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Damages - But-for Measure of Damages. Truong v. Jeweler’s Mutual Insurance Company
In Truong v. Jeweler’s Mutual Insurance Company (Ont CA, 2024) the Ontario Court of Appeal dismissed a jewelry insurer's appeal, here where a central issue was whether the insured actually owned the stolen jewels.
Here the court addresses issues of 'but for' and 'actual cash value' measures of damage:[4] The trial judge found in favour of the respondents and awarded them $502,100 as compensatory damages for the loss of the jewellery. He also awarded a further $45,000 as punitive damages. He was of the view that the respondents never should have been put to the proof of their pre-Policy ownership of the jewellery because Jeweler’s Mutual accepted the respondents’ ownership when it issued the Policy – a policy it admitted had not been the result of any material misrepresentation. By not paying, and defending, on the basis that once there was a loss the respondents had to prove pre-Policy ownership, Jeweler’s Mutual attempted to impose an obligation on the respondents that would not have been reasonably expected by an insured and arrogated unto itself an un-bargained for right, in bad faith.
[5] Jeweler’s Mutual does not challenge, on appeal, the trial judge’s findings that the respondents owned the jewellery and that it was stolen from them as they alleged. It asserts, however, that there was no legal basis for an award of punitive damages, and that the compensatory damages were assessed on an incorrect principle.
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[8] There was also no reversible error in the trial judge’s calculation of compensatory damages in the sum of $502,100 to reflect the loss payable under the Policy. Although the trial judge was in error to say, at one place in his reasons, that Jeweler’s Mutual was not permitted to rely on provisions of the Policy that specified what would be paid in the event of a loss, the error was of no moment. The trial judge calculated the loss on the basis of the appraised values of the jewellery reflecting its replacement cost, which was one of the bases the Policy prescribed for settlement of a loss. Jeweler’s Mutual led no evidence that the other basis in the Policy, actual cash value, was less than the appraised values, and the evidence it points to on appeal does not justify that conclusion.
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[47] Jeweler’s Mutual submits that compensatory damages should be calculated so as to put a plaintiff in the position they would have been in had the breach not occurred, but that in doing so the terms of the contract cannot be ignored. It submits that the trial judge erred when he found that Jeweler’s Mutual could not rely on terms of the Policy that stipulate what would be paid in the event of a loss and instead valued the loss in accordance with the appraisals submitted at the time of the Policy.
[48] Although it acknowledges that the appraisals reflected the replacement value of the items, and this was one of the payment options under the Policy, it argues that another option was to pay the “actual cash value” of the jewellery. While that term is not defined in the Policy, Jeweler’s Mutual submits it has an equivalent meaning to market value.
[49] I agree with Jeweler’s Mutual that in assessing damages for breach of contract, where there are several ways in which the contract may be performed, damages are to be assessed on the basis of the mode of performance that would have been the least costly for the defendant: Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, [2004] 1 S.C.R. 303, at paras. 11 and 20. See also SS&C Technologies Canada Corp. v. The Bank of New York Mellon Corporation, 2024 ONCA 675, at paras. 131-34.
[50] The loss settlement provisions of the Policy contemplated payment of replacement value or actual cash value as modes of performance by Jeweler’s Mutual in the case of loss. The trial judge’s articulation of the measure of damages could only have led to an erroneous result if actual cash value was the less costly alternative, that is, if actual cash value was less than replacement value. The appraisals in this case reflect replacement value.[2]
[51] Jeweler’s Mutual did not plead in its statement of defence that actual cash value should be the basis of the calculation of the respondents’ damages, nor did it lead any evidence at trial of the actual cash value, at least in those terms. That distinguishes this case from Lieberman v. Federation Insurance Company of Canada, 2004 BCSC 572, 12 C.C.L.I. (4th) 265, where the court awarded an amount equal to the actual cash value of a ring, as opposed to its higher replacement value. There the court had evidence of both values: see para. 18.
[52] Jeweler’s Mutual points, on appeal, to evidence from which it submits we could discern actual cash value, and fix it at an amount less than replacement value. It fairly concedes that it did not present these calculations to the trial judge. However, even if we were to consider the argument at this stage, the evidence does not support the conclusion we are asked to draw.
[53] For example, Jeweler’s Mutual points to references in the evidence about wholesale prices, but it conceded in argument that actual cash value was not the same as a wholesale price. It points to evidence that the purchase amounts reported by Mr. Truong of the four non-inherited pieces of jewellery were, on average, 14% lower than the appraised values for those items. But the purchases described by Mr. Truong occurred years before the appraisals and therefore the purchase prices would not necessarily reflect actual cash value at the time of the loss.
[54] Finally, Jeweler’s Mutual points to evidence of the appraisers who testified that while major retailers would charge prices in accordance with the appraised values, individual jewellery stores may charge less in some circumstances. The evidence of one of the appraisers (Mr. Stern) was that while a major retailer would probably sell for more than the appraised amount, lower prices might be available “if you have a friend or something in the business”. The other appraiser (Mr. Ho) confirmed that major retailers sell at “full” price and that discounts may be available at individual stores (in unquantified amounts) depending on who they were selling to or what was being sold.
[55] The evidence of Mr. Stern does not assist Jeweler’s Mutual. Market value, or fair market value (to which actual cash value equates[3]), is defined as “the price that a seller is willing to accept and a buyer is willing to pay on the open market and in an arm's-length transaction” (see Black’s Law Dictionary, at p. 1871). Prices that are hypothetically available in non-arm’s length transactions (from a “friend… in the business”) are not market transactions. Similarly, Mr. Ho’s evidence of potential discounts in unquantified amounts contingent on what is sold and to whom is far too speculative to support the conclusion about actual cash value that Jeweler’s Mutual asks us to draw. Indeed, the evidence that major retailers would sell at the appraised values – if not higher – undercuts the argument that actual cash value was lower than the appraised values the trial judge used.
[56] In order to succeed on this ground of appeal, Jeweler’s Mutual must satisfy us that any error in the trial judge’s articulation of the measure of damages had an effect on the outcome. I am not satisfied that the evidence shows that there was any effect on the outcome flowing from the trial judge’s use of appraised values, regardless of his statement about the measure of damages. I would therefore reject this ground of appeal. . Aylmer Meat Packers Inc. v. Ontario
In Aylmer Meat Packers Inc. v. Ontario (Ont CA, 2022) the Court of Appeal considered a lawsuit by an abattoir against the province:[111] The governing principles are trite law. The basic tort principle for the determination of damages is that the plaintiff is to be placed in the position it would have been in had the defendant not committed the negligent act: Athey v. Leonati, 1996 CanLII 183 (SCC), [1996] 3 S.C.R. 458, at para. 32; Tokarz v. Cleave Energy Inc., 2022 ONCA 246, at para. 43. . Bowman v. Martineau
In Bowman v. Martineau (Ont CA, 2020) the Court of Appeal engaged in a useful summary of the measure of damages, in this case whether negligence causing a real estate purchaser to purchase damaged property was calculated by the cost of repair the property or its resulting diminution in value:(1) The Measure of Damages
(a) Applicable Legal Principles
[8] The general, well-settled rule for the assessment of compensatory damages in tort actions is that, as far as damages can accomplish this, the plaintiff is entitled to be put into the position he or she would have occupied but for the injury caused by the defendant: Nan v. Black Pine Manufacturing Ltd. (1991), 1991 CanLII 1144 (BC CA), 80 D.L.R. (4th) 153 (B.C.C.A.), at p. 157.
[9] Restoration of the plaintiff’s position should not amount to under or over compensation but only result in the amount of compensation that will make the plaintiff whole. Accordingly, limits are placed on compensation: a plaintiff can generally only recover for actual injury caused by the defendant’s conduct, and not for damages that are too remote in that they are speculative or not reasonably foreseeable: Clements v. Clements, 2012 SCC 32, [2012] 2 S.C.R. 181, at para. 13; Deloitte & Touche v. Livent Inc., 2017 SCC 63, [2017] 2 S.C.R. 855, at para. 77.
[10] Achieving the restoration of the plaintiff’s position requires an approach that is not unnecessarily complicated or rule-ridden but responsive to the facts of each given case: James Street Hardware and Furniture Co. v. Spizziri, 1987 CanLII 4172 (Ont. C.A.), at pp. 27-28.
[11] In cases where the harm to be compensated for is property damage, damages have typically been assessed either as the cost to repair the property or its resulting diminution in value. The historical common law position was that damage caused to real property was measured by the diminution in the value of the land: C.R. Taylor (Wholesale) Ltd. and others v. Hepworths Ltd., [1977] 2 All E.R. 784 (Q.B.) at pp. 790-91, citing Jones v. Gooday (1841), 8 M. & W. 146. However, later English cases held that the cost of reinstatement, or repair, could be awarded in an appropriate case: Dominion Mosaics and Tile Co. Ltd. and another v. Trafalgar Trucking Co. Ltd. and another, [1990] 2 All E.R. 246 (C.A.), at pp. 249-50; Hepworths, at p. 791, citing Harbutt’s Plasticine Ltd. v. Wayne Tank and Pump Co. Ltd., [1970] 1 All E.R. 225 (C.A.). These later authorities have been received into the law of this country: James Street Hardware; Nan, at pp. 157-158. The application of one or the other of these approaches is governed by the specific facts of the particular case and the further regulating factors of causation, reasonableness and proportionality that I have already referenced.
[12] In professional negligence cases involving real property, like the present, careful attention must be paid to the causal link between the injury suffered and the act of negligence. Depending on the facts, the negligence may not actually have caused property damage, rendering the case law concerning the assessment of damages for harm to property inapplicable.
[13] In some cases, the professional negligence will actually have caused the defect in the property or will have caused the plaintiff to lose the right to recover for that defect. For example, in Kienzle v. Stringer (1981), 1981 CanLII 1851 (ON CA), 35 O.R. (2d) 85 (C.A.), leave to appeal refused, [1982] S.C.C.A. No. 252, the solicitor’s negligence in conveying the property caused a defect in title and the plaintiff was entitled to recover the cost of putting the title in good order. In Jarbeau v. McLean, 2017 ONCA 115, 410 D.L.R. (4th) 246, the solicitor negligently failed to commence an action against an engineer who negligently certified the defective construction of a new home. But for the negligence, the plaintiffs would have recovered the cost to repair the property against the negligent engineer, whose negligence had, in turn, caused the defect in the property. Finally, in Tabata v. McWilliams et al. (1982), 1982 CanLII 2159 (ON CA), 40 O.R. (2d) 158 (C.A.), the solicitor negligently failed to warn the client, who was purchasing a home, of the need for an occupancy permit prior to occupation of the property. But for the negligence, the plaintiff could have insisted on an occupancy permit being obtained by the vendors prior to closing, which would have “in all probability” involved the repair of the property. Given these cases involve defects in property, the case law concerning the assessment of damage to property applies.
[14] In other cases, however, the professional negligence will not have caused damage to property, but rather will have merely caused the plaintiff to enter into a transaction they would otherwise have avoided. For example, in Messineo et al. v. Beale (1978), 1978 CanLII 1570 (ON CA), 20 O.R. (2d) 49 (C.A.), a solicitor negligently failed to discover and report a pre-existing defect in the vendor’s title but did not cause the defect. In Toronto Industrial Leaseholds Ltd. v. Posesorski (1994), 1994 CanLII 7199 (ON CA), 119 D.L.R. (4th) 193 (Ont. C.A.), a solicitor negligently failed to report the existence of an option to rent the purchased property at below current market rents but did not bring the option into existence. Finally, in Krawchuk v. Scherbak, 2011 ONCA 352, 106 O.R. (3d) 598, leave to appeal refused, [2011] S.C.C.A. No. 319, the real estate agent negligently failed to take any steps to inquire into the accuracy of the vendors’ representations concerning the condition of the property, but did not cause its poor condition. In these cases, damages were assessed by looking to the overpayment paid by the plaintiff and their consequential damages, rather than the cost to repair or remove the defect.
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[24] As the appellants’ wrong did not cause the property defect, the respondents are not entitled to demand what they could never have had even if the appellants had not been negligent, namely, a house free of mould and water damage: Posesorski, at p. 210; Avrom Evenchick (Trustee of) v. Ottawa (City) (1998), 1998 CanLII 591 (ON CA), 111 O.A.C. 132 (C.A.), at para. 12; Samson v. Lockwood, 1998 CanLII 1920 (Ont. C.A.), at p. 13. They are only entitled to damages to compensate them for entering into a bad transaction they would have otherwise avoided. These damages will include their overpayment for the defective property, namely, its diminution in value.[2] . 2049390 Ontario Inc. v. Leung
In 2049390 Ontario Inc. v. Leung (Ont CA, 2020) the Court of Appeal made this comment on the replacement level of damages sought in this insurance broker negligence case:[52] In addition to finding that the respondents met their duty of care and or contractual obligations to the appellant, the trial judge noted that a party is not entitled to replacement cost damages where there is no evidence it would have diligently replaced the building with a building of like kind and quality: Carter v. Intact Insurance Company, 2016 ONCA 917, 133 O.R. (3d) 721, at paras. 48-49, leave to appeal refused, [2017] S.C.C.A. No. 53.
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