damages owed to the plaintiff on the grounds of applicable taxes. Canadian courts have referred the question of how to tax damages awards to the Canadian legislature as a matter of tax policy.47
In very limited circumstances, a tax benefit may reduce a damages award where it is found that 'but for the loss', the plaintiff would otherwise not have received tax benefit.48 This is only where sufficient evidence is led to specifically calculate the tax benefit and it is not merely hypothetical.49
The taxation of the damages award
Once the plaintiff has received a damages award, how the award is taxed under Canada's Income Tax Act (ITA), from either the payor or payee's perspective, depends on how the award is characterised with reference to the provisions under the ITA and the existing jurisprudence, if any.50 Although the jurisprudence in this area is not always clear, general rules have emerged that can assist counsel in determining the tax liability that may arise from a damages award. Counsel must carefully scrutinise what type of damages award is being received.
Under the ITA, a taxpayer is liable to pay tax on any income arising from the non-exhaustive 'source' listed in the ITA, which is income from office, employment, business and property, or any other provision under the ITA that may give rise to tax liability.51 Further, the damages award may be taxable if it is compensation for taxable income under the ITA.52 If the award is compensation for a non-taxable capital receipt, then it is likely not taxable.53
Based on these principles, it is clear that if the damages award can reasonably be considered to be income that would otherwise be taxable under the ITA then it is taxable in the hands of the recipient.54 For example, the compensation for a finder's fee, loss of profits, or disability insurance benefits in arrears have all been held to be taxable as income.55 A payment for damaged or destroyed property is treated as a taxable capital receipt that would otherwise have been received had the property been sold.56 Punitive damages are considered to be 'windfalls' that are non-taxable.57
Damage awards for personal injury claims are treated differently. All amounts that qualify as pecuniary special or general damages are excluded from taxable income regardless of the fact that the amount of such damages may have been determined with reference to loss of earnings of the taxpayer.58
From the payer's perspective, as a general rule, a damages payment and related costs will be deductible if incurred for the purpose of earning, producing or protecting business income; acquiring or protecting a capital asset.59
The use of expert evidence is an exception to the 'opinion rule' established in Canadian common law that requires a witness to testify to facts gained from their senses.60 In addition to the principles discussed below, Canadian jurisdictions have legislated procedural preconditions that must be complied with in order for written and oral expert evidence to be admitted at trial.61
ii The role of expert evidence in calculation of damages
Expert witnesses are frequently retained in commercial and personal injury matters to assist the court in quantifying the plaintiff's loss. The purpose of expert evidence is to assist the court to understand the evidence regarding the party's loss so that the court can reach the correct damages award.
For example, accounting, financial or valuation experts are frequently called upon by parties to assist the court in the quantification of damages.62 In particular, courts routinely admit expert evidence in cases where the quantification of a financial loss or business value is complex, involves a significant dollar amount, or is in dispute between the parties.63
iii The court's role excluding and managing expert evidence
Admission of expert evidence for a damages assessment depends on whether it meets the following basic criteria established by the Supreme Court of Canada in R v. Mohan: (1) relevance; (2) necessity in assisting the trier of fact; (3) the absence of any exclusionary rule; and (4) a properly qualified expert.64 The evidence will not be admitted if the court finds that the expert opinion does not meet this criteria.
Once expert evidence is admitted, the trier of fact (typically a judge, as opposed to a jury, in commercial matters) determines how much weight is to be afforded to an expert's testimony when reaching its conclusion.65 For example, in Rousta v. MacKay, even though the court admitted the expert's opinion into evidence, it placed no weight on the opinion concerning the valuation of the plaintiff's future income-earning capacity.66 This was because the expert's methodology and assumptions had failed to account for certain factors when projecting for the plaintiff's businesses future income. In this case, the expert had made a projection assuming the plaintiff would work full-time, without considering that throughout the business' past performance the plaintiff had only worked part-time.67
iv Independence of experts
To be considered a properly qualified expert under the R v. Mohan framework, the expert must be able to fulfil his or her overriding duty to give an opinion that is impartial, independent and absent of bias.68 The impartiality and independence of an expert is a threshold requirement that the court considers in determining whether the expert is properly qualified to give an opinion on the issue in question prior to admitting his or her evidence.69 Expert evidence should be ruled inadmissible if the expert is not impartial, in the sense that they cannot objectively assess the questions at hand.70 Expert evidence is also inadmissible when it is established that he or she is providing evidence that is not the product of his or her independent judgement.71
Many provinces and territories also provide explicit requirements related to the independence of expert witnesses.72
Independence does not require that counsel and the retained expert not consult with one another in preparing for litigation. For example, in Moore v. Getahun, the Ontario Court of Appeal determined that consultation and collaboration between counsel and expert witnesses is essential to ensure that the expert's report assists the court in determining the issues. Collaboration between counsel and a retained expert does not necessarily erode the ability of the expert to remain independent and objective.73
A recent example that illustrates the importance of an independent expert is Davies v. The Corporation of the Municipality of Clarington.74 In this case, a plaintiff who had been injured retained an accountant to give evidence regarding the plaintiff's past and future earning capacity.75 Finding that the expert's evidence was 'little more than a regurgitation of what he was told' by the plaintiff, the Ontario Superior Court excluded the evidence because the expert had not independently reviewed the evidence in reaching their conclusions.76 The exclusion of this evidence left the plaintiff without an expert to assist the court in quantifying his losses. Instead, the trial judge quantified damages after considering documentary and lay witness evidence. The trial judge made no award for past or future loss of income.77 The plaintiff had requested damages in excess of US$60 million, partly comprised by his request for US$2,555,136 per annum to age 65 for past and future loss of income.78 Instead, the plaintiff was awarded general damages of US$50,000.
v Challenging experts' credentials
As discussed, an expert must be properly qualified to give evidence on the subject matter to which his or her testimony relates. An expert's credentials are considered by Canadian courts in qualifying the expert.79 Once the trial judge rules that the witness has the requisite credentials to provide opinion evidence in relation to a damages assessment, the extent of the expert's accomplishments and experience is a matter of weight to be given to that expert's opinion.80
At the admissibility or qualification stage, whether the expert has the requisite credentials or not depends on particular facts of the case, the expert and the opinion that he or she is offering.81 Canadian courts do not apply a rigid analysis in assessing an expert's credentials. As long as the trial judge is satisfied that the witness is sufficiently experienced, the court will not focus on whether the expertise was derived from specific studies or by practical training, although that may affect the weight to be given to the evidence.82
On the issue of weight, the more tailored a party's expert's credentials are to the expert opinion he or she is providing, the more likely that the party's expert's opinion will be accepted or favoured by the court.83 This is especially important if the court is faced with opposing experts who are similarly qualified. For example, in Orr v. Metropolitan Toronto Condominium Corp No. 1056, both experts were qualified to give an opinion regarding the valuation of the difference between a two-storey and three-story condominium unit. However, the court preferred the evidence of the plaintiff's expert. This was in part because one of the defendant's experts had testified that they were not familiar with the authoritative textbook for appraisers in Canada.84
vi Novel science and methods
An expert opinion that is based on novel science or a novel methodology must meet the same framework for admissibility as set out above. The Supreme Court of Canada has further held that a novel scientific theory or technique is subject to special scrutiny. Prior to being admitted, an opinion based on novel science must satisfy the basic threshold test of reliability.85 While there is a more intense investigation into the reliability and validity of the science underlying the opinion, there is no requirement that the science on which the opinion is based must be generally accepted in the scientific community.86
A court may evaluate the reliability of novel science or methods based on factors identified by the United States Supreme Court in Daubert v. Merrell Dow Pharmaceuticals, Inc, which has been adopted in Canada.87 These factors include whether the theory or technique can be and has been tested; whether the theory or technique has been subjected to peer review and publication; the known or potential rate of error or the existence of standards; and whether the theory or technique used has generally been accepted.88 This is a flexible analysis and these factors are non-exclusive.89 What factors the court considers and the weight given to each is case-specific.90
vii Oral and written submissions
In Canadian litigation, the parties in a trial before a judge may make both oral submissions and written submissions regarding the appropriate damages award if liability is established. There are typically only oral submissions in trials before Canadian juries.
Recent case law
i Six Factor Professional Services Ltd v. Aquilini Investment Group Limited Partnership
In February 2020, the British Columbia Supreme Court awarded nearly US$608,000 in damages to Six Factor Professional Services (Six Factor) for breach of contract by the Aquilini Investment Group (Aquilini). Aquilini had ordered and received Google G-suite licences from Six Factor, but terminated the agreement without paying Six Factor for its licences and services.91
The damages decision in Six Factor is demonstrative of a trial court's approach to calculating contract damages. In this case, the court concluded that Aquilini's actions constituted a straightforward breach of contract and that the only way to make Six Factor whole was to award it the sum specified in the contract, adjusted for the time value of money.
The facts of the case
In 2017, Aquilini entered into a memorandum of agreement (MoA) with Six Factor to purchase 1000 G-suite licences with a licence term of four years. The MoA stipulated that additional licences could be purchased at a predefined price, and that Six Factor would provide deployment and support services to Aquilini. Six Factor delivered the initial batch of 1000 licences: Aquilini was to pay for those 1000 licences in two equal instalments in July 2019 and July 2020. Six Factor also delivered a further 20 suites at Aquilini's request. Aquilini terminated the agreement in 2018 and paid nothing to Six Factor for the licences or services rendered, despite Six Factor having performed all of its obligations. The MoA did not contain a termination clause. At trial, Aquilini did not dispute that it had breached the MoA. The sole issue before the court was the approach to the quantification of damages.
Six Factor took the position that Aquilini had committed an anticipatory breach by repudiating the contract before performance was due. Six Factor thus sought expectation damages, which it calculated as the price Aquilini had agreed to pay for the licences and services under the MoA. In contrast, Aquilini argued that Six Factor was entitled to the profit it expected to make under the MoA, but was not entitled to a refund of the expenses incurred. Aquilini concluded that Six Factor was entitled to only $55,000, which is the profit that Six Factor would have earned after accounting for expenses. The trial judge disagreed with Aquilini, holding that the only evidence she required in order to calculate Six Factor's loss was provided by the MoA.92
In calculating damages, the trial judge paid particular attention to the time value of money. Aquilini argued that the court could not award damages for future instalments—for the July 2020 instalment, for example—since the MoA did not include an acceleration clause. The trial judge concluded, however, that an award of damages for future instalments is appropriate so long as the amount is adjusted to account for the present value of future income.93 With regard to past instalments and obligations, the trial judge noted that the sum in question must be adjusted by the appropriate interest rate.94
In calculating the final damages, the trial judge awarded Six Factor the Canadian equivalent of US$273,044 for the 1 July 2019 instalment, plus interest calculated from 1 July 2019 onwards; the present value of the Canadian equivalent of US$273,044 for the 1 July 2020 instalment, to be discounted in accordance with the Law and Equity Act; the Canadian equivalent of US$32,071.20 for the 20 additional licences; and the Canadian equivalent of US$29,818.10 for technical and training deployment.95
The significance of the decision
The Six Factor decision illustrates how, depending on the time and nature of a contractual breach, a single contract can result in different damages calculations.
ii T&C Holdings Limited v. Booster Juice Inc
In March 2020, the Ontario Superior Court of Justice held that T&C Holdings Limited (T&C), the owner of a retail shopping plaza, was entitled to a small monetary award for rental losses as a result of Booster Juice Inc's (Booster Juice) breach of a commercial lease of retail space in the shopping plaza.96 T&C, which sold the plaza in March 2016, took the position that Booster Juice's vacancy, beginning in January 2015, resulted in a lower purchase price for the plaza as a whole.
The facts of the case
T&C was the owner and landlord of a retail shopping plaza known as Town & Country Plaza until March 2016, when T&C sold the plaza in an arm's length transaction to CJ Global Investments Ltd (CJ Global). Booster Juice had operated as a tenant in the plaza starting in October 2009 and had signed a lease expiring in January 2020. The lease, among other provisions, held that if Booster Juice was in default in respect of its rent payment for a period of five days or if the defendant abandoned the leased premises, then T&C had the right to terminate the lease.97 Booster Juice abandoned the Booster Juice Premises in January 2015. T&C delivered notice to Booster Juice affirming the Lease and reminding Booster Juice of its continuing obligations. T&C only delivered a formal Notice of Termination of the Booster Juice Lease in June 2015.
One of the key questions before the court was whether Booster Juice's abandonment affected the purchase price that T&C received for the plaza as a whole. The trial judge noted that there was no direct evidence regarding the basis upon which CJ Global had determined the purchase price of the plaza.98 Instead, the parties presented opinion evidence from expert appraisers. T&C's expert evaluated the plaza using the direct capitalisation approach, which converts a single year's income expectancy into an indication of value. T&C's expert placed greater weight on the existing income in place at the time of sale. Under such an approach, Booster Juice's vacancy mattered greatly; specifically, T&C's expert equated Booster Juice's vacancy with a diminution in value of approximately $240,000. In contrast, Booster Juice's expert contended that the valuation of a plaza should include all aspects of income and expenses, without singling out one small vacancy. He concluded that Booster Juice's absence 'had no impact on the purchase price'.99
The trial judge was not persuaded by either expert's approach, even though both experts had 'respectable credentials and undoubted expertise'. The trial judge characterised both opinions as speculative and noted that only CJ Global, the purchaser, could explain whether a modest increase in rental income would have resulted in a higher offering price.100 Since neither party called upon a representative of CJ Global, the trial judge concluded that he had no evidence, apart from such documents as the agreement of purchase and sale, from which to develop reliable insight into CJ Global's decision-making process. The trial judge thus focused on the agreement of purchase and sale, which did not provide for any adjustment to the plaza's purchase price based on a change in the plaza's net rental income. The trial judge refused to find that Booster Juice's absence had any measurable impact on the price paid for the plaza.101
The significance of the decision
T&C Holdings demonstrates the importance of marshalling the necessary evidence on damages in advance for the purposes of establishing damages. It further shows that courts have the discretion to reject experts' valuation methodologies, even if those experts have good credentials and are well versed in the relevant subject matter. In this case, the experts failed to contact representatives of CJ Global and thus were unable to provide insight into CJ Global's decision-making process.
iii Pfizer Canada ULC v. Pharmascience Inc
In February 2020, the Federal Court of Appeal (FCA) dismissed an appeal by Pfizer Canada ULC (Pfizer). The FCA rejected Pfizer's argument that the court, in calculating damages, would have to account for Pharmascience's hypothetical infringement of Pfizer's patent in a 'but-for world'.102 In dismissing Pfizer's appeal, the FCA largely upheld the Federal Court's reasoning in Pharmascience Inc v. Pfizer Canada ULC.103
The facts of the case
Pfizer held a patent for pregabalin, a pain medication, since 2004. In 2013, Pharmascience received a notice of compliance (NOC) under the Patented Medicines (Notice of Compliance) Regulations, allowing Pharmascience to market a generic version of pregabalin. Pharmascience had tried to enter the market in 2011, but was unable to do so when Pfizer unsuccessfully sought an order under the Regulations prohibiting the issuance of a NOC to Pharmascience. Pharmascience thus sought damages for the sales it lost for the period of time that it was kept off the market. In response, Pfizer argued that Pharmascience was not entitled to damages because its hypothetical sales of pregabalin would have infringed Pfizer's patent at that time. Pfizer also brought a defence of ex turpi causa, a doctrine which holds that a proceeding founded on a claimant's own wrongdoing should not succeed.104
Pharmascience sought a summary trial on the question of whether Pfizer's defence of ex turpi causa by reason of patent infringement was relevant to the assessment of damages. The Federal Court granted the motion and dismissed Pfizer's defence of ex turpi causa. Assessing damages under the Regulations requires courts to compare what happened in the real world with what would have happened in a hypothetical, 'but-for world'. The trial judge held that the two worlds were interlinked: 'the absence of obstacles to market entry in the real world should prevail in the but-for world'.105 In this case, Pfizer had not objected to or opposed Pharmascience's entry to the market in the real world in 2013. Thus, the trial judge held that in the 'but-for world', Pharmascience would have entered the market and earned profits without any intervention by Pfizer.106 The trial judge thus found that Pfizer's defence of ex turpi causa was not relevant to an assessment of Pharmascience's damages. Pfizer appealed from the Federal Court's order.
The FCA dismissed the appeal with costs, and largely upheld the trial judge's reasoning. The FCA similarly noted that Pfizer did not bring any action against Pharmascience for patent infringement after Pharmascience began marketing its version of pregabalin, and also pointed out that Pfizer had confirmed on discovery that it would not have sued Pharmascience for patent infringement in the but-for world.107
The court largely accepted the Federal Court's reasons, though it noted that the trial judge should have treated as binding and dispositive the Supreme Court's decision in Sanofi-Aventis v. Apotex Inc, which, as the trial judge correctly noted, 'stands for the proposition that the absence of obstacles to market entry in the real world should prevail in the but-for world'.108 The court noted that the Supreme Court's decision was binding on both the Federal Court and the FCA.
The significance of the decision
The Pfizer decision illustrates how best to approach the real world/but-for world dichotomy. Clearly, the two concepts are not entirely separate: actions in the real world will determine a court's assessment of what would have occurred in a but-for world.
Civil justice reforms
1 Junior Sirivar is a partner in McCarthy Tetrault's litigation group and co-chair of the firm's international arbitration group. Andrew Kalamut is a partner in McCarthy Tétrault litigation group and a member of the firm's international arbitration group. The authors thank Bonnie Greenaway, Morgan Watkins and Preston Lim, students-at-law, for their assistance with writing this chapter.
2 2105582 Ontario Ltd (Performance Plus Golf Academy) v. 375445 Ontario Limited (Hydeaway Golf Club), 2017 ONCA 980 at Paragraph 58 (CanLII) [Performance Plus]; citing Milina v. Bartsch (1985), 49 BCLR (2d) 33 at p. 78, 1985 CanLII 179 (BC SC), McLachlin J. (as she then was); Barber v. Vrozos, 2010 ONCA 570 at Paragraph 86 (CanLII); Rougemont Capital Inc v. Computer Associates International Inc, 2016 ONCA 847 (CanLII), at Paragraph 44 (CanLII) [Rougemount].
3 S M Waddams, The Law of Damages (Carswell: 2018) (loose-leaf, online version) at Chapter 1.10 [Waddams].
4 Performance Plus, note 2 at Paragraph 58.
5 Andrews v. Grand & Toy Alberta Ltd,  2 SCR 229 at p. 230, 1978 CanLII 1 (SCC) [Andrews].
6 Performance Plus, note 2 at Paragraph 60.
7 Jeffrey Berryman, Remedies: Cases and Materials (Toronto: Emond Montgomery Publications, 2012) at p. 1038.
8 Waddams, note 3 at Chapter 1.30.
9 id. at Chapter 1.10.
10 Borrelli v. Chan, 2018 ONSC 1429 at Paragraph 942 (CanLII) [Borrelli], aff'd SFC Litigation Trust v. Chan, 2019 ONCA 525.
11 Waddams, note 3 at Chapter 1.660.
12 Rougemount, note 2 at Paragraphs 45, 47 and 50; Waddams, note 3 at Chapter 2.270; Asamera Oil Corp Ltd v. Sea Oil & General Corp,  1 SCR 663 at pp. 664–65, 1978 CanLII 16 (SCC) [Asamera Oil].
13 Rougemount, note 2 at Paragraph 50.
14 Kinbauri Gold Corp v. Iamgold International African Mining Gold Corp,  246 DLR (4th) 595 at Paragraph 125, 2004 CanLII 36051 (ONCA) [Kinbauri].
15 Waddams, note 3 at Chapter 1.660.
16 Kinbauri, note 14 at Paragraph 126.
17 Asamera Oil, note 12 at pp. 664–65.
18 Agribrands Purina Canada Inc v. Kasamekas, 2011 ONCA 460 at Paragraphs 56,68 (CanLII).
19 id. at Paragraphs 44–70; Expert evidence is discussed in full, below.
20 For a full discussion regarding expert methodology, see Farley J Cohen & Prem M Lobo, 'Business value as a measure of loss in litigation contexts: reflecting business “reality” over hypothetical “fantasy” ' (2011) Adv J [Cohen & Lobo].
21 Hamilton v. Open Bakery, 2004 SCC 9 at Paragraph 20 (CanLII).
22 Ford Motor Company of Canada, Ltd v. Ontario Municipal Employees Retirement Board, 79 OR (3d) at Paragraphs 38–40, 2006 CanLII 15 (ONCA).
23 Cohen & Lobo, note 20.
24 Schenker v. Scott, 2014 BCCA 203 at Paragraph 72 (CanLII) [Schenker]; El-Khodr v. Lackie, 2017 ONCA 716 at Paragraph 9 (CanLII).
25 IBM Canada Limited v. Waterman, 2013 SCC 70 at Paragraphs 90–91 (CanLII); Schenker, note 24 at Paragraph 76; Hallatt v. The Queen, 2001 CanLII 590 at Paragraph 30;  1 CTC 2626.
26 Waddams, note 3 at Chapter 3.990.
27 RSC, 1985, Chapter C-52, Section12.
28 Gatineau Power Co v. Crown Life Insurance Co,  SCR 655 at p. 657,1945 CanLII 33 (SCC); Batavia Times Publishing Co v. Davis, (1978), 20 OR (2d) 437 (HC), aff'd (1979), 26 OR (2d) 249 and 800 (CA).
29 Wei v. Mei, 2018 BCSC 1057 at Paragraph 54 (CanLII), aff'd Wei v. Li, 2019 BCCA 114.
30 Naturex Inc v. United Naturals Inc, 2016 BCSC 1502 at Paragraph 21 (CanLII).
32 Waddams, note 3 at Chapter 7.330.
33 Waddams, note 3 at Chapter 7.1000.
34 241 Pizza (2006) Ltd v. Loza, 2017 ONSC 4171 at Paragraphs 16-17 (CanLII).
36 id. at Paragraph 16.
37 Judgment Interest Act (Alta); Court Order Interest Act (BC); Court of Queen's Bench Act (Man); Judicature Act (NB), Section 45; Judgment Interest Act (Nfld & Lab); Judicature Act (NWT), Sections 55, 56, 56.1, 56.2; Judicature Act (NS), Section 41; Courts of Justice Act (Ont), Sections 127-8; Judicature Act (PEI), Sections 56-60; Pre-judgment Interest Act (Sask). Also see Waldron, The Law of Interest in Canada (Toronto, Carswell, 1992) at pp. 131–59.
38 Waddams, note 3 at Chapter 7.470. See Ontario, for example, which sets out the applicable interest rate in the Courts of Justice Act, RSO 1990, Chapter C. 43 at Section 127(1).
39 See Bank of America Canada v. Mutual Trust Co, 2002 SCC 42 (CanLII). In that case, the Supreme Court of Canada held, despite Ontario's Courts of Justice Act, compound interest could be awarded in some circumstances at common law.
40 For a full discussion, see Mark M Orkin, The Law of Costs, 2ed (Aurora, Ontario: Canada Law Book, 2015) (Carswell: 2018) at Chapter 205.2 [Orkin].
41 For example, see Ontario's Courts of Justice Act, RSO 1990, Chapter C-43, at Section 131(1); Rules of Civil Procedure, RSO 1990, Chapter C-43 at Section 57.01(1). In The Law of Costs, Orkin has also classified several categorical exceptions to the general rule that costs follow the result, following the case of Cooper v. Whittingham: (1) misconduct of the parties; (2) miscarriage in the procedure; (3) oppressive and vexatious conduct of the proceedings; and (4) other cases.
42 Inter-Leasing, Inc v. The Minister of Revenue, 2014 ONCA 683, at Paragraph 5.
43 Orkin, note 40 at Chapter 205.2
44 Boucher et al. v. Public Accountants Council for the Province of Ontario et al., 2004 CanLII 14579 at Paragraphs 24, 71 OR (3d) 291 (ONCA).
46 The Queen in Right of Ontario v. Jennings,  SCR 532 at p. 541, 966 CarswellOnt 61; Cunningham v. Wheeler; Cooper v. Miller; Shanks v. McNee  1 SCR 359 at pp. 417–18, 1994 CanLII 120 [Cunningham].
47 Cunningham, note 45; Waddams, note 3 at Chapter 3.950.
48 Hodgkinson v. Simms,  3 SCR 377 at p. 399, 1994 CanLII 70.
50 RSC, 1985, c. 1 (5th Supp) [ITA]; Schwartz v. Canada,  1 SCR 254 at Paragraph 52, 1996 CanLII 217 [Schwartz].
51 ITA, note 50 at Section 3.
52 See Canada Revenue Agency, Interpretation Bulletin IT-365R2, 'Damages, Settlements and Similar Receipts' online: https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/it365r2/archived-damages-settlements-similar-receipts.html. [Bulletin IT-365R2].
53 Windfalls, such as lottery winnings, inherited amounts, gifts and other gratuitous payments are not taxable because they lack the essential elements of 'income'. See See David Wentzell, 'Taxation of Income from Unlisted Sources: An Analysis of Schwartz v. The Queen', Report of Proceedings of Forty-Eighth Tax Conference, 1996 Tax Conference (Toronto: Canadian Tax Foundation, 1997), 67:1-15.
54 Bulletin IT-365R2, note 51; Schwartz, note 50 at Paragraph 52.
55 CED 4th (online), Income Tax, 'Damages and Settlements' at (IV.7.(a)) Section 301 [CED].
57 Bellingham v. R,  1 CTC 187 at Paragraphs 2, 46, 1995 CarswellNat 881 (FCA) [Bellingham].
58 Bulletin IT-365R2, note 51; Bellingham, note 57 at Paragraph 45; CED, note 55 at (IV.7.(b)) Section 303.
59 See Canada Revenue Agency, Interpretation Bulletin IT-467R2 'Damages, Settlements and Similar Receipts' online: https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/it467r2/archived-damages-settlements-similar-payments.html.
60 Gordon D. Cudmore, Civil Evidence Handbook (Carswell: 2018) (loose-leaf, online version) at Chapter 14.1 [Cudmore].
61 For more information relating to the jurisdiction, see the Provincial Rules of Practice and Provincial and Federal Evidence Acts.
62 For further discussion on how Canadian courts weigh the evidence of parties, see Cudmore, note 60 at Recommended Readings: Prem M Lobo and Peter J Henein, 'Credibility under scrutiny: A study of the weight placed on expert valuation and damages evidence in Canadian court judgments'.
64 R v. Mohan,  2 SCR 9 at pp. 20-25, 1994 CanLII 80 [Mohan].
65 Cudmore, note 59 at Chapter14.1; Mohan, note 64 at Paragraph 149.
66 Rousta v. MacKay, 2018 BCCA 29 at Paragraph 22-28 (CanLII).
68 White Burgess Langille Inman v. Abbott and Haliburton Co, 2015 SCC 23 at Paragraphs 32, 46 (CanLII).
69 id. at Paragraphs 52–54.
70 id. at Paragraph 11.
72 In Nova Scotia, for example, the Civil Procedure Rules require that an expert's report be signed by the expert who must make (among others) the following representations to the court: that the expert is providing an objective opinion for the assistance of the court; that the expert is prepared to apply independent judgement when assisting the court; and that the report includes everything the expert regards as relevant to the expressed opinion and draws attention to anything that could reasonably lead to a different conclusion (Section 55.04(1)(a), (b) and (c)). The Queen's Bench Rules (Saskatchewan), Section 5-37; Supreme Court Civil Rules, B.C. Reg. 168/2009, Section 11-2(1); Rules of Civil Procedure, RRO 1990, Regulation 194, Section 4.1.01(1); Rules of Court, YOIC 2009/65, Section 34(23). Moreover, the rules in Saskatchewan, British Columbia, Ontario, Nova Scotia, Prince Edward Island, Quebec and the Federal Courts require experts to certify that they are aware of and will comply with their duty to the court: Saskatchewan Queen's Bench Rules, Section 5-37(3); British Columbia Supreme Court Civil Rules, Section 11-2(2); Ontario Rules of Civil Procedure, Section 53.03(2.1); Nova Scotia Civil Procedure Rules, Section 55.04(1)(a); Prince Edward Island Rules of Civil Procedure, Rule 53.03(3)(g).
73 2015 ONCA 55 at Paragraphs 56, 63–66, leave to appeal dismissed, 2015 CanLII 58374 (SCC).
74 2018 ONSC 4370 (CanLII)
75 id. at Paragraph 79.
76 id. at Paragraphs 95–96, 113–114.
77 id. at Paragraph 451.
78 id. at Paragraph 6.
79 Sopinka, Lederman & Bryant, The Law of Evidence in Canada (Toronto: LexisNexis 2018) at p. 854. [Sopinka].
81 R v. Pham, 2013 ONSC 4903 at Paragraph 31. In the context of a drug case involving a large quantity of heroin, Durno J set out a lengthy list to consider in determining whether a proposed expert witness is adequately qualified. The factors listed are as follows: the manner in which the witness acquired the special skill and knowledge upon which the application is based; the witness' formal education (i.e., degrees or certificates); the witness' professional qualifications (i.e., a member of the College of Physicians and Surgeons); the witness' membership and participation in professional associations related to his or her proposed evidence; whether the witness has attended additional courses or seminars related to the areas of evidence in dispute; the witness' experience in the proposed area or areas; whether the witness has taught or written in the proposed area or areas; whether, after achieving a level of expertise, the witness has kept up with the literature in the field; whether the witness has previously been qualified to give evidence in the proposed area or areas, including the number of times and whether the previous evidence was contested; whether the witness has not been qualified to give evidence in the proposed area or areas and if so, the reason or reasons why; and whether previous case law or legal texts have identified the contested area as a proper area for expert evidence and, if so, who might give the evidence. After considering these factors, Durno J found that a police officer could testify (with the exception of a few issues) based on his years of experience dealing with heroin users, although he had no scientific background.
82 Sopinka, note 79 at p. 853 (emphasis added).
83 See for example: Municipal Property Assessment Corp, Region No. 15 v. Clublink Corp, 2009 64 OMBR 225; CarswellOnt 8241. The defendant put forth an expert to opine on the valuation of golf course facilities. The expert had numerous professional certifications specifically regarding the appraisal of golf courses, and was considered a 'leading authority'.
84 Orr v. Metropolitan Toronto Condominium Corp No. 1056, 2016 ONSC 7630 at Paragraphs 28, 33, 2016 CarswellOnt 19819.
85 Mohan, note 64 at Paragraph 28.
86 R v. J-LJ,  2 SCR 600 at Paragraph 34, 2000 SCC 51 (CanLII).
87 id. at Paragraph 33.
89 R v. Trochym, 2007 SCC 6 at Paragraph 139 (CanLII).
90 id. at Paragraphs 139–141.
91 Six Factor Professional Services Ltd v. Aquilini Investment Group Limited Partnership, 2020 BCSC 127 [Six Factor].
92 id., at Paragraph 23.
93 id., at Paragraph 19.
94 id., at Paragraph 12.
95 id., at Paragraph 26.
96 T&C Holdings Limited v. Booster Juice Inc, 2020 ONSC 1942 [T&C Holdings].
97 id., at Paragraph 4.
98 id., at Paragraph 16.
99 id., at Paragraph 24.
100 id., at Paragraph 26.
101 id., at Paragraph 29.
102 Pfizer Canada ULC v. Pharmascience Inc, 2020 FCA 55 [Pfizer].
103 Pharmascience Inc v. Pfizer Canada ULC, 2019 FC 1271 [Pharmascience Inc].
104 id., at Paragraph 2.
105 id., at Paragraph 21.
106 id., at Paragraph 24.
107 Pfizer, note 102, at Paragraph 3.
108 Pharmascience Inc, note 103, at Paragraph 21.