Expectation Dmgs
Breach of K: P is entitled to be compensated--subject to mitigation--to the extent nec to place P in the same position as if the K had been performed. (RG McLean)
Double Recovery (excess comp to P is a burden on D)
Therefore, any costs that would’ve been incurred without a breach (and any work accomplished despite the breach) stands as a debit against P’s recovery.
(RG McLean) This incl:
· purchase price (of press);
· costs of supervision/overhead;
· expenses and time of work actually done.
Deducted from gross but not net profit.
M.G. Baer criticism: by deducting the capital cost from P’s recovery for a ltd period (2 yrs), the entire capital expense is attributed to the first 2 yrs of operation. This is an error, b/c at end of 2 yrs, P would have a yrs profit and a 2 yr old press (orig value - depreciation).
Loss of Expected Future Profits
Historically: irrecov b/c too remote
Now: recoverable. CL codified in Sale of Goods Act: The measure of dmgs for breach of a W is the estimated loss directly and naturally resulting in the ord course of events from the breach of W. What is “directly and naturally”?
Lost Future Profits not recov where P can obtain substitute goods (mitigation). (Simon v. Parsons).
Loss of future profits are recoverable if they should have been w/in the reas contemplation of the parties or ought reas to have been foreseen by the parties. (Canlin) P recovered lost repeat orders from pool cover customers where D supplied material not fit for its specified purpose.
· Impt: no substitute goods avail; injury to rep involved; P was v. specific about needs
The burden of proof lies w/P. (Canlin)
The amt of future profits and period for which they will be allowed will depend on the facts of each case. Although such dmgs may be difficult to assess, the ct should make every effort (otherwise shirking its responsibilities).
(Canlin) Assessment based on:
· past history of P w/customers and an estimate of expected future biz
· loss of goodwill and rep
· an estimate of time before P could re-enter the field (4 years)
(Prof: Should 4 yrs of capital investment be deducted?)
Recov of Lost Profits limited to what is reas. (Sunnyside Green Houses).
Expectectation Dmgs Cases
Canlin Ltd. v. Thiokol Fibres Canada (1983) (OntCA): T entered K w/CT to supply fabric for pool covers. CT intended to enter the ready market for such covers in the US. The material supplied by T was unfit for the intended purpose, and CT’s rep was trashed.
Held: (Cory JA): Loss of future profits are recoverable if they should have been w/in the the contemplation of the parties or ought reas to have been foreseen by the parties. The burden of proof lies w/P. The amt of future profits and period for which they will be allowed will depend on the facts of each case. Although such dmgs may be difficult to assess, the ct should make every effot (otherwise shirking its responsibilities).
R.G. MacLean Ltd. v. Cdn Vickers Ltd (1971) (OntCA): P bought a printing press from D. Difficulties arose w/the press and it became apparent D couldn’t fix it. P rejected an offer by D to refund payments in exchange for its return, and therefore incurred further expenses and losses.
Held: (Arnup J): P is entitled to be compensated--subject to mitigation--to the extent nec to place P in the same position as if the K had been performed. Therefore, any costs that would’ve been incurred without a breach (and any work accomplished despite the breach) stands as a debit against P’s recovery. This incl: purchase price; costs of supervision/overhead; expenses and time of work actually done.
Reliance Dmgs
P must elect b/w Rel (loss of capital) and Exp interests (loss of net profits). (Sunshine Vacations) This choice is unfettered. (CCC Films).
but:
Rel dmgs cannot exceed exp interest. (Bowlay; Sunshine Vacation)
· otherwise, P is over-compensated;
· ensures D is not insurer for P;
· more consistent with true principle of compensation.
When are Rel Dmgs a better choice than Exp dmgs?
· Remoteness: P must show quantifiable dmgs for exp interest. Where exp dmgs are speculative or v. remote, P might have a very difficult burden of proof. For rel dmgs, D bears burden of proving P would’ve suffered net loss.
(Sunshine Vacation) P could not establish lost profits (exp interest) on travel agencies would have exceeded the capital investment (reliance interest).
· Rel dmgs include gains prevented, opportunities lost.
· Rel dmgs may include pre-K expenditures.
Bad Bargain (D’s breach saves P from losing money)
Where D can establish P would have suffered a net loss had K been completed, only nominal dmgs will be awarded. (excess to P=punishment of D)
(Bowlay) Losses resulted from bad bargain and inefficient work practices, not D’s breach. Breach saved B from further losses.
Onus on D: D must defeat rebuttable pres that P would at least recover expenses.
(Sunshine Vacation) D could not establish P would not recover capital investment in travel agencies, therefore rel dmgs awarded.
Burden of Proof: (Amman Aviation, Aust) Maj applied bal of probs: 20% chance P would fail to recoup rel interest was insufficient to rebut pres. Deane J would have deducted 20% from the recovery of rel dmgs.
P’s counter-argument: Much of expenses were capital costs to be recovered over future Ks which P was no longer in position to enter (rejected in Bowlay).
Pre-K Expenditures
P may recover all pre-K expenditures reas in the contemp of the parties as likely to be wasted if the K was broken. (Anglia TV)
Ogus: better solution mt be to allow P recovery for all costs after substantial agreement.
Prof: perhaps better if dmgs viewed as protecting exp interest.
Rebuttable presumption: P would have recovered expenditures w/o breach.
Negligent Misrep (Tort)
Purposes of dmgs for neg misrep is to put P in same position as if misrep had never been made. P must establish position on bal of probs. (Rainbow Industrial).
Measure of dmgs for neg misrep is the tortious measure: P limited to Rel dmgs (expenditures - actual value obtained). ie. amt nec to restore P to same position as if neg misrep had never been made (subj to remoteness). (Beaver Lumber)
(Beaver Lumber) Dmgs=dif b/w value of worker’s services and amt paid to him, plus consequential losses (including total additional amts P spent on the prop minus the actual value). Ct assumed worker’s services were valueless.
Restricting recov to rel interest allows cts a degree of lattitude: ie. cts can award above and below the trad concept of rel interest. For ex:
Lost opportunities may be incorporated into Rel dmgs. ie. Rel dmgs can include expected profits. (V.K. Mason)
(V.K. Mason) P was not fully paid b/c D bank neg misrep’d a developer’s financing. Rebuttable pres that P would have found work elsewhere if not induced by misrep. Lost profits on this K a reas estimate of missed op. (altho remoteness applies: if exceptional K, perhaps not entitled to that amt).
If induced into K by neg misrep, P enjoys a rebuttable pres that they would not have entered K w/o the neg misrep and should therefore be placed status quo ante. As an innocent victim, P should not bear burden of negativing every hypothetical situation.
D bears burden of proving P would still have entered K w/o neg misrep. (Rainbow Industrial Caterers).
Double Recovery
Net profit + Rel dmgs is not double compensation.
Gross profit + Rel dmgs is double comp. (b/c gross profits includes expenses).
Restitutionary Dmgs
Underlying principle for dmgs: compensation for what P has lost.
but: sometimes cts stray from this principle to provide restitionary dmgs.
Purpose: not compensation, but the prevention of D’s unjust enrichment. Focus is on D’s wrongful gain, not P’s loss. D is forced to disgorge any benefit arising from her wrong-doing.
3 Elements of Restit Dmgs:
1) D’s wrongful conduct must have resulted in unjust enrichment to D.
2) P must be “deprived” of something by D (tho not nec value; can be an op to negotiate or autonomy).
(Wrotham) Development on P’s prop in breach of RC caused no loss of prop value, but P was deprived of op to demand a reas price for relaxing the RC.
3) No juristic reason for D retaining benefit (such as a legal relationship making D’s retention of the benefit legal).
Measurement: Methods of Calculation
1) Opportunity Cost
A) P entitled to recover price they could’ve reas demanded from D for D’s conduct.
(Wrotham, UK) Proper sum of recovery was the reas cost of obtaining a relaxation of the RC from P. This sum is equal to a reas percentage of D’s anticipated profits (5%).
(Jaggard, UK) Aff’d Wrotham as correct on even compensatory principles. P granted reas licence fee for D’s access to new house in breach of RC.
All factors influencing the reas price P might have demanded must be considered.
(Seager) Dmgs should be based on the reas comp for use of confidential info. B/c info was special, P gets a sum equal to the total of reas royalties. Info then becomes D’s.
· Non-Special Info: if info could be obtained from a competent consultant, then dmgs=consulting fee.
· Special Info: If info involved an “inventive step”, dmg=price willing buyer would pay for info.
Focus is on D’s wrongful gain, not P’s loss.
(Strand) If D wrongfully made use of P’s goods (theatre switchboards) for its own purposes, it must pay a reas hire on them, even if P has in fact suffered no loss, even if P could not have used themselves, or had a substitute avail. Wrongdoer can’t be better of for not asking permission. If D merely retained the goods, and didn’t use them, it would not be liable for hiring charge. Hiring charge runs until D disposes of goods, or until judgment.
B) P entitled only to nominal dmgs. (Bredero Homes, UK)
(Bredero Homes) UKCA unwilling to extend restit to breach of K generally, and rejected argument that P was deprived of an op to bargain as “a fiction”. Reconsidered in Jaggard.
2) Net Profit
In trademark, patent and confidential info cases, P may elect b/w claiming dmgs sustained from the wrongful act or the net profit D obtained from the wrongful act. (Peter Pan) Net profit awarded b/c the manufacture of womens’ undergarments “necessarily and inevitably” involved the use of confidential info. Otherwise, probably apportionment.
3) Apportionment: used where D mixes their own industry w/P’s “stolen” prop; therefore, awarding all net profit to P would over-compensate.
Onus on D to establish their proportion of the final product.
Dmgs=Portion of profit attributable to the appropriation of P’s prop. (ie. Enhancement in Sales).
(Dubliner) P only entitled to that portion of D’s profits attributable to use of P’s trademark after expiration of K (20% of net).
(Edwards) P granted 1/3 of net profits b/c 1/3 of caves for which D was offering tours were beneath P’s prop.
4) Savings Comparison
(Townsview Properties) P entitled to amt D saved by encroaching onto P’s land for access and storage while constructing a mall.
Can Restit dmgs exceed Exp dmgs? No clear authority.
Argument: Restit dmgs for breach of K should be ltd to the purchase price.
Rationale:
· Cts don’t want to reward P for a bad bargain (Bowlay)
· purpose of restit dmgs is to prevent unjust enrichment. If D can realize a greater profit
by breaching the K, it is just enrichment, and D should not have to share profits w/P
beyond the purchase price).
Restitutionary Dmgs Cases
Wrotham Park Estate Co. v. Parkside Homes Ltd (1974) (Ch.): D built 14 homes on P’s prop in breach of a restrictive cov. An inj to demolish the houses was refused. The ct had to determ whether the proper measure of dmgs was the dimin in land value (0) or the value of D’s use of the prop. If latter, how to calculate?
Held: (Brightman J.): P should be placed in the same postition as if the RC had not been broken. D could’ve avoided breaching RC in 2 ways: not developing, or getting P to relax the RC. Therefore, the proper sum of recovery is the reas cost of obtaining a relaxation of the RC from P. This sum is equal to a reas percentage of D’s anticipated profits (5%).
Strand Electric Engineering Co. Ltd. v. Brisford Entertainments ltd (1952) (UKCA): D allowed a theatre company (BT) to take possession of a theatre before completion of the purchase. P lent BT switchboards until permanent boards could be made and installed--when BT refused delivery of the perm bds, P accepted rental on the orig bds. D then took possession of the theatre and retained the bds, disclaiming any responsibility for rental to P.
Held: (Denning LJ): If D wrongfully made use of P’s goods for its own purposes, it must pay a reas hire on them, even if P has in fact suffered no loss, even if P could not have used themselves, or had a substitute avail. Wrongdoer can’t be better of for not asking permission. If D merely retained the goods, and didn’t use them, they would not be liable for hiring charge. Hiring charge runs until D disposes of goods, or until judgment.
Peter Pan Manufacturing Corp v. Corsets Silhoutte Ltd. (1964) (Ch.): Ct found D had wrongfully manufactured and sold womens’ undergarments that involved confidential info supplied by P, and granted an inj to stop D. What dmgs is P entitled to?