Damages

How BC law treats it

Damages are the main remedy in civil cases. In contract, expectation damages put the claimant where it would have been if the contract had been performed, and reliance damages repay wasted expenditure. Recoverable loss must be within the reasonable contemplation of the parties (Hadley v Baxendale (1854), 156 ER 145), and mental distress damages are available in contract only where that loss was in reasonable contemplation (Fidler v Sun Life Assurance Co of Canada, 2006 SCC 30). In tort, damages restore the claimant to its position before the wrong. Nominal damages mark a breach with no proven loss. Aggravated damages compensate for intangible injury caused by high handed conduct. Punitive damages punish and are rare, reserved for malicious or outrageous conduct where other awards are not enough (Whiten v Pilot Insurance Co, 2002 SCC 18). Canada has no treble damages. A liquidated damages clause that is a genuine pre-estimate of loss is enforceable, but a clause that operates as a penalty may not be enforced as written. The claimant must take reasonable steps to mitigate its loss, and cannot recover what it could reasonably have avoided. Courts also add prejudgment and post-judgment interest under the Court Order Interest Act. Other remedies include injunctions, specific performance, rescission and an accounting of profits. Under the Limitation Act a claim must generally start within two years after it is discovered (s. 6). Claims up to $5,000 go to the Civil Resolution Tribunal, claims up to $35,000 to Small Claims Court in the Provincial Court, and larger claims to the BC Supreme Court.

What it means for your business

Knowing how damages are measured tells a business what a claim is really worth before it spends money suing, and what its exposure is when it is sued. Limitation of liability and liquidated damages clauses, careful records of losses, and prompt mitigation all affect recovery. Picking the right forum and starting before the limitation period runs out are basic steps that decide many cases. Example: A Victoria caterer's refrigeration contractor installs faulty equipment and food spoils. The caterer recovers the cost of the spoiled stock and lost profit on a cancelled event, but not profits it could have saved by renting a replacement unit promptly.

Risks and common mistakes

Claiming losses that were not reasonably foreseeable when the contract was made. Failing to mitigate, such as by not finding a replacement supplier or tenant. Expecting punitive or treble damages in an ordinary commercial dispute. Drafting a liquidated damages clause that is really a penalty. Waiting past the two year limitation period while negotiating.