Remoteness of Damages

• Author: Jamie Cassels/Elizabeth Adjin-Tettey
• Profession: Professor of Law, Vice President Academic, and Provost, University of Victoria/Professor of Law, University of Victoria
• Pages: 345-374

345

CHAPTER 11

REMOTENESS OF

DA M AGES

A. INTRODUCTION

The common law places limits on the amount of damages recoverable

for a tort or breach of contract, in order to avoid unduly burdening the

defendant with an entirely unexpected or disproportionate degree of

liability. As when a small pebble is thrown in a pond, the ripple effects

from the commission of a tort or a breach of contract can spread far

and wide. Even a minor breach of contract or tort may cause damage

quite unforeseen by the parties and out of proportion to the culpability

of wrong done. As a judge in one leading case explained, the relentless

pursuit of the compensation principle, without limit, would result in

liability for the most improbable and unpredictable consequences and

would be unduly harsh on the defendant.1 Thus, every system of law

has a way of limiting the damages for which a defendant may be re-

sponsible. As Lord Wright explained,

[t]he law cannot take account of everyt hing that follows a wrongful

act; it regards some subsequent matters as outside the scope of its

selection, because “ it were inf‌inite for the law to judge t he cause of

causes,” or consequences of cons equences… . In the varied web of

1 Victoria Laun dry (Windsor) Ltd. v. Newman Industrie s Ltd., [1949] 2 K.B. 528

(C.A.) [Victoria Laundry].

REMEDIES: THE LAW OF DAMAGES346

affairs, the law must abstract some consequences as relevant, not per-

haps on grounds of pure logic but simply for practical reason s.2

The principle of remoteness of damages is the law’s primary means

of guarding against unduly burdening the defendant with an inappro-

priate degree of liability. The question is whether, on the facts of the

case, the damages claimed are too “remote” to be recoverable. The

essential issue when addressing this question is whether it is fair to

burden the defendant with the particular loss that has occurred. As

Cromwell J.A. said in D.W. Matheson & Sons Contracting Ltd. v. Canada

(Attorney General), “remoteness imposes on damage awards reasonable

limits which are required by fairness.”3

B. REMOTENESS IN CONTRACT

1) The Rule in Hadley v. Baxendale

The test for whether a particular loss is too remote is one of “reasonable

contemplation.” The defendant will be responsible for a loss when that

loss could be said to be within her reasonable contemplation at the time

of entering into the contract. The leading case is Hadley v. Baxendale,4

in which a carrier (Pickford’s, a company owned by Baxendale) was

late in delivering a broken mill shaft to a manufacturer. The item had

been shipped as a prototype for the manufacture of a replacement. As

a result of the late delivery, the plaintiff mill owner lost prof‌its because

the mill was idle for longer than necessary. The court held that the loss

was too remote to be recoverable and provided the classic formulation

of the rule:

Now we think the proper rule in such a case as the present is

this: — Where two parties have made a contract which one of t hem

has broken, t he damages which t he other part y ought to receive in

respect of such breach of contract should be such as may fairly and

reasonably be considered either ar ising natura lly, i.e., according to

the usual course of things, from such breach of contract its elf, or

such as may reasonably be supposed to have been in the contem-

plation of both parties, at the time they m ade the contract, as the

2 “Liesbosch,” Dredger v. “Edison,” S.S. (Owners), [1933] A.C. 449 at 460 (H.L .)

[Liesbosch].

3 D.W. Matheson & Sons Contracting Lt d. v. Canada (Attorney General)(2000), 187

N.S.R. (2d) 62 at para. 69 (C.A.) [Matheson].

4 (1854), 9 Exch. 341, 156 E.R. 145 [Hadley].