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Contract - Damages - Loss of Chance

Torts - Damages - Loss of Chance

Trillium Motor World Ltd. v. Cassels Brock & Blackwell LLP (Ont CA, 2017)

In this complex class action case the Court of Appeal considers damages for loss of chance, in both contract and tort:
[261] Trillium’s loss of chance claim raises issues of concurrent liability in contract and tort. The question whether an action for damages for a lost chance sounds in tort is unsettled under the current Canadian jurisprudence. However, the doctrine of lost chance in contract law has been expressly recognized both in Canada and England: Chaplin v. Hicks, [1911] 2 K.B. 786; Webb & Knapp (Canada) Limited v. City of Edmonton, 1970 CanLII 173 (SCC), [1970] S.C.R. 588; St. Thomas Subdividers Ltd. v. 639373 Ontario Ltd. (1996), 1996 CanLII 575 (ON CA), 91 O.A.C. 193 (C.A.).

[262] The distinction between loss of chance claims in contract and claims for damages in tort is important because, in contract law, proof of damage is not part of the liability inquiry. In contrast, in tort law, liability rests not only on proof of a breach of the applicable duty of care but, as well, on a showing by the plaintiff that the defendant’s conduct caused a loss.

[263] In a solicitor’s negligence case like this one, where there is concurrent liability in contract and tort, the law is clear that a plaintiff may advance a claim for damages for “loss of chance”. The leading case on the loss of chance to obtain a benefit or avoid a loss in the solicitor’s negligence context is the English Court of Appeal’s decision in Allied Maples Group Ltd. v. Simmons & Simmons (a firm), [1995] 4 All E.R. 907. In Allied Maples, the defendant solicitors negligently failed to warn their clients of the consequences of deleting a warranty in an agreement of purchase and sale. The warranty stated that there were no existing or contingent liabilities on any leaseholds held by the vendor’s subsidiary. In fact, there were such liabilities, and the plaintiff was bound by them.

[264] The plaintiff sued its solicitors, arguing that if it had been properly advised, it would have successfully negotiated some level of protection from liability or, alternatively, walked away from the transaction. In an argument that mirrors Cassels’ position on this appeal regarding the Canada Conflict, the solicitors countered that they were not liable because there was no causal link between the breach and the damages.

[265] The Court of Appeal held that this argument confused the issues of causation and damages. The headnote of the case captures the court’s key holdings:
Once the plaintiff proved on the balance of probability as a matter of causation that he would have taken action to obtain a benefit or avoid a risk, he did not have to go on to prove on the balance of probability that the third party would have acted so as to confer the benefit or avoid the risk to the plaintiff. Instead, the plaintiff was entitled to succeed provided he showed that there was a substantial, and not merely a speculative, chance that the third party would have taken the action to confer the benefit or avoid the risk to the plaintiff. The evaluation of a substantial chance was a question of quantification of damages, the range lying somewhere between something that just qualified as real or substantial on the one hand and near certainty on the other.
[266] The majority dismissed the solicitors’ appeal because the plaintiff had established that it would have negotiated the warranty issue if it had been properly advised, and there was a substantial chance that it would have obtained partial or full protection from the leasehold liabilities: see Lawyers’ Professional Liability, supra, at p. 227.

[267] In Ontario, Folland v. Reardon (2005), 2005 CanLII 1403 (ON CA), 74 O.R. (3d) 688 (C.A.), is the leading case on loss of chance in solicitor’s negligence. In Folland, the plaintiff sued his former lawyer for the alleged negligent conduct of a sexual assault trial. The plaintiff argued that, but for his lawyer’s negligence, he would have been acquitted. This court held that the claim raised a genuine issue for trial.

[268] Justice Doherty, writing for the court, went on in obiter to consider the plaintiff’s additional argument that, as a result of his lawyer’s negligence, he had lost the chance to be acquitted. This claim was novel, arising as it did in the criminal law context. The court considered the relevant case law and held, at para. 73:
Whatever the scope of the lost chance analysis in fixing liability for tort claims based on personal injuries, lost chance is well recognized as a basis for assessing damages in contract. In contract, proof of damage is not part of the liability inquiry. If a defendant breaches his contract with the plaintiff and as a result a plaintiff loses the opportunity to gain a benefit or avoid harm, that lost opportunity may be compensable. As I read the contract cases, a plaintiff can recover damages for a lost chance if four criteria are met. First, the plaintiff must establish on the balance of probabilities that but for the defendant’s wrongful conduct, the plaintiff had a chance to obtain a benefit or avoid a loss. Second, the plaintiff must show that the chance lost was sufficiently real and significant to rise above mere speculation. Third, the plaintiff must demonstrate that the outcome, that is, whether the plaintiff would have avoided the loss or made the gain, depended on someone or something other than the plaintiff himself or herself. Fourth, the plaintiff must show that the lost chance had some practical value.
[269] The Folland court concluded that a lost chance claim was not available to the plaintiff on the facts of the case; among other reasons, it held, at para. 92, that “public policy would not countenance a damage award” in circumstances where, on the trial court’s findings, the plaintiff probably committed the crime for which he was charged.

[270] Recently, in Berry v. Pulley, 2015 ONCA 449 (CanLII), 335 O.A.C. 176, at para. 70, this court described a “two-step framework” for the determination of a loss of chance claim. Associate Chief Justice Hoy explained, at para. 72, that the court must first determine if the four criteria set out in Folland are met. If they are, then the court proceeds to the second step and “will award damages equal to the probability of securing the lost benefit (or avoiding the loss) multiplied by the value of the lost benefit (or the loss sustained)”.

[271] More recently still, in Jarbeau v. McLean, 2017 ONCA 115 (CanLII), this court restated the principles that govern a loss of chance claim in the context of an action for solicitor’s negligence. Justice Pardu, writing for the court, quoted from para. 73 of Folland, set out above, and stated, at paras. 27-28:
Where a plaintiff in a tort action arising out of solicitor’s negligence can establish on the balance of probabilities that but for the [solicitor’s] negligence he or she would have avoided the loss, he or she should be fully compensated for that loss.

Where a plaintiff can only establish that but for the solicitor’s negligence he or she lost a chance to avoid a loss, a claim for breach of contract may permit recovery for the value of that chance.

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