Hamilton v. Open Window Bakery Ltd. et al., (2003) 184 O.A.C. 209 (SCC)

• Judge: McLachlin, C.J.C., Major, Bastarache, Binnie, Arbour, LeBel and Deschamps, JJ.
• Court: Supreme Court of Canada
• Case Date: Thursday November 13, 2003
• Jurisdiction: Canada (Federal)
• Citations: (2003), 184 O.A.C. 209 (SCC);2004 SCC 9;316 NR 265;[2004] 1 SCR 303;[2003] SCJ No 72 (QL);184 OAC 209;JE 2004-470;40 BLR (3d) 1;235 DLR (4th) 193

Hamilton v. Open Window Bakery (2003), 184 O.A.C. 209 (SCC)

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[French language version follows English language version]

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Temp. Cite: [2004] O.A.C. TBEd. FE.121

Jane Hamilton (appellant) v. Open Window Bakery Limited (respondent)

(29225; 2004 SCC 9; 2004 CSC 9)

Indexed As: Hamilton v. Open Window Bakery Ltd. et al.

Supreme Court of Canada

McLachlin, C.J.C., Major, Bastarache, Binnie, Arbour, LeBel and Deschamps, JJ.

November 13, 2003.

Summary:

Hamilton contracted to provide services to a bakery for 36 months. The contract provided that after 18 months (August 5, 1998), the bakery could terminate the contract on three months' notice. The bakery terminated Hamilton without notice prior to August 5, 1998. Hamilton sued for breach of contract.

The Ontario Superior Court, in a decision reported at [2000] O.T.C. Uned. E54, allowed the action and awarded Hamilton $38,812.50 after applying a 25% discount for the risk that the bakery would have exercised its right to terminate prior to the completion of the 36 months. The court awarded costs to Hamilton on a party and party basis to October 30, 2000, the date at which production and discovery were complete, and on a solicitor-and-client basis thereafter. The bakery appealed, asserting that the trial judge erred in failing to find that damages had to be limited to August 5, 1998, plus three months, and in awarding solicitor and client costs.

The Ontario Court of Appeal, Goudge, J.A., dissenting, in a decision reported at 157 O.A.C. 222, allowed the appeal and varied the judgment by reducing the damages awarded to $14,250 and by setting aside the award of costs on a solicitor and client scale and substituting an award of costs on a partial indemnity scale. Hamilton appealed.

The Supreme Court of Canada dismissed the appeal with regard to damages, allowed the appeal on the issue of costs and restored the award of solicitor and client costs.

Contracts - Topic 4021

Remedies for breach - Damages - General - Hamilton contracted to provide services to a bakery for 36 months - The contract permitted the bakery to terminate the contract on three months' notice after 18 months (August 5, 1998) - The bakery terminated the contract prior to August 5 - The trial judge awarded Hamilton $38,812.50 after applying a 25% discount for the risk that the bakery would have exercised its right to terminate prior to the contract's completion - The Supreme Court of Canada affirmed the appellate court's reduction in damages to $14,250 based on 18 months' service plus three months' notice - The trial judge erred in engaging in a tort like inquiry into what would have happened if the bakery had not breached its contractual obligation and in concluding that it would not have terminated at the earliest opportunity - The assessment of damages required only a determination of the minimum performance Hamilton was entitled to under the contract, i.e., the performance which was the least burdensome for the bakery - Hamilton agreed at the outset that she was entitled to no more by contracting for terms that could be truncated with notice entirely at the bakery's discretion - See paragraphs 18 to 20.

Contracts - Topic 4021

Remedies for breach - Damages - General - The Supreme Court of Canada affirmed the general principle that, in cases where a defendant who wrongfully repudiated a contract had alternative modes of performing the contract, damages were to be assessed based on the method of performance which was the least profitable to the plaintiff and the least burdensome to the defendant - The method of performance that was most advantageous or least costly for the defendant might not always be clear at the outset from the contract's terms - A court might have to consider evidence to determine an estimate of the costs of the various means of performance - In some cases it would only be after that factual investigation that a court could confidently conclude that a certain mode of performance would have been the least burdensome for the defendant - That this factual investigation might need to be conducted in some instances did not undermine the general principle - See paragraphs 11 to 17 and 21.

Damages - Topic 5703

Contracts - Breach of contract - Damages in reasonable contemplation of parties - [See both Contracts - Topic 4021].

Damages - Topic 5721

Contracts - Breach of contract - Measure of damages - General - [See both Contracts - Topic 4021].

Practice - Topic 7470

Costs - Solicitor and client costs - Entitlement to - Unproved allegation of fraud - The defendant terminated a contract with the plaintiff, claiming dishonesty - The trial judge awarded the plaintiff damages and solicitor and client costs from the date when production and discovery were completed and the facts necessary to demonstrate that the plaintiff had been at most negligent were available - The Supreme Court of Canada stated that an unsuccessful attempt to prove fraud or dishonesty did not lead inexorably to the conclusion that the unsuccessful party should be liable for solicitor and client costs, since not all such attempts would amount to "reprehensible, scandalous or outrageous conduct" - However, allegations of fraud and dishonesty were serious and potentially very damaging - Where, as here, a party makes such allegations unsuccessfully at trial and with access to information sufficient to conclude that the other party was merely negligent and neither dishonest nor fraudulent, solicitor and client costs were appropriate - Further, a court should set aside a costs award on appeal only if the trial judge erred in principle or if the award was plainly wrong - The trial judge did not err in principle - The award was not plainly wrong - Given the trial judge's privileged position to assess credibility and the highly fact-driven nature of the analysis that was required, the costs order had to be affirmed - See paragraphs 24 to 27.

Practice - Topic 8421

Costs - Appeals - Grounds - General - [See Practice - Topic 7470].

Practice - Topic 8425

Costs - Appeals - Grounds - Error in principle - [See Practice - Topic 7470].

Cases Noticed:

Cockburn v. Alexander (1848), 6 C.B. 791, refd to. [para. 11].

Park v. Parsons Brown & Co. (1989), 39 B.C.L.R.(2d) 107 (C.A.), refd to. [para. 11].

Ippolito (Aldo) & Co. v. Canada Packers Inc. (1986), 17 O.A.C. 180; 57 O.R.(2d) 65 (C.A.), refd to. [para. 11].

Lavarack v. Woods of Colchester Ltd., [1967] 1 Q.B. 278 (C.A.), refd to. [para. 11].

World Navigator, Re, [1991] 2 Lloyd's L.R. 23 (C.A.), refd to. [para. 11].

Western Oil & Fuel Co. v. Kemp (1957), 245 F.2d 633 (8th Cir.), refd to. [para. 12].

Stewart v. Cran-Vela Rental Co. (1975), 510 F.2d 982 (5th Cir.), refd to. [para. 12].

Withers v. General Theatre Corp., [1933] 2 K.B. 536 (C.A.), refd to. [para. 13].

Young v. Young et al., [1993] 4 S.C.R. 3; 160 N.R. 1; 34 B.C.A.C. 161; 56 W.A.C. 161, refd to. [para. 26].

Duong v. NN Life Insurance Co. of Canada (2001), 141 O.A.C. 307 (C.A.), refd to. [para. 27].

Authors and Works Noticed:

American Jurisprudence (2nd Ed. 1988), vol. 22, para. 126 [para. 12].

American Law Institute, Restatement (Second) of Contracts (1981), vol. 3, para. 344 [para. 12].

Fleming, John G., The Law of Torts (9th Ed. 1998), p. 5 [para. 16].

Fridman, Gerald Henry Louis, The Law of Torts in Canada (2nd Ed. 2002), pp. 2 [para. 16]; 11 [para. 15].

Heuston, R.F.V., and Buckley, R.A., Salmond and Heuston on the Law of Torts (21st Ed. 1996), pp. 8, 9 [para. 16].

Linden, Allen M., Canadian Tort Law (7th Ed. 2001), p. 4 [para. 16].

Orkin, Mark M., The Law of Costs (2nd Ed. 1987) (2003 Looseleaf Update), para. 219 [para. 26].

Waddams, Stephen M., The Law of Damages (Looseleaf Ed.), pp. 13-19, 13-20, 13-21 [para. 11].

Williston on Contracts (3rd Ed. 1968), para. 1407 [para. 12].

Counsel:

Susan J. Heakes and Tiffany Little, for the appellant;

Paul Gemmink, for the respondent.

Solicitors of Record:

Heenan Blaikie, Toronto, Ontario, for the appellant;

Gemmink & Associate, Toronto, Ontario, for the respondent.

This appeal was heard and decided on November 13, 2003, by McLachlin, C.J.C., Major, Bastarache, Binnie, Arbour, LeBel and Deschamps, JJ., of the Supreme Court of Canada. Arbour, J., delivered the following reasons for judgment of the court on February 19, 2004.