• What do we mean by “inadequacy” of damages?
Money
INJUNCTIONS
We can bridge interim injunctions and specific performance together
by the considerations that the court will make before issuing those
remedies. These orders are different from judgment, because
they will be liable to a charge of contempt of court.
We can ask how appropriate discretionary and different [that is, how
equitable] these remedies are. Equity decisions include moral
considerations and other factual considerations (such as taking
advantage of a person). Common law remedies generally involved
damages (payment of money) likely due to a concern over the
abuse of power over individual liberties.
We cannot speak about remedies without talking about rights, say
Berryman and Cassels. “The nature and scope of rights depends
upon the nature of the remedy that will be available to vindicate
those rights.” This can support Birks’ argument, because really the
court issues recognizes a plaintiff’s right – and shapes the court
order to correspond to how it understands the right. Rights are
fashioned to protect certain interests and the remedy chosen will
reflect how the court views a particular right.
A breached contract for an idiosyncratic right may not give rise to
an award for specific performance, because the idiosyncratic right
perhaps is not a recognizable interest – when enforcement would
impose hardship upon a defendant.
The court must consider three points when issuing specific relief.
1. Firstly, when asking for a remedy, the plaintiff must establish a
cause of action, and therefore cause for a specific remedy.1
This depends on the rights that we already have. However,
courts may work backwards by considering the remedies to
unpack the rights.2
2. Secondly, the courts will consider whether damages are the
appropriate remedy. The courts will generally not grant
specific relief if it can remedy with damages.
1
We do not really consider this question in this course.
2 4
This is a very cynical view of the notion of rights. It is a “predicative” view
of rights. It is hard to disentangle our rights and remedies.
may not be able to fix the problem, the defendant cannot
pay, the plaintiff does not suffer harm, etc.
• How important is this consideration?
• Why do we consider damages as the primary remedy?
Specific relief is not a remedy as of right, but we can
attribute this to the history of the common law.3
Birks might suggest that discretion at this stage is soft, given that
there is precedent to support when damages are/not adequate.
3. Thirdly, the court will consider whether equitable rules bar an
award. For example, the order causes undue hardship to the
defendant. It is at this stage where hard discretion operates.
It is at this stage where the court will employ moral arguments that
address the consciences of the parties. Again, we can attribute this
to the influence of equity; however, we must consider why the court
makes these considerations today.
Some remedies are only available if the plaintiff has/will suffer
irreparable harm. This concept has a large number of meanings.
The court will also consider the balance of convenience/cost.
The court considers both the interests of the plaintiff and defendant.
Quia Timet Injunctions 4
Before addressing injunctions, we must consider the following
categories:
• Time – is it preventative (quia timet) or responsive to a wrong?
• Action – is it a negative (to restrain) or a mandatory (to compel)
injunction?
• Interest – does the injunction address trespass, nuisance,
personal injury, property injury, breach of contract, etc.?
3
Does this rule lead to odd results? If we were to re-invent the legal
system, would we ignore this rule?
Be careful about the categories in the book. Cases will often consider
more than one remedy question.
These categories overlap, because all three of these issues always
arise when we consider injunctions that deal with land. We want to
work out which factors are more important for which categories.
Fletcher v. Bealey (1885) Chancery Division UK
Facts: The plaintiff, a paper-maker, filed for a quia timet injunction
against the defendant, and alkali producer based up the river. The
plaintiffs used the water for its business. The defendant, though
already restrained by injunction not to dump toxins directly into the
river, deposited the waste on a site near the river. The plaintiff
alleged that over time, the waste would seep find its way into the
river.
Issues: Is the plaintiff entitled to the quia timet negative injunction?
Holding: No.
Reasoning: The cause of action is in nuisance, based upon his
riparian rights. Justice Pearson quotes Lord Broughham’s judgment
in Earl of Ripon v. Hobart to explain that the court will make the
following considerations, as to whether an injunction is appropriate:
• Whether there is irreparable harm (that is substantial) caused by
an imminent danger such that “no prudent person would incur”
the risk,5
• The apprehended damage must be substantial,
• Whether “balancing the magnitude of the evil against the
chances of its occurrence.”
The plaintiff cannot win if it merely establishes that injury will occur
at some distant point in the future. Pearson determined that not
enough toxins will enter the river to justify the imminence. He puts
his faith in science to discover a technological solution to this
problem. Pearson, however, does issue the judgment without
prejudice so that the plaintiff could re-apply in future if the
defendant’s actions are causing a nuisance.
Rationale: The plaintiff must establish substantial irreparable
harm, at some point in the near future, that the balance of
5
Nobody has done anything wrong yet. Therefore, it seems important for
the court to consider whether a person is about to interfere with someone
else’s rights.
convenience favours it.6
The laws do matter, because the law should speak to something
beyond mere economic consequences: from a moral standpoint, a
riparian owner should not have to suffer a polluted river.
Imminence of the harm is an important consideration, since in
Jagtoo v. 407 ETR Concession Co., the Ontario Superior Court
determined that the plaintiffs may not feel the effects of the
construction of the highway for a long time (if ever). Canadian
provinces have environmental legislation that allows the state or
private persons to review/contest public projects and environmental
assessments.
Palmer v. NS Forest Industries (1984) NSTD
Facts: The plaintiffs filed for a quia timet injunction asking the court
to restrain the defendants from spraying dioxin near their homes.
Issues: Are the plaintiffs entitled to the quia timet negative
injunction?
Holding: No.
Reasoning: The risk to health, if proven, would have constituted
irreparable harm in this case, and an injunction would have been an
appropriate remedy to subdue that risk. However, Justice Nunn did
not find that the plaintiffs established an imminent danger to their
health.
The defendants were going to spray a herbicide with only a small
about of the dioxin – well below the maximum regulated level. The
court found no risk that the dioxin will travel down the river or
through ground water to contaminate the plaintiffs’ homes.
6
If there is an inefficient legal rule, the parties can bargain around them.
They will have an incentive to do so, because parties can make gains, by
changing the rules themselves. Economist Coase spoke to this theorem.
However, the theorem does not address all of the possible people affected
by the defendant’s pollution. There are costs associated with trying to
effect collective action (transaction costs), such that they would consume
any benefit from stopping the pollution.
It may not matter who owns what property, so long as we know what the
rules (and consequences) are, so that parties can negotiate. What are
the incentives? If the polluter wants to continue polluting, it will buy
out the riparian rights of its neighbours downstream.
Rationale: The court will consider scientific evidence and
government regulations to consider the standard by which the
risk of irreparable harm is set. The plaintiff must establish
irreparable harm given the above considerations.
Hooper v. Rogers (1975) UK Court of Appeal
Facts: The plaintiff and defendant are adjacent homeowners. The
defendant bulldozed a tract of land below the plaintiff’s house,
which exposed it to soil erosion that might eventually lead to the
collapse of the plaintiff’s house. The trial judge award damages.
The plaintiff and defendant both appealed.
Issues: Is the plaintiff entitled to the quia timet mandatory injunction
– which would require the defendant to reinstate the slope of the
land by the house?
Holding: No. The plaintiff received damages instead.
Reasoning: An expert witness for the plaintiff testified that a “real
probability of prejudice to the plaintiff’s house” exists.
Lord Justice Russell said that the damage is imminent. The word
“imminent” is used, he explained, to describe circumstances when
the remedy sought is not premature.
The court is allowed to substitute damages for specific relief
because of Lord Cairn’s Act. It appears that it is easier to give the
plaintiff money, than to compel the defendant to act (perhaps
because the parties did not get along).
Rationale: The court will use “soft” discretion to determine
whether the damage is imminent – that is, whether the claim
for relief is not premature.
We seem to have a contradiction: the court awards injunctions
when damages are not appropriate, yet the court in this case gave
damages in this case instead of the injunction. However, the
damages seem to be an equivalent to the cost of specific
performance of the injunction in this case.
Mandatory Injunctions – Order to take positive action (to repair)
The following cases show that the court will be concerned when it is
asked to impose a mandatory injunction, when the defendant is
“innocent” or a victim of circumstance.
Redland Bricks v. Morris (1970) House of Lords
Facts: The plaintiff land-owners sued their defendant neighbours to
prevent future slippage of their land, due to excavation by the
defendant. The plaintiff already received for damages for damages
occurred already. This is not a trespass or nuisance. The wrong
has occurred, but not the harm. The lower court determined that
the defendants did not act wantonly.
Issues: Should the plaintiffs be entitled to a mandatory (quia timet)
injunction to stop future slippage? Is the plaintiff entitled to a repair
order?
Holding: No; however, the plaintiffs were not prejudiced by the
decision and they may seek further remedies in future should the
situation worsen.
Reasoning: Lord Upjohn articulated four basic principles that a
court must consider before ordering a mandatory quia timet
injunction. Those principles are general in nature, because each
case ought to be considered by its own particular circumstances.
Isenberg v. East India House Estate Principles [for Quia Timet]
1. The plaintiff must show a strong probability that he will suffer
grave damage in the future. This is a restraining principle.
2. If damage were to occur, damages will not be sufficient or
adequate to remedy the situation.
3. When the defendant has acted unreasonably, the court may
order the defendant to restore the status quo and expense his
profits from his unreasonable behaviour. Where, however, no
legal wrong has occurred and may never, the court may forego
the injunction, because the plaintiff will have an action in future if
he suffers injury.
4. In the case of a mandatory injunction, the defendant must
know exactly what he has to do to carry out the order.
Again, the court undertakes a balancing exercise to determine
whether the mandatory injunction is the appropriate remedy under
the circumstances.
In this case, Upjohn determined that the court failed to satisfy the
fourth condition. Without guidance as to the repair costs, they could
have escalated to 30,000₤, which would have offended the third
principle. This shows the court’s concern over the economic
waste of an open-ended order with no concern over the
market-value loss to the plaintiffs.
Rationale: An order for a mandatory injunction must be clear,
so as to give instruction to the defendant to remedy the
situation. Where the costs greatly outweigh the injury, the
defendant may not be obliged to act, but may have to pay
damages only.
This reflects a consideration from Fletcher v. Bealey. The more
general the order is, the more it starts to look like a superstructural
generic right. The court would merely tell the defendant what he
should already know to do. If the court’s order mandates a very
specific action, the defendant may claim that it can take alternative
actions.
Why not award damages to the plaintiff to remedy the situation
itself? The court probably did not want to help the plaintiff, because
they could have awarded damages or tailored the injunction.
Perhaps relative costs to the parties was an underlying
consideration in this case too.
An order for a mandatory injunction might be appropriate when a
party conveys property to another in trust, but lives at the property
in a life estate and abuses the property for the capital beneficiary,
see Vane v. Barnard.
In Lim v. Titov, the defendants built a retaining wall on its
neighbour’s property. The court ordered the removal of the wall, but
not the part that fell below the subsoil.7 The “intrusion of the wall is
a small infringement upon the plaintiff’s rights.” The very value of
land rights, however, is the right to exclude others and to the control
the use of one’s land oneself. This plays an important consideration
in how the court assesses whether an injunction or damages is the
appropriate remedy.
7
The court does not treat interference with the subsoil as it would
interference with the topsoil, because this part of the property is out of
view, not used, and limited by government access to minerals, etc.
In Krehl v. Burrell, Jessel MR explained that in cases when the
plaintiff refuses to pay damages or to agree to a reasonable offer,
the court can order an injunction. He added, “ the question I have
to consider is, whether the court ought to exercise the discretion
given by Lord Cairns’ Act by enabling a rich man to buy the poor
man’s property [through an award of damages].”
Kerlenmar Holdings v. District of Matsqui shows that the court
will consider the material effects of a mandatory injunction. Instead
of awarding the cost to de-flood land in that case, the court awarded
damages equivalent to the value of the un-flooded state of the land.
These cases raise the same dilemma as in Peevyhouse v.
Garland Coal. When land is worth very little, but it means very
much, and a substitute piece of land may be more expensive, the
court may consider that a mandatory injunction or a high amount
of damages economically wasteful.
Injunctions to Protect Property Interests
In cases that deal with property rights, the court tends to look
more favourably to injunctive remedies, rather than damages.
Until 1858, courts did not have the authority to grant damages for
present and future injury, which required the plaintiff to initiate new
actions for new damages. With the Lord Cairns’ Act, common law
courts gained the remedial flexibility to grant damages for future
injury.
Like real property, which is seen as unique and a paramount right,
plaintiffs may request an injunction for the return of fungible
(unique) chattels.
Nuisance, unlike trespass, requires damage, in that it limits an
occupier’s right to use and enjoy his property.
Goodson v. Richardson (1874) Chancery Court
Facts: The defendant had a permit to lay pipes to construct a water
supply under a public roadway that crossed the plaintiff’s land. The
permit required the defendant to obtain permission of the
landholders before laying the pipes. The defendant laid the pipes
[knew it was a trespass] and the plaintiff served notice to him.
Issues: Is the defendant entitled to a prohibitive injunction to
prevent the laying of pipes and a mandatory injunction to remove
them?8
Holding: Yes.
Reasoning: The plaintiff owns the subsoil, but he does not have
unlimited right to it. The state is also the “guardian” over the
roadway. In this case, Lord Shelborne explains, is about private
expropriation. The defendant “deliberately and unlawfully invaded”
the plaintiff’s land. This is the proper subject of an injunction.
Rationale: Continued deliberate trespass is grounds for a
prohibitive injunction.
The defendant could have argued that the interference was nominal
interference with land, which may only lead to nominal damages. In
Behrens v. Richards, the Chancery court award nominal damages
to the plaintiff, because the application was trivial in the sense that it
restrained person who had crossed a path for many generations of
owners, without injury to the land.
The defendant could have argued that the balance of costs favours
he defendant, because it would have been very expensive to tear
up the pipes.
The next two cases offer competing positions on the granting of
interim injunctions when the plaintiff has suffered a trespass but no
damage.
Woollerton and Wilson Ltd. v. Richard Costain Ltd. (1970) Ch.9
Facts: The plaintiffs sought an interlocutory injunction (binding until
trial) to restrain the defendant from moving the crane over the
plaintiff’s building. The plaintiff has suffered no injury or
inconvenience. The defendants offered 250₤ to compensate the
plaintiffs for the trespass.
Issues: Is the plaintiff entitled to an injunction?
Holding: Yes and no; Justice Stamp suspended the injunction until
the beginning of the trial.
Reasoning: Stamp refers to Goodson v. Richardson and Eardley
v. Granville to state that damages would be no compensation,
8
The pipes are already laid, but the order will compel their removal.
9 12
This may be a rare exception to the general rule.
where the plaintiff does not suffer injury: only the invasion of the
property right.10 This is a clear invasion of the property right and,
therefore, the plaintiff is entitled to its injunction. The defendant
cannot use the good faith argument, because it knows what it is
doing is a trespass.
Stamp distinguishes this case from Eardley because Eardley dealt
with nuisance and this was a case of trespass. Stamp uses his
discretion to postpone the injunction. He considers the following
factors:11
• the defendant’s offer to the plaintiff,
• the defendant’s cranes have never resulted in an insurance
claim (never caused damage for passing over a building),
• the building is near completion, and
• the defendant could have placed the crane in only one location.
Rationale: The court has discretion to look to the parties’
behaviour and the balance of convenience to consider whether
it can suspend an injunction.12 The court felt that it was
intuitively ridiculous that the plaintiff should bar the
defendant’s building project.
1. The injunction should not be allowed for nominal
interference. Nominal is a combination of a consideration of the
cost to the defendant and the degree of inference to the plaintiff.
This case shows why black-and-white rules for remedies do not
work. This might be a response to Birks. The discretion is at the
level of remedy.
2. Perhaps the court recognizes an implied limitation in
property rights. This also brings the court’s discretion into the
consideration. This discretion is at the level of rights. However, the
considerations may be the same between the two.
Stamp cited another case, Shelfer v. London Electric to articulate
10
This does not mean, however, that damages are inadequate,
because the defendant could have compensated the plaintiff for the
trespass.
11
Even though the court does not base its decision expressly on
economics, and in fact, it uses moral arguments to grant the injunction only
after to suspend it, this decision makes economic sense, because by not
delaying the injunction, the defendant would suffer economic loss.
This is a case of suspension.
a “working rule” whereby a court might give damages instead of an
injunction for nuisance. Although nuisance and trespass are
both tort claims based on interference with property, a plaintiff
arguing for trespass is not prima facie entitled to an injunction,
where a plaintiff arguing for a nuisance will be.
The court may give damages may be given if:
1. The plaintiff’s injury is small,
2. The court can estimate the injury in dollar terms,
3. The injury is compensatable by money,
4. An injunction would be oppressive for the defendant.
In that case, the court found that the plaintiff suffered no financial
loss, but an injunction would have caused hardship to the
defendant.13
The authors of the Red Book explain that several decisions reveal
that sometimes the court will treat interference with airspace as a
mere nuisance and presumably, the Shelfer test might be used to
award damages. When the interference is more pronounced
(harmful), then the court may consider it as trespass and grant an
injunction.
John Trenberth Ltd. National Westminster Bank Ltd. (1979) Ch.
Facts: The defendant’s building was in need of repair. The
defendant had a duty to maintain the building (which was adjacent
to the roadway); however, to repair it, the defendant needed to
access the building via the plaintiff’s land. The plaintiff refused
permission to trespass. The defendant trespassed anyway.
Issues: Is the plaintiff entitled to an interim injunction?
Holding: Yes.
Reasoning: The court rejected the defendant’s three claims.
Firstly, Justice Walton determined that the defendant deliberately
chose the least expensive course of action – to repair and
trespass. The defendant could have torn down the immovable and
rebuilt it in a safe condition.
The actual damage to the plaintiff is negligible. Watson reasoned
that this should not be an excuse for people to intentionally
trespass.
13
Had the court awarded the injunction without suspension, the plaintiff
and defendant might have negotiated after the order.
Thirdly, Watson referred to Stamp’s decision in Woollerton
[suspension of the injunction]. Watson questioned the approbation
of that judgment. Neither counsel in this case thought that
Woollerton was rightly decided. That the defendants consulted the
plaintiffs in advance, that the plaintiff did not apply for a quia timet
injunction, that competing duties are at issue, that the defendant
would benefit greatly, should not support the choice to postpone the
injunction.
Rationale: Continued deliberate trespass is grounds for a
prohibitive injunction.
Ontario’s Municipalities Act allows people to trespass upon their
neighbours’ property to make repairs to their own. It states that a
person may enter to make repairs to the extent they are necessary,
but the party must restore the adjoining land to the existing
condition. This might indicate that if damage were to arise, a court
could impose a mandatory injunction to repair the neighbour’s
property.
Bertram v. Builder’s Association and Cash Cleaners Ltd. V.
Delmas show that the court may award nominal or punitive
damages for deliberate, but negligible trespasses on a neighbour’s
property. Morton Horwitz suggests that absolute dominion over
one’s property is an unrealistic expectation in modern society.
People live closer together, and access to one’s property via a
neighbour’s can be a more efficient means of repair.
Another argument against the issuance of injunctions stems from
the power of the bargaining chip – post-judgment. In Isenberg v.
East India House Estate, the defendant argued that an injunction
could allow a plaintiff to extort the defendant. The court in that case
agreed and held that “in this case I think it matter of very doubtful
result whether any damage had been sustained … to what end,
then should I exercise a jurisdiction … to deliver over the defendant
to the plaintiffs bound hand and foot, in order to be made to an
extortionate demand.”
In Phonographic Performance Ltd. v. Maitra the court rejected
the notion that an injunction ought to be refused because it could be
used as a bargaining tool. The injunction is necessary to preserve
the right to license the use of one’s property. An injunction would
amount to an implied license, when the plaintiff refused to issue
one.14
Alternatives to Injunctive Relief for Trespass
MacDonald v. Lawrence and Lawrence shows that the court does
generally not permit private expropriation (such as the building of
fences over the property line). In that case, the judge ordered a
mandatory injunction to remove the dividing wall between the
plaintiff and defendant’s property, as well as the construction of a
new wall to “prevent any continuing trespass or nuisance by reason
of collapse of fill material from the defendant’s lot.” If the defendant
did not comply, the court would grant the plaintiff $3650 to complete
the job on its own. This is the monetary equivalent to the
injunction.
In Dempsey v. J.E.S. Developments Ltd., however, the
defendant’s building (valued at $600 000) would have had to be
removed if the court ordered an injunction. The court awarded
damages instead [for the release of the plaintiff’s property interest],
and it considered the increase in the rental income that the
defendant would gain by virtue of this expropriation. This
essentially stripped the defendant of potential gains from its
wrongful actions.
In Townsview Properties Ltd. v. Sun Construction, the court
delayed an injunction to encourage the parties to negotiate a
settlement [that is, to re-arrange the property lines], so that both
parties could avoid further litigation.
It seems inconsistent with the idea that the court will not order an
injunction when the plaintiff has proven a trespass. Judges contend
that they have discretion to assess the injunction. There may be a
substantive justification. The courts seem to be correcting defects
in the law. They may be changing the law of trespass – in cases
like Woollerton. The courts seemed quite concerned with a
subjective evaluation of the behaviour of the parties. Did the parties
try to negotiate? Did the parties act reasonably?
Why not have a right to an injunction? Perhaps there are
supervision problems – the court cannot possibly supervise the
14
Parties can strike a bargain after the court grants the injunction.
injunction, or perhaps the infringements are too trivial. Perhaps that
an injunction, sanctioned by a contempt order and jail time, requires
that the court consider the defendant’s behaviour. Failure to
perform a monetary obligation will enable the court to seize
property.
NUISANCE
Nuisance is an unreasonable interference of one’s property. The
standard rule is still that an injunction is the remedy.
Miller v. Jackson (1977) CA
Facts: The plaintiff buys a house next to a cricket ground and sues
the club for balls hit onto their property. The club claimed that it
took all reasonable measures to avoid hitting balls onto the
property. Balls rarely left the pitch. The plaintiff is seeking an
injunction and damages.
Issue: Is the plaintiff entitled to damages and an injunction for
nuisance?
Held: The defendant is liable; however, the plaintiff is entitled only
for present and some future damages.
Reasoning: Lord Denning, in dissent, rejected Sturges v.
Bridgman to state the proposition that “a balance has to be
maintained between the right of the occupier to do what he likes
with his own [land], and the right of his neighbour not to be
interfered with.” This is no nuisance, because it is not an
unreasonable use of the land. Denning finds a public interest in
protecting the park as a cricket ground. He would have dismissed a
claim for damages, but the club agreed to pay for damages.
Lord Geoffrey Lane cited Sturges v. Bridgman to state that the law
on the matter is decided: coming into the nuisance is no defence.
He grants the injunction, but suspends its operation for 12 months
to allow the defendants to seek an alternative pitch.
Lord Cumming Bruce sought to “strike a fair balance between the
right of the plaintiffs to have quiet enjoyment of their house and …
the opportunity of the inhabitants of the village … to enjoy the manly
sport.” He recognizes that the rules of equity allow for flexibility in
his remedial assessment and therefore his does not order the
injunction.
Rationale: In cases where an injunction would affect the
“public interest” the court may award damages for present and
future injury instead.
Kennaway v. Thompson shows that the court could have tailored
its injunction instead. In that case, the court recognized the
interference with the plaintiff’s property, but itemized the events that
the defendant boating club could hold each year, and limited the
club from exceeding a noise limit during non-event periods.
R. Sharpe, “Injunctions and Specific Performance
Sharpe explains that the Coase theorem demonstrates that
regardless of legal rules, plaintiffs and defendants with incentives
to bargain will do so, if a mutually beneficial bargain can be struck
– because the person who most values the property right will
acquire it.
The pursuit of efficiency, Sharpe explains, is shaped by the
court’s objective to recognize/affirm litigants’ rights. A plaintiff, as
a subject of rights, should not lose simply because he is the least-
cost avoider. Sharpe adds that the motive for behaving the way
we do is not always shaped by wealth-maximization. Therefore,
the law should not speak solely to economic assumptions when
those assumptions are unreliable.
Why refuse the injunction? Perhaps, like in Spur v. Del Webb, the
plaintiff moved into the area and incurred the nuisance by consent.
Since this is not relevant to the consideration of whether there is a
nuisance, it may be a relevant consideration for discretion. Again,
this fits with the tradition in equity to consider the consciences of the
parties.
Boomer v. Atlantic Cement Co. Ltd. (1970) NYCA
Facts: The defendant operates a cement plant. It employs 300
people. The trial judge found a nuisance from emissions and
vibrations of the plant and award damages.
Issues: Are the plaintiffs entitled to a full injunction?
Holding: No. The defendants paid the plaintiffs permanent
damages.15 The defendants then acquire an easement to pollute.
Reasoning: Justice Bergan recognized that the defendant’s actions
damaged the plaintiffs’ property. However, the estimated damage,
being $185 000 is only a fraction of the defendant’s investment in
the business, $45 000 000, and the jobs at stake if the plant was to
close. Bergan considered a suspended injunction to allow the
defendant (and its industry) to develop technology to reduce the
interference. He rejects this option as to unlikely to unfold within 18
months post-trial.
A grant of damages to the plaintiffs allows them to redress their
personal proprietary losses, but it will not preclude a public agency
from acting to seek its own relief in court regarding the health
implications of the plant’s operation.
Given the cost to the defendant (balance of convenience), the court
awards the injunction, which the defendant can vacate by paying
damages.
Rationale: When remedying the nuisance by injunction, the
court will consider the effect of the injunction of the
defendant’s enterprise. Should the costs greatly exceed the
damage incurred, the court may substitute damages for
present and future injury instead.
Critique: Justice Jasen warns of “the grave dangers in overruling
our long-standing rule of granting an injunction where a nuisance
results in substantial continuing damage.” This allows rich
defendants to pay a fee to continue polluting. The allowance of
permanent (future) damages would amount to the recognition of a
servitude/easement on the plaintiff’s lands to spread pollution.
Jasen would have issued a suspended injunction to allow the
defendant to enjoin the company from continuing to discharge
particulates over the plaintiffs’ property.
15
Present and future damages. The defendants acquired the easement
so that they would face a future lawsuit. The defendant bought the
right to pollute.
If the economically efficient result is to allow the pollution to
continue, why pay damages?16 Society wants the polluter to
behave reasonably (with a certain amount of care, but not
excessive care). The function of the damage award is to provide an
incentive not to increase risk of damage. If damages were too high,
the defendant would be too careful. With too many damages, the
victims will not take enough precautions. This judgment creates
an incentive to a new company to assess how much it would
cost to place its factory (to take precautions).
What the court is doing is a judicial expropriation. The court
expropriated the plaintiff’s neighbourhood at a reasonable cost.
Lord Blanesburgh in Manchester v. Farnworth, the cost to remedy
the pollution should be included in the costs to produce the product.
That cost can then be allocated to the consumer. Atlantic Cement
was effectively able to expropriate property interests of the plaintiff,
because the court’s remedy would not recognize the plaintiffs’ right
to use their lands free from unreasonable interference. Justice Duff,
of the Supreme Court of Canada held in Canada Paper v. Brown
that it is not about expropriation, rather the denial of an injunction is
“merely [the application] the limitations and restrictions which the
law imposes in relation to the pursuit of this particular form of
remedy in order to prevent it from becoming an instrument of
injunctive and oppression.”
The authors of the Red Book ask us to consider whether the notion
of utility is an underlying concept that informs the law of remedies.
In this case, as in many environmental tort suits, the courts will way
the utility of the polluting enterprise against the benefit of enjoining it
from polluting.
Spur Industries Inc. v. Del E. Webb Development (1972) AZSC
Facts: The trial court determined that Spur’s cattle feed lot located
near the plaintiff’s development constituted a nuisance and ordered
the injunction. The feed lot had not caused problems until the
plaintiffs moved into the neighbourhood, like in Miller v. Jackson.
Issues: Is the plaintiff entitled to an injunction? Is the defendant
entitled to compensation for a forced shut-down of its business [for
being expropriated]?
Holding: Yes. Yes.
16
This is the same question that we would ask in a tort case.
Reasoning: Cameron explained that this was a populous area and
the whole neighbourhood was effected by the smell and flies.
However, “the area being primarily agricultural” impacted the court’s
decision. Although coming into the nuisance is not a defence,
Cameron determined that the plaintiff should not use this reason to
assume all of the advantage about developing in a suburb, without
incurring some disadvantage.
Cameron agreed with City of Ft. Smith v. Western Hide & Fur Co.
when he explained, “the law of nuisance affords no rigid rule to be
applied in all instances.” It is elastic. It undertakes to require only
that which is fair and reasonable under all the circumstances.”
The developer is not blameless, because he chose (foreseeably) to
buy land near a feed lot. Therefore, he will have to indemnify the
defendant for the reasonable cost of moving out or shutting down
his business.
Rationale: The court may award compensation to a defendant,
forced to shut down its business, if the court finds that the
plaintiff came into the nuisance with foreseeable knowledge of
the interference.
As in Boomer, there is a good rationale for paying damages. It
compels developers to consider the cost of developing near a feed
lot in the future. Spur takes Boomer a step further, because the
plaintiff had to pay for the cost of expropriating the defendant.
The court must ask itself two questions:
1. What can the court do to resolve the conflict between the parties?
2. Who should bear costs related to the re-adjustment of the parties’
positions following this decision?
The casebook notes that other developers can “free ride,” because
Del Webb must bear the whole cost of expropriating the defendant,
while others can share in the benefit of increased marketability and
property value once the interference from the feed lot is gone.
A judge might say that the courts have a huge amount of discretion
to account for all of the facts before they issue a remedy. They also
have discretion as to the content of the order. Why exercise that
discretion? Why, for example, make a victim pay damages?
Economists will often show that the law has a hidden economic
logic. These are cases in which the courts will deny plaintiffs their
rights in favour of economic utility [weighing of costs and gains].
The courts chose the lowest cost solution.
These cases are not really about remedies, but about correcting
defects in property law. This is reconcilable with both of the
economic or the legal arguments regarding discretion.
SPECIFIC PERFORMANCE
This is another form of mandatory injunction, which compels the
defendant to do what it obligated itself to do.
The basic rule is that when damages are adequate, the plaintiff is
not entitled to specific performance. We have to consider what it
means to say: “damages are inadequate” and is this true?
Why do courts consider other factors to determine whether they
should order specific performance? Are the rules different from
proprietary claims?
S. Smith, “Remedies for Breach”
Professor Smith’s tries to understand whether contractual
obligations are mere promises, relianced-based obligation, or
something else. In so doing, he focuses on contractual remedies,
because they may inform this understanding.
He proposes that there are two major paradigms in remedy
analysis: the “rights-based theories” and the “social utility/economic
theories.”
Rights-based theories are premised upon the idea that a person
binds himself morally by making a promise to another. In breach of
that promise, the promisee is entitled to bring an action to request
that the court remedy the breach, either by direct enforcement or by
substitute enforcement.
Utilitarian theories provide that the basis for remedies in contract is
the promotion of wealth maximizing behaviour, either by directly
increasing welfare or by imposing (dis)incentives to do so in the
future. Smith critiques this approach by stating that individuals do
not always act in a rational, wealth maximizing manner, remedies
that are forward-looking are not really remedies at all, because a
remedy addresses an injury, and thirdly, it ignores what is due to
the promisee [“morally unattractive”].
Specific Performance
Advocates against orders for specific performance suggest that it is
inappropriate because the order comes too late, it is not exact
performance, money is often not good enough to remedy the
problem, compensation can be paid in lieu of performance, and
performance intrudes upon persona liberty. Smith responds by
stating that “late delivery is, in essence, the same thing as timely
delivery” and the plaintiff may accept late performance as a
substitute for performance not given by the defendant per the terms
of the contract. The court is not ordering the defendant to do
something he has not already about himself to do already.
Utility arguments posit that the court should reward efficient
breaches of contract, because the defendant maximized overall
utility by failing to perform an inefficient bargain [see Tito v.
Waddell]. Smith notes some complicating factors. Issuing specific
performance would have the effect of compelling parties to plan
their contracts better and to allocate risk of changes in the market,
in advance: risks, which might compel a breach. It is hard to say
whether rules that compel orders for specific performance or
damages produce lower transaction costs, because economists and
lawyers have had difficulty assessing the costs either way.
Hammond J., Butler v. Countrywide Finance Ltd. (1993) NZHC
Justice Hammond’s judgment reads like an academic article on
specific performance in sale of goods contracts.
Hammond states that “the principles of civil remedies is to put the
person whose rights have been violated in the same position – so
far as it can be done – as if those rights had been observed.” A
judge will consider the following factors:
1. Plaintiff autonomy – the plaintiff should have first choice of
remedy, because it is the injured party.
2. Economic efficiency – relative efficiency of a remedy may be
 relevant for present and future considerations. Economists suggest that the law does not necessary want
3. Severity – the law recognizes the principle of proportionality defendants to perform all of the time. Consider the following
such that it will not excessively penalize a defendant. example.
4. Nature of the primary right & moral view of the interests at stake
– some rights should be enhanced or supported by tough
remedies to emphasize their importance.
5. Effect on third parties – injunctions may enjoin others as well, so
that third parties may not take advantage of restraint on the
defendant solely. Each party is better off, because the widgets are going to the party
6. Difficulties of calculation – the court may avoid who values them the most. Therefore, the parties should perform.
over/underestimating damages. Sometimes, a party may make a mistake.
7. Practicability of enforcement – the court may be brought into
disrepute if it cannot enforce a specific remedy.
8. Conduct of the parties – since equity acts on the conscience of
the parties, the courts will look at the behaviour to see if their
consciences are clear and whether, given the behaviour and
This is no longer an efficient contract, and economists would not the
attempts at neighbourliness, the plaintiff deserves a specific
parties to perform. The law says that the vendor does not have to
remedy.
perform, but has to pay damages. Anywhere up to $200, this is an
efficient contract. It is cheaper to pay damages afterwards. Without
What sum of money would leave you indifferent to actual
damages, there is no incentive to perform.
performance and getting the money? The court will award a sum of
money that leaves the plaintiff in the same position.
There are other ways that the original contract will become
inefficient: a second purchaser may offer $400 and the vendor
In some cases, it will be impossible to compensate. This seems to
breaches. The value to the purchaser drops and the purchaser
be true in cases of unique goods. There are two explanations:
breaches (see Peevyhouse v. Garland Coal; Tito v. Waddell).
Firstly, the plaintiff cannot get the very thing that the defendant
promised it. Money would not be an adequate substitute. This
The idea that people actually act on these incentives is not entirely
presumes that a monetary award can allow for “substitute” specific
accurate.
performance in sale of goods contracts.17 In some exceptional
cases, however, absolutely no sum of money will compensate the
If the law required performance every time, the party looking to
plaintiff (i.e. in the case of rare items, heirlooms, art, etc.).
breach will attempt to negotiate [per Coase’s theorem]. Per
Compensation must be accurate and cases of unique goods create
example 1, the vendor might offer $201 and the purchaser will
a problem of calculation. For unique goods, we cannot calculate
counter with $299 – and then they will meet in the middle. The
the damages. bargaining is more difficult in cases that involve multiple parties with
large-scale nuisances. This is easier to do in bilateral contracts.
Let us consider the economic analysis of specific performance.
Why not give specific performance all of the time?
Bargaining costs money. A rule mandating specific performance,
purchasers must re-negotiate. However, it takes more court time to
17
consider damages. The parties, themselves, would have to
Birks would say that the best way to fulfill the original duty is to compel a estimate damages. Where are we now? Well, we do not seem to
person to fulfill its obligation. However, given liberty considerations, this have enough evidence to determine which rule is more efficient.
may not be possible. Therefore, damages will enable the plaintiff to re-
acquire performance and the damages are merely a substitute for the
right.
The story tells us that the law may aspire to an economic utility.
Economic analysis of the law tries to show that the law often works
based on this assumption. There are other assumptions that
function in parallel [rights/moral arguments].
Like the deterrence theory of punishment, economic arguments as
applied to contract law, applies an idea of incentives/disincentives
for action.
If the economic explanation is not persuasive, then what other
explanations are there? The historical explanation of the division
between law and equity is not adequate. Specific performance is
too difficult to supervise, the parties do not want it, it is impossible,
etc. The civil law considers that specific performance has an “air of
servitude” even if the debtor agreed to act.
We have to look at what the court is doing when it awards
damages: do the damages amount to a substitute specific
performance? When money is not possible to compensate [i.e.
unique goods], the court orders specific performance. Economists
might suggest that courts cannot determine the proper incentives.
Long-term contracts may be other cases when courts ordered
specific performance. Again, the court faces a determination
problem. In the sense, the coal was “unique” in Dominion Iron,
because the plaintiff could not get the exact good from someone
else. Damages can compensate, but it is hard to work out (see
Tannenbaum below).
Conclusion
We have to start from the assumption that, irrespective of efficient
breach of contract, parties are supposed to fulfil their agreements.
Supervision and liberty are principal arguments put forward by the
court. This is a practical concern.
The question of whether damages are adequate amount to an
assessment of substitute specific performance. Where substitute
specific performance is possible, the supervision and liberty
arguments do not become problematic, and the court can get
around specific performance orders.
Perhaps the court is weighing all of these factors together [see
Justice Hammond’s judgment].
Sale of Goods and Chattels
Falcke v. Grey (1859) Chancery Court
Facts: The plaintiff, a dealer in curiosities, offered the defendant 40l
for two unusual vases. The defendant received another offer from a
third party who was also a dealer in curiosities. She accepted the
latter offer and sold the vases for 200l. The plaintiff sued.
Issues: Is the plaintiff entitled to specific performance?
Holding: No.
Reasoning: The court will not deny specific performance to the
plaintiff, but on the same note, it will only give specific performance
if damages are not capable of compensating the plaintiff.
The plaintiff argued that the hard bargain should not preclude
specific performance. The court agreed; however, the Lord
Chancellor stated that inadequacy is a sufficient reason for the court
to exercise its discretion [although he did not say why]. The Lord
Chancellor continued and stated the plaintiff’s intention was not
honest.
As for compelling the third party purchaser to transfer the property
to the plaintiff, the Lord Chancellor held that the plaintiff failed to
prove that the third party purchaser did not have notice that the
vases were promised to him [even though the court suspected that
the purchaser knew of the plaintiff’s agreement with the defendant].
Rationale: Damages will be adequate except when the goods
are unique, rare, or unusual.18 This rule does not apply if the
bargain is unfair.
Normally, the plaintiff would get specific performance.
Cdn. Long Island Petrolium Ltd. v. Irving Industries (1975) SCC
Facts: Irving and Sadim were joint owners and developers of an oil
lease. Sadim sold its interest to CLIP without informing Irving and
was in breach of the joint ownership contract.
Issues: Is Irving entitled to specific performance of the contract,
such that it can exercise the right of first refusal to bar CLIP from
obtaining title in place of Sadim?
Holding: Yes.
18
Land is almost always considered unique (see below).

Reasoning: Justice Maitland cites Lumley v. Wagner to explain
that the court will not have as much difficulty enforcing negative
covenants. In this case, Sadim conveyed the property to CLIP
giving full knowledge of the joint ownership contract. Maitland
quotes Fry on Specific Performance to support his holding that
third parties may be held liable to an action for specific performance
upon the “equitable ground of conscience.”
Rationale: Where a third party breaches a negative covenant
and is aware (or ought to be) of the breach, the court may
order the enforcement of the covenant and the return of
property to the plaintiff.
Long-Term Contracts for the Supply of Goods or Services
There is a problem with fungibility in these cases, which makes the
supervision argument more important. Unlike a unique good, that
involves a one-off transfer, it becomes more difficult when the court
must take away the plaintiff’s goods from a pool of goods.
Dominion Iron & Steel Co. v. Dominion Coal Co. (1908) NSSC
Facts: The trial judge found breach of a supply contract for coal.
The plaintiff did not claim damages, but asked for specific
performance (delivery of the coal). The contract had an arbitration
clause for review of the transaction every 5 years.
Issues: Are the plaintiffs entitled to specific performance?
Holding: Yes.
Reasoning: Justice Russell explained that the “ground for specific
relief” is the inadequacy of a legal remedy (namely, damages).
Russell finds that the damages are inadequate because market
conditions may change (which makes the assessment of damages
over the course of a long contract difficult) and the payment of a
lump sum may ruin the defendant company. The arbitration clause
makes things more difficult, Russell explained. Presumably, the
parties could make a going-transaction adjustment if one or the
other was incurring too much cost.
Russell relied on Taylor v. Neville, in which the court ordered
specific performance for a long-term contract for the supply of iron.
Rationale: When the assessment of damages would be
conjectural, in situations with long-term supply contracts, a
court could enforce the contract. These are akin to “unique”
goods.
Critique: The House of Lords overturned the NS court’s judgment.
The plaintiff is entitled to two types of damage:
1. Damages owing to the wrongful repudiation of the contract
[and then to treat the contract as over], and
2. Damages owing because of the defendant’s actions
committed before the breach.
The court may enforce specific performance when the supply
contract involves “unique” goods. This is problematic, because the
assessment of uniqueness may vary. For example, Dominion Steel
could claim that Dominion Coal’s coal is unique, because the
material is presumably close to its production site, and available at
a lower cost. A plaintiff may also depend on the supply of goods
and denial of such goods may ruin the plaintiff’s business. See
Fruits de mer Oceans Ltée v. Lanteigne et autres.
Ryan v. Mutual Tontine (1893) Court of Appeal
Facts: The plaintiffs sought the enforcement of a covenant in a
lease for a residential flat. The covenant stated: “a resident porter
appointed an removable by the lessors, but who shall be an act as
the servant of the tenants.” The porter was supposed to be in
constant attendance, clean the common areas, and receive and
deliver the tenants’ mail, among other things. The defendants
appointed a porter that neglected his duties.
Issues: Is the plaintiff entitled to an injunction that will prevent the
hiring of an irresponsible porter, and compel the hiring of a
responsible one? The plaintiff also claimed damages. Is the
plaintiff so entitled?
Holding: The plaintiffs are entitled to damages only.
Reasoning: Lord Esher stated a rule: a court cannot enforce a part
of a contract, except if it the contract falls within an exceptional
class (namely, contracts to create railways). Lord Lopes agreed
with Esher, and added, ”the court will not compel specific
performance with there is another adequate remedy.” Lopes
accepted the trial judge’s damage award and held that the plaintiff
could always file subsequent actions for future breaches.
Lord Kay recognized that if the court compelled specific
performance, it would have to supervise the execution of the
contract.
Rationale: A court will not order specific performance of part of
a contract – especially if that contract is for personal service.
In Posner v. Scott-Lewis, the Chancery Division articulated a test
where a court may order specific performance of a personal service
contract.
a. Is there sufficient definition as to what the defendant has to
do to comply with a court order?
b. Will the court have to supervise to an unacceptable degree?
c. What hardships will the parties suffer?
The general rule is that the court will not enforce building contracts;
however, Tannenbaum shows that money cannot get substitute
performance, because the defendant now owns the land. No sum
of money will guarantee the construction of the road.
Tanenbaum v. W.J. Bell Paper Co. Ltd. (1956) Ont. Supr. Court
Facts: The plaintiff sought specific performance of a contract for the
construction of a roadway [like Wicksteed Avenue] and pipe to
connect his land to the defendant’s land.19 The defendant
constructed the roadway and pipe, but to a lesser quality.
Issues: Is the plaintiff entitled to specific performance?
Holding: Yes.
Reasoning: Justice Gale stated the “railway rule” for specific
performance of service contracts:
• “Where a person [the defendant] undertakes accommodation
works on lands possessed by him,
• In consideration for obtaining those lands or in consideration of
the purchase price of other lands sold by him [defendant has
obtained possession of the land via the contract],
19
• If the particulars of the work are sufficiently clear and defined, &
• The court concludes that damages will not provide an adequate
remedy for the breach [the plaintiff had a substantial interest in
the performance], per Wolverhampton & Walshall R. Co. v.
London & North-Western R Co.
The court is still concerned with supervision and liberty, and
therefore the court will examine the actual obligations.
The court rejected the defendant’s three arguments against specific
performance.
The defendant argued that the terms of the agreement were not
sufficiently clear. The court held that it will not insist on a standard
of complete precision, but it will give effect to the intention of the
parties. All that the defendant had to do was to copy the essential
elements of a named street.
The court then considered the substitution of damages. In this
case, there are two sources of damage: the cost of future repairs,
and the decrease in the value of the enjoyment of the plaintiff’s
land. The court would have to “speculate” as to those costs.
The defendant also argued that it had partially performed the
contract and that produced a usable road. The disparity between
the defendant’s performance and the terms of the contract is not
slight [such that a court could refuse performance]. Once
development of the plaintiff’s land begins, it will be out of
possession of the roadway to make effective repairs, and therefore
the reconstruction should proceed sooner rather than later.
Rationale: The court enforces the rule from Wolverhampton.
When contracts involving the transfer of land are at issue, the
court may be more inclined to order specific performance.
Why not assess the loss as the cost to repair the road? You cannot
get substitute specific performance, because the plaintiff does not
own the land – the defendant does!
In Dynamic Transport Ltd. v. O.K. Detailing Ltd., the Supreme
Court of Canada ordered delivery of a piece of land to the plaintiff.
If not, the court ordered the defendant to pay the plaintiff damages
in result of the loss of bargain – which in this case, amounted to a
loss of $147 000.
Personal Service Contracts
Giles & Co. v. Morris (1972) Chancery Division
Facts: The outgoing director made an agreement with the incoming
director, the plaintiff, that he would take over the position. The
Board of Directors did not hire him. The plaintiff asked for specific
performance.
Issue: Is the plaintiff entitled to specific performance?
Holding: Yes and No.
Reasoning: The plaintiff cannot get substitute specific performance
[because this was a contract to enter into a contract]. Therefore the
plaintiff can get performance.
The court enforced the hiring agreement, but then the company can
then hire and fire Giles. The court will not compel the Board to
perform the subsequent service agreement. The plaintiff will be
entitled to damages.
Rationale: The company likely will not compel performance of
a personal service contract.
In all of these cases, it is hard to assess damages and the services
are unique. However, the court would have difficulty supervising
the order. There are also liberty problems. The court can,
however, impose a negative order on the defendant not to act. It is
easy to tell to see if a person broke the negative covenant.
Money might serve as compensation, but the plaintiff cannot use
that money to acquire exact substitute performance.
Lumley v. Wagner (1852) Chancery Court
Facts: The defendant agreed to sing for the plaintiff and not for any
other parties.
Issues: Is the plaintiff entitled to an injunction to compel the plaintiff
to sing?
Holding: No, but he is entitled to a negative injunction.
Reasoning: The defendant bound herself not to sing for others.
However, a court can order a negative injunction to compel the
defendant to fulfill her agreement.
The court distinguishes Clarke v. Price – a case in which the court
refused to order the defendant to take notes as he had agreed –
because there was no negative covenant in that contract. The court
also distinguishes Hooper v. Brodrick, because in that case, the
defendant did not breach the terms of the lease.
In this case, the defendant did break her contract, and therefore, the
court sought to enforce the terms of the covenant.
Rationale: Where a contract for personal service stipulates
both a negative and a positive covenant for exclusive
performance, the court may enforce the negative covenant
when the defendant is in breach – if the enforcement does not
compel performance.
Warner Bros. v. Nelson (1937) Court of Kings Bench
Facts: The defendant entered into a contract with WB for exclusive
service for a year. Before the termination of that contract, the
defendant entered into another contract with another film producer.
Issue: Is the plaintiff entitled to a negative injunction?
Held: The court orders the injunction, for (the lesser of) the duration
of the continuance of the contract or for three years in the
jurisdiction of the court (in the UK).
Reasoning: The plaintiffs argued that the “enforcement of the
negative stipulation in this contract will not put the defendant in the
position that she must either perform the stipulation or starve.” The
defendant is at liberty to earn her living in another way. Conversely,
the defendant argued that the effect of enforcing the stipulation
would be that the defendant must work for the plaintiff – that a
negative covenant is merely a corollary to the positive covenant.
Justice Branson felt bound by the Lord Chancellor’s dictum in
Lumley v. Wagner as he stated that the court “operates to bind
men’s consciences, as far as they can be bound, to a true an literal
performance of their agreements.” The defendant, having broken
her positive undertakings to perform for the plaintiff, is not barred
from doing business whatsoever. The court will use its discretion to
consider whether it ought to limit an injunction.
“The defendant is stated to be a person of intelligence, capacity and
means, and no evidence was deduced to show that, if enjoined from
doing the specific acts otherwise than for the plaintiffs, she will be
unable to employ herself.”
The provision of the contract which states that a breach may “cost
the producer great and irreparable injury and damage” indicates
that an order for damages is not an appropriate remedy.
Rationale: Where a contract for personal service stipulates
both a negative and a positive covenant for exclusive
performance, the court may enforce the negative covenant
when the defendant is in breach – if the enforcement does not
cause undue hardship.
These two cases show how the enforcement of the negative
covenant would compel performance of the positive agreement.
Detroit Football Co. v. Dublinksi (1955) Ont. HCJ
Facts: The plaintiff, DFC, sought to enjoin the defendant from
playing football for the Argonauts while under contract with Lions.
The restraint of trade clause read: “the player promises … not to
play football or engage in activities related to football for any other
person … except with prior written consent of the Club.”
Issues: Is the plaintiff entitled to the interlocutory injunction?
Holding: Yes.
Reasoning: Justice Wells quoted Halsbury’s Laws of England to
explain that “where there is a substantial question to be
investigated, and that matters ought to be preserved in statu quo”
the court can order the injunction. The plaintiff must show a strong
prima facie case in support of the right which he asserts, and that
the injunction will protect the plaintiff from suffering irreparable
injury, which cannot be adequately remedied by damages.
Although the defendant argued that without being able to play for
the Argonauts, he would be unable to earn a livelihood, Wells
cites affidavit evidence to explain that the plaintiff has expended
considerable sums to scout and to train the defendant. This
evidence was not contradicted – and therefore, Wells relied on it.20
20
This argument came up in the Schroeder case. This provides the
justification for the covenant – it does not give justification for the
injunction, however.
Rationale: When a plaintiff can show that it will suffer
“irreparable harm” such that it cannot be adequately assessed
by damages, and the plaintiff has a strong prima facie case for
an injunction, the plaintiff may be entitled to one.
Critique: The Ontario Court of Appeal overturned the injunction,
because the injury could be assessed in financial terms. The
plaintiff purchased another player. Although the substitute player
was less “efficient and skilful,” the plaintiff did not establish that it
suffered a loss because of that (no decline in gate revenue).
The plaintiff proved damages of $6 950 – the difference between
the costs of paying the substitute player and the credit of non-
payment of the defendant’s salary (and others traded away), and
therefore, the court ordered the defendant to pay that amount.
Courts will enforce restrictive covenants to prevent harm to the
plaintiff business. In this case, Dublinski playing for the Argonauts
will not harm Detroit. It may be that the court did not like the
covenant.
Page One Records, Ltd. v. Britton (1967)
Facts: The plaintiffs, Page One, brought an action against the
defendants, the band the Troggs and their new managers, for
breach of the Page One management contract. The plaintiffs and
the Troggs had agreed in February 1966, that the plaintiff “shall …
advance the professional career of [The Troggs] ...” By December
1966, the Troggs became an established group and were financially
successful.
Issues: Are the plaintiffs entitled to a negative injunction?
Holding: No.
Reasoning: The defendants have not established that the plaintiffs
breached their management contract. Justice Stamp distinguished
Lumley v. Wagner and accepted the defendants’ argument that:
‘an injunction is never granted which would have the effect of
preventing an employer discharging an agent who is in a fiduciary
position vis-à-vis the employer.”
Stamp determined that the Troggs could not act as their own
managers and that they could not survive without managers. If
Stamp ordered the negative injunction, he effectively would enforce
the contract.
Rationale: If the parties are in a relationship of
trust/confidence, the court likely will not order a negative
injunction to enforce a restraint of trade clause.
The following case is very rare, but it fits with the supervision and
liberty framework. Substitute specific performance is not possible,
because the employee is close to retirement.
Hill v. CA Parsons & Co. Ltd (1972) Court of Appeal
Facts: The plaintiff, an employee of 35 years and two years from
retirement, sought an injunction ordering his employer to restrain
the employer from implementing a notice to terminate his
employment, from imposing conditions on him without his consent,
and from conspiring with others to impose such conditions. The
employer accepted terms from a trade union to require that their
employees all be members of such union. The plaintiff refused
membership and received notice of termination, with only one
month’s notice. This is a wrongful termination case.
Issues: Is the plaintiff entitled to the injunction?
Holding: Yes.
Reasoning: Lord Denning explained that given the plaintiff’s
experience and standing in the company, one month’s notice was
grossly insufficient.
The servant normally is eligible for damages for breach of an
employment contract – where the dismissal was unjust or without
due notice. Denning stated that the rule is determinative, and that a
court can order an injunction to stop the master from treating the
contract as at an end. In this case, the employer did not want to
terminate the contract – but had faced pressure from the rival union.
Denning referenced the Industrial Relations Act – not yet in force –
which likely would have protected the plaintiff in this case.
Lord Sachs concurred, and stated that in rare cases, the court can
grant an injunction to restrain a defendant from terminating the
plaintiff. Sachs considers the three main grounds that normally
support the termination of the contract:
1. Unlike most cases, the confidence of the employer and
employee is not compromised, as both parties desire to
maintain a working relationship,
2. Damages do not provide an adequate remedy, because the
employee likely cannot gain alternate employment21, and
3. Reinstatement is possible.
Sachs recognizes his discretion to act and cites this case as an
exceptional one, where it would be appropriate to do so.
Rationale: A court may order the specific performance of an
employment contract, when the employee and employer agree
and when reinstatement is possible.
Critique: Lord Stamp does not accept that the court should apply a
statute not yet in force. The court did not have the opportunity to
hear the rival union to take its position into account. The Lumley
case did not operate in the employee’s favour. The defendant was
in economic straights and needed the agreement with the rival
company to save its business. Lord Stamp was not convinced that
damages would not be an adequate remedy.
The following cases, Stevenson v. Air Canada, considered
whether the plaintiff employee is entitled to an interlocutory
injunction to preserve his employment beyond the contracted age
maximum. These cases debate what it means to “preserve the
status quo” depending upon whose position you consider.
Stevenson v. Air Canada (1981) Ont. High Court of Justice
Facts: The collective agreement required all pilots to retire at age
60. The plaintiff, at age 60 and in good health, sought an
interlocutory injunction to enjoin the defendant from forcing his
retirement (suspend the rules of the collective agreement until a
hearing before the Canadian Human Rights Tribunal).
Issues: Is the plaintiff entitled to the injunction?
Holding: Yes.
Reasoning: Justice Henry cites Hill v. Parsons as a precedent
case, but cautions that it applies in exceptional cases. The plaintiff
argued that he should not be bound by an agreement that is
contrary to law, and that he would suffer irreparable harm that
cannot be compensated by damages if he was forced to retire at 60.
21
This does not appear to be a determining factor.
Although the CHRT might find in the plaintiff’s favour, the plaintiff
will have lost a sense of fulfillment, self-esteem, and the tribunal
might recognize him as victim of discrimination. Given that the
plaintiff will have been unable to practice flying and given the
possible erosion of his skills, he would likely be unable to return to
work following a CHRT decision.
The defendant claimed that the injunction would cause seniority
problems, it would delay the promotion of younger pilots within the
organization, and it would pose an unwarranted risk, given that the
policy is designed for caution as its imperative.
Henry accepts the plaintiff’s arguments and orders the plaintiff’s
reinstatement. Air Canada made no criticism of the plaintiff’s
performance and reinstatement could be possible. Each case
should stand on its own facts, and according to Henry, this warrants
the court’s intervention.
Rationale: The court can preserve a contract of employment
via an injunction, when an employee seeks to continue
employment and seeks to review the contract for its
lawfulness.
Critique: The divisional court overturned Justice Henry’s decision.
The status quo in this case was the policy of mandatory retirement
at age 60. Air Canada would become subject to numerous
grievances if the court were to uphold the decision.
The following case deals more with restrictive covenants, than it
does with remedies.
Instone v. A. Schroeder Music Publishing Co. Ltd. (1974) CA
Facts: The plaintiff, a young composer of pop-songs, signed a 5-
year renewable distribution agreement with the defendant. The
defendant agreed to promote the defendant’s music and pay limited
royalties, in exchange for assignment of all copyrights.
Issues: Is the plaintiff bound by the terms of the contract?
Holding: No.
Reasoning: Lord Russell warned that the court ought not to
substitute its own views on restraint of trade clauses in contracts if
they reflect “current practice” and the parties agreed that it was
appropriate. However, contracts that “too unilaterally unfetter” the
trade of one party begin to look like restraint of trade contracts –
and it invites the court to look at its reasonableness. Those
contracts offend public order and are not enforceable.
Restraint during the contract period seems more reasonable than
post-contract. Russell found it unacceptable that one party must
commit his entire production not even for a promise of
compensation beyond a nominal amount.
Rationale: A court can consider the terms of a contract to
determine its enforceability, and thus reject a plaintiff’s claim
(or potential claim) to ask for specific performance.
The House of Lords heard the defendant’s appeal.
Lord Reid explained that the court must consider the restraint of
trade clause in the context of the whole contract. “Public interest
requires that the interests of both of the public and of the individual
that everyone should be free so far as possible to earn a livelihood.”
This interest works together with the agreement of the parties.
Although the plaintiff may produce good works, it may not mean that
the defendant will publish the plaintiff’s songs.
Land Contracts
Specific performance is often a matter of course for land contracts,
because the courts have regarded land as a unique good. The
courts have made exceptions, as in the case of Bashir v. Koper,
because the plaintiff sought to use the land as an investment.
Specific performance should not enable a plaintiff to use the delay
period between the breach and the trial as a “risk-free” period
(essentially along the same lines as mitigation of damages).
Courts have put three principle arguments forward – but the authors
of the Red Book have countered:
1. Damages would not put the plaintiff in the same position –
parties can place a value on the land, and the court can assess
it appropriately.
2. No amount of damages would necessarily compensate the
plaintiff – damages can be assessed and the court can use its
 discretion (as it does to award specific performance) to
determine the appropriate quantum.
3. The purchasers have an equitable estate in the land – the full
property does not pass from vendor to purchaser until the legal
and equitable titles are transferred. Therefore, neither party has
a complete interest in the realty: one that would compel the
court to decide in favour of one party the other.
The principle that specific performance should be granted for
contracts that involve the sale of realty no longer appears to be the
standard position of the common law. In cases where the realty is
treated by the parties as a commodity or where the plaintiff has
concurred that its damage can be assessed in monetary terms, the
court may not award specific performance.
The following case illustrates the importance of mitigation of
damages. A court will assume that the plaintiff mitigated its
damages as would a reasonable person at the time of breach.
Be careful with these cases, is the plaintiff (buyer or vendor) asking
for the land or for money (either substitute specific performance, or
damages, etc.).
Domowicz v. Orsa Investments Ltd. (1993) OSC
Facts: The defendants reneged on a deal to sell the plaintiffs an
apartment building that the plaintiffs were going to renovate and
lease.
Issues: Are the plaintiffs entitled to specific performance?
Holding: No.
Reasoning: Justice Adams stated that “monetary relief constitutes
the normal remedy for a breach of contract.” Adams then discusses
Fuller and Purdue’s “Reliance Interest in Contract” to consider the
extent of the damages. The law, Adams says, “does not hold
promisors accountable for all loss arising from their conduct.”
Judges must account for policy aims as well (see Hammond J.,
Butler v. Countrywide Finance Ltd. above).
A judge must assume that the breach is an efficient one, and
therefore the defendant should compensate the plaintiff for the
plaintiff’s lost expectation – to vindicate the plaintiff’s right, but to
reward the defendant for an economically efficient decision. The
plaintiff had duty to mitigate its loss and it should not be rewarded
for allowing losses to accumulate.
Adams referred to Bashir v. Koper, to explain that often property is
an investment – it is detached from other purposes (such as voting,
residence, dignities, etc.). The plaintiff can receive adequate
compensation for its lost profits on the investment.
The plaintiff argued, presumably like in Bashir v. Koper, that no
two pieces of land are alike and that it should not be forced to
accept the judgment of the court as to the potential value of the
land. Again, however, the plaintiff should not be entitled to a risk-
free period to hold out for a potential gain, when it could have
mitigated its loss and filed a later claim for damages for lost profit.
Rationale: A breach of contract for the transfer of land will not
give a prima facie right for specific performance. The court will
consider the plaintiff’s intended use for the land and if the use
is for financial gain, it will consider whether the plaintiff
attempted to mitigate its loss.
Semelhago v. Paramadevan (1996) SCC
Facts: The plaintiff sued for specific performance for the sale of a
house. The defendant conveyed the home to a third party. The
value of the house at issue increased by $120 000; however, the
value of the plaintiff’s house increased by $110 000 from trial to
closing.
Issues: Is the plaintiff entitled to specific performance?
Holding: No.
Reasoning: Justice Sopinka explained, “courts have tended to treat
all real estate as being unique and to decree specific performance
unless there was some other reason for refusing equitable relief.”
Now, the common law position has shifted such that it is up to the
plaintiff to establish that the property is unique.
The court should not encourage people to stop mitigating their
losses because of an expectation of specific performance.
Rationale: Damages constitute the default remedy for breach of
contract for sale of land contracts.
This decision, however, had a major impact on the legal profession,
as lawyers must now counsel their clients that an uncertainty exists
in the law related to the sale of realty. Clients can choose to apply
for specific relief, but they may also have to mitigate their losses per
Domowicz, should the court find that the plaintiff could have
acquired a substitute property and filed for damages.
The shift in the common law’s position on specific performance for
the sale of land demonstrates a gradual erosion of specific
performance relief, for exceptional cases, like malicious breaches of
contract.
The following judgment deals with specific performance in contracts
of lease.
Verral v. Great Yarmouth Borough Council (1981) QB CA
Facts: The National Front, a right-wing extremist party, rented a
hall from the Council for their convention. A new Council was
elected in the interim period. It rescinded the contract.
Issues: Is the plaintiff entitled to specific performance?
Holding: Yes.
Reasoning: Lord Denning overruled Thomson v. Park, a case in
which a licensor revoked a license, because the licensor has the
“power” to revoke, even if it does not have the “right” to do so. The
licensor can thus pay damages for breach of contract.
Denning relied on Winter Garden v. Millennium Productions to
hold that a licensor should not deny a person with the right to enter
a premises entry if the licensee behaves himself. The assembly in
this case was a lawful one, and Denning accepted testimony that
“there has never been any trouble inside the meeting.”
Rationale: A renter may be entitled to specific performance of a
rental contract for premises when the renter has not breached
any conditions of the agreement, and where the risk of breach
is negligible.
Actions for Debt – (Common Law Claim for Specific Performance)
In actions for debt, the court will order “specific performance” to
repay the debt. If the court was giving damages, the court would be
open to a claim of having suffered extra loss, because the
defendant did not pay the money on time.
What is weird with these cases is that the courts will not pay
damages for these cases. The court will pay interest, however,
which effectively amounts to damages. The reasons for not giving
specific performance do not apply [because it is easier to award
money, because there is no supervision or liberty problems].
*White and Carter (Councils) Ltd. v. McGregor (1962) HL
Facts: The plaintiffs produced litterbins and they sold advertising on
them. The defendant’s employee agreed to a contract; but the
respondent repudiated the contract before performance began.
Issues: Is the plaintiff entitled to damages?
Holding: Yes.
Reasoning: The innocent party generally has a choice: the party
can accept the repudiation and sue for damages, or continue
to perform.22 The problem with this choice rule is that it seems
inconsistent with the idea of mitigation, because a party can sit on
damages.
The plaintiffs did not accept the repudiation, and they continued to
perform. Once they did so, they performed, and they claimed an
action in debt.
Rationale: When a party repudiates, the other party can accept
or not,23 subject to the “legitimate interest” exception.
This emphasizes the importance of the ‘obligation,’ because the
victim can ask for performance and then claim the contract price.
This seems bizarre because this is waste: money was spend for
labour that creates no value.
• Could we conceive the contract as having two parts: the
agreement to agree (Contract A) and the performance phase
(Contract B). Since the breach occurred before performance,
the plaintiff should not be entitled to it. The “legitimate interest”
22
For example, the aggrieved party can accept goods, and sue for the
cost caused by the defect.
23
Lord Reid left the possibility that if the plaintiff does not have “legitimate
interest” to perform, then it should not perform. Also, if the plaintiff needs
the co-operation from the other party, then plaintiff will not be able to go
through with performance.
 allows for the performance of Contract B, because the plaintiff
has a “unique/special” interest in actually performing and not just
in damages.
• On a macro-level, we can equate “legitimate interests” and
“uniqueness” in supply cases. This does not explain why the
court would allow the plaintiff continue to perform without a
legitimate interest (if this is true).
• There is also an issue of good faith/abuse of rights. A plaintiff
should not be able to abuse his position to compel performance
by the defendant.
Stipulated Damages Clauses
Parties who use stipulated damages clause tend to show the other
party how much the cost of a breach will be. The monetary
obligation is the substitute for specific performance.
There is something a little different from the other specific
performance orders. This is not the enforcement of the primary
obligation. The law treats these provisions differently, since the
plaintiff can get an injunction to perform the primary obligation.
Therefore, the order might be a remedial one.
The court does not always enforce penalty clauses.
Economists argue that the court will not enforce penal clauses,
because they prevent efficient breaches. Penalty clauses compel
performance, because the cost of actually performing the contract is
less than the penalty.
However, there are good reasons to give specific performance.
Courts routinely underestimate damages. Commercial parties know
what they are doing. Reputation is very important. The defending
party often asks for the clause, to get the contract.
Any contract can be inefficient. Why remove these particular
clauses and not others? Well, most people do not expect a breach.
Most people are bad at estimating damages that happen in the
future.
Perhaps penal clauses create an incentive to delay the contract to
get the penalty money [which creates an inefficiency]. However, the
spur the other party to gather sufficient information so as not to fall
victim to the penalty.
From a non-economic perspective, the parties are trying to usurp
the role of the court. However, parties often do stipulate remedies
successfully. Only unreasonable provisions are struck down. This
shows that the court cares about fairness. In cases where there is
a very high risk that the parties will make a mistake, the party will
make a mistake. This high-risk argument applies to the moral and
to the economic argument. We can consider the same argument
for restrictive covenants in general.
Elsley v. JG Collins Insurance (1978) SCC
Facts: The plaintiff bought the defendant’s business and then hired
the defendant as an employee. The contract of employment
contained a penalty clause of $1000 for breach of contract. After
working for the defendant for 17 years, the plaintiff re-entered the
field and took half of the plaintiff’s clients. The plaintiff sued for an
injunction and for damages.
Issues: Is the plaintiff entitled to both?
Holding: Yes; however, he is entitled to a maximum of $1000.
Reasoning: Justice Dickson referred to Jones v. Heavens in which
the court determined that even with a penalty clause, a plaintiff may
apply for an injunction instead, but if the plaintiffs elect for the
injunction, they cannot obtain the penalty damages. National
Provincial Bank of England v. Marshall stands for the proposition
that a defendant cannot deprive a plaintiff of that injunction by
paying damages stipulated in the penalty clause.
The court may award both an injunction and damages when it
concerns the sale of “goodwill” when the plaintiff buys the
defendant’s business and then the defendant continues causing
injury to the plaintiff.
Dickson considered Wirth and Hamid Booking Inc. v. Wirth to
state, “I do not however read these cases as excluding damages for
past loss by reason of the breach, but only for precluding recovery
of the liquidated amount referable to breach in the future.”
Therefore, Dickson identifies two periods as sources of damage: the
plaintiff is entitled to restrain the defendant for breach of a covenant.
This is an equitable remedy, which, per section 21 of the Judicature
Act, the court may substitute for equitable damages.
Therefore, for any part of the breach of covenant not restrained, the
plaintiff is entitled to equitable damages, until the plaintiff receives
the injunction.
Rationale: A plaintiff can receive an injunction and damages
for breach of a penalty clause. The plaintiff may receive
equitable damages for breach up to the point when the court
orders the injunction (in addition to the injunction).
There are two types of liquidated damages provisions:
a) Penalty provisions – the plaintiff must prove the amount that
he ought to recover up the maximum, and
b) Liquidated damages provisions – the plaintiff is entitled to
the entire amount.
Covenants are not disjunctive obligations. This shows that
covenants are meaningful obligations.
Philips v. Hong Kong (AG) (1993) HL
Facts: Philips entered into a contract with the government. The
contract contained a liquidated damages provision if the company
did not meet its deadline.
Issues: Is the contract penal in nature?
Holding: No.
Reasoning: Lord Woolf found that the sum was not unreasonable,
but the fact that it included a minimum, made it appear more like a
penal clause. The court “should not be too ready to find the
requisite degree of disproportion lest they impinge on the parties’
freedom to settle for themselves the rights and liabilities following a
breach of contract.”
There may be different causes of the non-completion – each
resulting in a breach. Minimum provisions may be penal, but it was
not in this case.
Rationale: The court will presume that such clauses in
commercial contracts are liquidated damages clauses. The
breaching party can rebut this presumption.
Substitute Specific Performance
BE CAREFUL ABOUT THE ORDERS RESULTING FROM LAW
AND FROM EQUITY.
Many damage awards are really “substitute” specific performance.
The court calls these awards “damage” awards. One kind of
damage award is purely compensatory. The court cannot undue
the wrong. Many contract claims result in damage award (i.e. a
caterer fails to show up to the event). The breach of the contract in
these cases is akin to a tort claim.
Another kind of damage award is a substitute. The court often
assesses damages at the cost of performance, as we see in
Radford below.
Radford v. DeFrobervill (1977) Ch. Division
Facts: The plaintiff wanted to erect a wall. The defendant breached
the contract. The cost to erect the wall has increased from 1200£ to
3400£.
Issues: Is the plaintiff entitled to damages?
Holding: Yes. The plaintiff is entitled to the cost of erecting the
wall.
Reasoning:
The defendant claimed that the construction of the wall would lower
the value, and therefore its construction would be wasteful. Even if
the wall only marginally increased the land’s value, the plaintiff
should only be entitled to the difference.
The court will not give damages at the level of performance, unless
the court is confident that the plaintiff will go out and get
performance. The court is not trying to compensate for the wrong,
but to ensure that the plaintiff obtains the thing that was promised.
Rationale: The court can award damages as a substitute for the
breach of the plaintiff genuinely intends to find substitute
performance.
 EQUITABLE DEFENCES
THESE DEFENCES ONLY APPLY TO EQUITABLE CLAIMS
Seldom are equitable remedies the prima facie choice of courts.
The plaintiff generally must establish the inadequacy of damages.
Even in cases of the sale of land – a commodity thought of typically
as being unique – the courts have moved away from equitable
remedial orders.
These cases will introduce some element of morality, in a way in
which ordinary orders for damages or debt are made.
Equity Will Not Aid a Volunteer
A volunteer is someone that acquires a right without having given
consideration to the debtor. For the purposes of orders related to
specific performance, the court will not consider contracts under
seal singularly as evidence of consideration.
If a plaintiff is trying to invoke equity to give it something, and the
plaintiff has not paid, the court may not enforce. This is relevant in
trust cases. If a third party purchaser has no notice, and has paid
no value (that is, the third party purchaser received the trust
property as a gift), we have two innocent party. In that situation,
since the third party did not pay, the third party’s rights are weaker.
The third party will then hold the good on constructive trust for
the plaintiff.
The rule, however, applies to two-party cases.
Riches v. Burns (1924) Ont. Supreme Court
Facts: The plaintiff bought land from the defendant. Later that
month, the plaintiff obtained an option to purchase another parcel of
land. These two transactions were distinct, according to the
findings of the trial judge. The document evidencing the option was
under seal. The plaintiff never paid the $1 consideration for the
option. The defendant sent notice to the plaintiff that he was
planning to sell the land. The plaintiff never received notice and the
defendant did not sell.
Issues: Is the plaintiff entitled to exercise the option?
Holding: No.
Reasoning: Justice Riddell held that the seal was not sufficient to
assist the plaintiff in affirming his option to buy.
Rationale: Equity will not grant specific performance when the
plaintiff has not paid “good and valuable” consideration for the
right at issue.
The contract is valid, and the plaintiff may be entitled to damages,
but not specific performance.
The Clean Hands Doctrine
“He who comes to equity must come with clean hands.” A party
cannot enforce a contract that is connected to something that is
unlawful.
Cerilli v. Klodt (1984) Ont. Superior Court
Facts: The defendant agreed to sell his house for $45 200 by
certified cheque, and $4 800 case on closing. He did not tell his
wife, as he was planning to keep the cash. When his found out, she
consented to the sale. The defendants did not proceed with the
sale.
Issues: Is the plaintiff entitled to specific performance of the sale?
Holding: No.
Reasoning: Justice Southey cited Alexander v. Rayson to explain
that the court will not enforce contracts that are void for public
policy. In this case the intention of the co-contractors was unlawful
[the defrauding of the defendant’s wife].
Rationale: The court is under an obligation not to enforce
agreements when they discover “illegality” even if the parties
do not raise the claim.
In the following case, HK Bank of Canada, the purchasers were
aware that the vendors had breached a previous obligation. Mere
knowledge of fraud did not seem to be enough.
HK Bank of Canada Ltd. v. Wheeler Holdings Ltd. (1993) SCC
Facts:
The subsequent purchaser is attempting to buy the property, but it
was aware of the earlier breach of contract.
Issues: Can CMHC impeach purchase, given the second mortgage
the second mortgage was obtained unlawfully?
Holding: No.
Reasoning: Justice Sopinka explained that Town House and
Wellington flagrantly breached their mortgage with CHMC. It does
“taint all the transactions involving property subject to those
obligations.” CHMC must establish that the respondent, HKBC is
guilty of wrongdoing amounting to unclean hands.
Sopinka did not find evidence of misconduct on the part of HKBC.
He could not infer from the facts that HKBC had knowledge of an
attempt to circumvent the conditions in the CHMC mortgage.
Rationale: The plaintiff, who seeks to establish relief based on
a claim that the defendant acted with unclean hands, must
show that a party knew [or ought to have known] that the party
was acting unlawfully.
Laches - Delay
This is the equitable equivalent to common law limitation periods.
Grauer Estate v. Governemnt of Canada (1986) Fed. Court
Facts: The plaintiff sought a declaration that the expropriation of its
land for the construction of the Vancouver Intl. Airport was “made
without or in excess or jurisdiction.” The plaintiffs never assented to
the expropriation or accepted compensation. The government
claimed that the plaintiff should be barred by reason of laches.
Issues: Can the government claim laches?
Holding: No.
Reasoning: Justice Collier cited Snell’s Principles of Equity:
1. Acquiescence by the plaintiff – the plaintiff is aware of its rights,
can complain of an infringement, but lets too much time to
elapse.
2. Change in the defendant’s position – the plaintiff’s delay results
in loss of necessary evidence necessary to meet the claim.
Time is no bar to equitable claims unless the plaintiff acquiesces.
Collier determined that although some witnesses are dead, there is
still sufficient evidence to defend the claim. The plaintiff tried at
several stages to pursue its claim, and have maintained occupation
since the expropriation.
Rationale: When the plaintiff has not acquiesced its rights, it
may continue to pursue the claim even if several years have
passed.
Cadbury Schweppes Ltd. v. FBI Foods Ltd. (1999) SCC
Facts: The plaintiff, Cadbury, applied for an interim interlocutory
injunction to restrain the defendant, FBI, from using confidential
information. The manufacturer continued to make the product, but
Cadbury allowed this to continue to five years.
Issues: Is the plaintiff entitled to the injunction?
Holding: No.
Reasoning: Justice Binnie reaffirmed the three findings of the trial
judge.
Firstly, Binnie determined that the plaintiff knew that FBI had been
selling a copy of “Clamato Juice” minus the clam broth since 1983-
1984. The plaintiffs wrote a cease and desist letter but did not
follow up for another six years. The delay and acquiescence may
bar an injunction but not relief altogether.
Binnie suggested that the law might “lose its deterrent effect” if it
would allow defendants to pay compensation for misuse of
confidential information – even if the information had contributed
only minimally to the defendant’s gains. However, the injunction, “if
granted, would have inflicted damage on the appellants
disproportionate to the legitimate interest of the respondents.”
Rationale: A claim for an injunction to enforce a confidentiality
agreement may be denied in favour of damages, when the
delay period was too long.
Hardship
In the hardship cases, we focus on the defendant party primarily.
This is a moral/sympathy argument. Fairness and sympathy
arguments may be different. The defendant is not asking to be
alleviated from the breach, but only from specific performance.
It makes sense that courts will refuse specific
performance/injunction and not monetary damages, because the
equitable relief can cause particular harm. This is like the refusal
of specific performance for liberty/supervision reasons. In Patel,
there is a particular problem with specific performance, which does
not occur with damages.
Patel v. Ali (1984) Chancery Division
Facts: The parties entered into a contract for the sale of the
defendant’s house. The plaintiff asked for specific performance,
because the bankruptcy trustee secured the house. The
circumstances surrounding the defendant have changed: she does
not speak English, her husband left her for Pakistan, she has three
young children, and she was fitted with an artificial leg. The
defendant relied upon the assistance of her neighbours. The
members of the Muslim community offered to pay for the damages.
Issues: Is the defendant entitled to specific performance?
Holding: No. If the neighbours pay the damages, the court will not
give specific performance. The bankruptcy explains why the
order was conditional, because the plaintiff would protect the
house from seizure.
Reasoning: Justice Goulding determined that the court may
recognize hardship as a ground for denying specific performance in
favour of damages. The discretion is fairly broad, as evidenced by
City of London v. Nash, in which the court refused demolition of
certain houses, because the demolition would be a public loss and
of no benefit to the plaintiff.
Goulding determined that potential buyers and sellers risk hardship
when the purchase or sell property; however, just as frustration or
mistake can void a contract, hardship can void a claim for specific
performance. The unforeseen circumstance does not need to be to
the same degree as legal frustration.
The court will also consider the circumstances surrounding the
contract – namely, how the order would affect third parties (in this
case, the defendant’s three children). In this case, damages are an
effective remedy, but Goulding did not explain why. He merely
determined that an equitable remedy would have caused hardship
to the plaintiff.
Rationale: Hardship incurred by a party may preclude the other
from receiving specific performance. That hardship need not
attain the level of frustration for breach of contract.
The authors of the Red Book cite Justice Cory in Stewart v.
Ambrosina to explain, “such hardship must have existed at the
time the contract was made and cannot be hardship that has arisen
subsequently from a change of circumstances … [because] if not
then difficult problems may arise” to determine how long after
formation hardship will preclude the possibility of an equitable
remedy.
Negative Covenants
Doherty v. Allman (1878) House of Lords
Facts: The plaintiff leased two premises for periods exceeding 900
years. The defendant covenanted to “preserve, uphold, support,
and maintain … all improvements made and to be made thereon”
as storehouses. The defendant lessee wanted to renovate and
improve the buildings to facilitate his business. The plaintiff
reserved the right to re-possess himself of the leases.
Issues: Is the plaintiff lessor entitled to an injunction ordering the
defendant to comply with the covenant?
Holding: No.
Reasoning: Lord Cairns determined that the defendant did breach
his contract, though “in the lapse of a portion of a very long lease of
this sort, would become absolutely useless as a store[house].”
Cairns determined that the property will undoubtedly increase
[ameliorating waste] in value with the improvements by the
defendant. There is no injury to remedy and therefore the
application fails.
Rationale: The court will not enforce a covenant that
disadvantages both parties.
Fothergill v. Rowland (1873)
Facts: The plaintiffs, ironmasters, contracted with the defendants
for the exclusive supply of coal generated from a seam in the
defendant’s mine. The plaintiffs were entitled to that exclusivity by
virtue of a contract of loan to extend the defendant’s operations.
The defendants breached by selling the coal to another buyer at a
higher rate.
Issues: Are the plaintiffs entitled to specific performance?
Holding: No.
Reasoning: Jessel MR stated that the plaintiffs are entitled to
damages amounting to the market price for the coal that the
defendant failed to supply them. The damages in this case are are
ascertainable. If the court ordered the defendant to stop selling
coal [negative injunction], then it would compel performance of the
contract in a round-about way (see Lumley v. Wagner).
In addition, Jessel did find an authority that stated that the court will,
by default, enforce a mandatory covenant by specific performance.
The court has the discretion to determine the appropriate remedy.
Rationale: The court will not enforce a supply contract by
ordering specific performance when damages are
ascertainable, even if the defendant has covenanted only to
sell to the plaintiff.
Metropolitan Electric Supply Co. v. Ginder (1901) Ch. Division
Facts: The defendant contracted with the plaintiff for the supply of
electricity: a contract which included a provision that stated, “the
consumer agrees to take the whole of the electric energy required
for the premises … for a period no less than five years.” The
defendant breached.
Issues: Is the plaintiff entitled to specific performance?
Holding: Yes. However, the defendant can apply for relief if the
plaintiff does not provide the defendant with a full supply.
Reasoning: The defendant argued that the covenant was a
negative stipulation, which stated that the plaintiff is not entitled to
buy electricity from another by implication, because he agreed to
buy all of his electricity from the plaintiff. Justice Buckley
distinguishes Lumley v. Wagner because that case dealt with
personal service contracts. “I therefore think that the fact that the
contract is affirmative in form and not negative in form is no ground
for refusing an injunction…”
Rationale: The court reserves the right to enforce specific
performance for contracts of supply.
Thomas Borthwick v. South Otago Freezon Ltd (1978) NZCA
Facts: Borthwick and South Otago had a contract of service. The
contract was for 20 years, with amendments considered every three
years. New management at South Otago repudiated the contract
with three days notice and reduced the services provided to the
plaintiff.
Issues: Is the plaintiff entitled to specific performance to enjoin the
defendant from changing the contract?
Holding: Yes.
Reasoning: Justice Cooke cites Lord Cairn’s dictum in Doherty v.
Allman, where he discounted “the mere technical differences
between negative words and affirmative words in a covenant,”
because “so long as it is fair and right and proper that the Court
should enforce the bargain which is made, the Court does enforce
it.”
The court ought to look at the nature of the contract between the
parties and whether breach is properly remedied by damages.
“The main significance of an express negative covenant … is
twofold. It enables the court readily to define what the defendant
may be enjoined from doing; and it emphasises that the defendant
has unequivocally accepted this obligation, thus tending to make it
more difficult for him to set up hardship.” 24
24
This makes little sense, given that an affirmative covenant can do the
same. All we need to do is look at Lord Cairn’s dictum.
The damages stipulation in the contract are low, and not an
appropriate remedy.
The amendment and arbitration provisions, Cooke explains, makes
it in the public interest that the court enforce the contract, because
the defendant had the opportunity to renegotiate the bargain.
Cooke found no practical difficulties in enforcing the contract –
because it involved routine matters as between the parties. The
injunction would not impose hardship upon the defendant – and the
court did not prejudice the defendant from applying for rescission if
it does.
Rationale: The court reserves the right to impose for contracts
of service when the defendant has no grounds for breach and
when the parties can resume business afterwards.
The court did not compel South Otago to perform its contract
via a mandatory injunction – because the company can stop
operating.
Recall, however, Propriété Cité Concordia v. Banque Royale, the
court compelled the Royal Bank to maintain its operating hours.
SBI Management v. Wabush Co-op (1985) NFLD SC
Facts: The plaintiff, a mall owner and lessor, sought to refrain the
defendant from ceasing operations of its supermarket. The
covenant read: “the Tenant shall not leave said Leased Premises
unoccupied or vacant, but shall continuously …”
Issues: Is the plaintiff entitled to specific performance?
Holding: No.
Reasoning: Justice Steele summarized the plaintiff’s arguments: it
will suffer irreparable harm not measurable by damages, it will
reduce traffic to the mall, it will lose rental income from other
tenants, and it will lose the defendant’s rental income.
Steele explains that the court could not enforce the mandatory order
to keep the lessee in business (because it is a service contract).
The problems with enforcing the order are such that the court could
not hope to supervise the administration of the business. The
plaintiff is limited to a remedy in damages.
Rationale: A court will not compel a business that is losing
money to continue to operate and abide by its lease.
The following case is the most important case in the section. This
case is nearly identical to the Propriété Cité Concordia case.
This is a moderately difficult contract to do something. The House
of Lords overturned the decision, effectively restating the common
law’s attitude that the contract was too difficult to supervise. There
are many ways not to comply with the order, which makes it difficult
to enforce.
The court of appeal probably thought that supervision was not a
problem, because Safeway would be worried about its reputation
[like Propriété Cité Concordia].
*Co-Operative Insurance Society v. Argyll Stores (1996) Ch.
Facts: The plaintiff leased a unit to the defendant for the operation
of a Safeway supermarket. The defendant was a key/anchor
tenant. The defendant gave notice that it was closing the store.
The plaintiff offered decreased rent and permitted it to assign its
lease to another store. Instead, the defendant left, stripping the
store of the fixtures.
Issues: Is the plaintiff entitled to specific performance?
Holding: Yes.
Reasoning: Lord Roch identified a paradox in this case: the court
has greater difficulty enforcing specific performance because the
defendant left and stripped the premises of the fixtures, thus making
it harder to assign the lease or to order performance.
Damages are inadequate, because the other tenants (3rd parties),
must file a claim against Safeway. The plaintiff cannot sue on their
behalf.
The plaintiffs were not guilty of delay and even offered to reduce the
rent. It is possible to “define with sufficient certainty the obligations
which the order would enjoin the defendants to meet in carrying on
the business of a supermarket.”
Rationale: The court can order specific performance to punish
wanton behaviour, even if the advantage to the plaintiff is out
of proportion to the costs to the defendant.
This case was overturned on appeal to the House of Lords.
REPLEVIN AND RESTITUTION
Replevin is a common law action for the recovery of goods that the
defendant has wrongfully detained. In replevin, the title does not
pass. The claim in tort is for conversation, while the order
requested is for replevin.
Restitution is an order that compels the defendant to give
something back to the other party. The court order replicates a pre-
existing primary duty. The title does pass to the defendant.
We can consider three common situations:
1. The plaintiff has transferred money or chattels to the defendant
by mistake, duress, undue influence, fraud, or on other
condition.25 The defendant has the property without
consideration. In most cases, the court will order the defendant
to repay the money, assuming the defendant does not have a
defence [see Birks].
When the defendant transfers chattels or money, the court will
order the transfer of money. The plaintiff is not entitled to the
property back; the title has passed. The primary duty is to
give the property back; however, the court will only enforce
the substitute duty to give money. A court wants to minimize
difficulty of duty.
The transferee holds the money or chattels on constructive trust
for the transferor.
2. The plaintiff has performed services (in anticipation of a
contract). There is a controversy as to whether these cases are
unjust enrichment, because the loss does not equal the gain.
There are rules that govern whether the court may give back the
value of the gain, or the degree of the loss.
3. Enrichment through wrongdoing may lead to a restitutionary
remedy. Generally, for breach of contract, the breaching party
25
Mistaken payment (“unjust enrichment by subtraction”).
does not have to forfeit profits. These cases are not necessarily
unjust enrichment, when the plaintiff is not enriched at the
defendant’s expense.
Most unjust enrichment cases involve orders for payment of money.
Proprietary remedies are available (constructive trusts) can apply as
well. Matrimonial legislation did not apply to common law partners.
A constructive trust involves a declaration of property rights; the
court will also include an order for specific relief to transfer the
property to the plaintiff.
Peter v. Beblow (1993) SCC on appeal from BCCA
Facts: The parties were in a common law relationship for 12 years.
The plaintiff, the common law wife, looked after the house. The
parties separated and the assets are in the defendant’s name. The
defendant paid off the mortgage while the parties were living
together.
Issues: Does the plaintiff have an interest in the defendant’s
property?
Holding: Yes.
Reasoning: The defendant holds the house on constructive trust for
the plaintiff. The court found that the defendant was unjustly
enriched, given that the parties did not have a contract.
The court must find:
1. A link between the property and the relationship. The
plaintiff does not need to establish an exact correspondence
between the contribution and the property at issue; however,
the courts will examine the correspondence.
2. That the monetary remedy is inadequate. The court will
consider the value that she has given, and whether there is
an attachment to the property.
If the only way that the defendant can satisfy the judgment is by
sale of the property, then the court will order a proprietary remedy.
The hand over of the house on constructive trust negates the
possibility that there are third party creditors.
Rationale: The court can order that the defendant in a common
law relationship holds the property for the plaintiff on
constructive trust.

Critique: Cory J. held “indirect financial contributions to the
maintenance of the property will be sufficient to establish the
requisite property connection.” The court has discretion to award a
constructive trust. The “surviving approach” will often be the
preferable method, says Cory, because the court can assess the
improvement to the property and make a fair assessment, as to
what assets the plaintiff is entitled.
This is different from the “value added” approach, which is used for
monetary awards. In those cases, the plaintiff gets a repayment of
its contribution. This approach is not favoured, because parties do
not see themselves as being able to “cash out” after a relationship.
Unlike the majority, the minority held that these cases are specific to
family cases.
These cases are problematic because of issues related to
mortgages on the property: is the plaintiff able to pay the mortgage?
What happens if the defendant took a mortgage recently, thus
encumbering its value? Courts deal with these cases as unjust
enrichment, but the house it only an approximation of the value of
her services – and the remedy does not correspond to the unjust
enrichment. This case is hard to fit with existing cases on unjust
enrichment. The court is giving the plaintiff something to else the
plaintiff than what she gave to the defendant.
It is hard to believe that the plaintiff is receiving the value of her
services back; what the court is doing is recognizing the sharing
element in relationships.
Re Gareau Estate (1995) OCJ
Facts: Two executrices probated a will and made overpayment to
five of the ten beneficiaries.
Issues: What should the court do about the repayment of the
funds?
Holding: The defendants held their property on trust for 20 years. If
before the 20 years, the defendants sell, they must repay the debt.
Brockenshire J. held that the overpayment must be recovered.
Some beneficiaries have already spent the money. It would be
inequitable for those beneficiaries to repay the money in full. Those
who have invested the money in real property will hold the real
property on constructive trust for the other beneficiaries.
Repayment will occur in 20 years.
The one beneficiary that has spent part of the overpayment ($6000
of the $31000) does not have to pay that part back, but is liable to
repay the rest.
Rationale: The court can order repayment of an overpayment from
a will, but delay the repayment if the money was invested.
This appears to be an equitable lien. The plaintiff essential has an
equitable mortgage to secure the payment.
The court is trying to give effect to a defence of change of position.
Ellingsen v. Hallmark Ford Sales Ltd. (2000) BCCA
Facts: Hallmark and Ellingsen contracted for the sale of a new
truck, contingent upon third party financing from the bank. Ellingsen
took possession of the truck and used it for a month, until Hallmark
discovered that the bank had denied financing, because Ellingsen
went bankrupt. Hallmark transferred title.
The other creditors claim that because Hallmark did not register its
security, it is an ordinary creditor. Hallmark took the interest, but it
did not register it (and therefore it is not opposable to third parties).
Therefore, to say that if the property is held on constructive trust,
then the Personal Property Registration Act would not apply.
Issues: Does Hallmark have a proprietary interest in the truck, or is
it part of the assets divisible by Hallmark’s creditors?
Holding: Hallmark has a proprietary interest (constructive trust).
Reasoning: Donald J.A. held that the sale never occurred because
Ellingsen did not meet the conditions of the sale. However,
Hallmark had transferred ownership to Ellingsen. It would not be
fair for the other creditors to enjoy a windfall, because the credit that
they extended was not based upon an estate that included the
truck.
Hallmark never intended Ellingsen to benefit if it did not pay the sale
price. Therefore, Ellingsen holds the car on constructive trust to
prevent the unjust outcome for Hallmark.
All Ellingsen did was to hold on to the truck until the sale would be
complete. He did not have an obligation.
Donald imposes the constructive trust before the bankruptcy so
that it protects Hallmark’s interest.
Rationale: Failure to pay for movable property may mean that if
ownership is transferred, the transferee holds the property on
constructive trust.
Critique: McEachern C.J.B.C. explained that Hallmark was an
unpaid vendor and that he had a security interest in the truck. The
purchase agreement was complete, although Ellingsen’s
performance was only partially complete. Therefore, Hallmark
should be treated as an ordinary creditor, because Ellingson had an
obligation to pay the money.
Proprietary Remedies
1. Constructive trust (for profits or substitution)
Using a constructive trust is awkward, because it also has other
ramifications. Generally, we do not of a duty of loyalty, because the
constructive trustee will generally merely have to hand back the
property.
Courts will not order a constructive trust if the defendant has sold
the object already.
2. Equitable lien (by contract or by operation of law)26
Money that his held after the property is sold is held in constructive
trust.
3. Mandatory injunction to transfer property
Courts really want to make sure that the property goes to the right
person. It seems odd that courts neglect this option. This option
26
For a lien, the person that holds the lien can use the property to satisfy
the debt. The person holding the lien does not have the right in the
property, but merely holds a secured obligation (see Gareau). If the
defaulter does not pay, the lien holder can sell the property. The person
holding the lien has to return the balance to the defaulter.
fits with third party creditors situations. Courts have discretion to
issue this equitable award, and they can consider the situation of
the creditors. The court should have used a mandatory injunction in
Peter v. Beblow instead, or it should have made a vesting order.
4. Vesting Order
Historically, courts did not have the authority to transfer title. They
could make an order to transfer, but they could not effect the legal
change themselves. Some provinces have granted the courts these
powers.
Are the courts merely confirming already existing rights (primary
rights) or are the courts creating new rights? A court may find that a
plaintiff is very meritorious, and thus it may award a proprietary
remedy that creates a new right (i.e. a defendant breached a
contract and the court awarded the defendant’s car to the plaintiff).
That depends, whether the trust is implied by the facts or implied by
the law. If the trust arises by the facts, the constructive trust will
replicate the right, whereas if the trust arises by law, it appears
more like a remedy. In Peter v. Beblow, is the court creating a new
right or is it giving effect to a right that already exists.
Constructive trusts may arise on the facts – and thus the order may
merely replicate the original right. Consider: a trustee is in breach
of trust and he trades the investment for a yacht. The trustee now
holds the yacht on constructive trust for the beneficiary.
Consider also: the settlor gives $1000 for use of refreshments, but
they only cost $800. The remaining $200 goes back to the settlor
on resulting trust otherwise the trustee would be unjustly enriched.
In Peter v. Beblow, the trust arises by law, makes it different from
the resulting trust of the refreshment situation. She contributes her
domestic labour, but she gets the house. The court creates the
remedy in this situation. He contribution is not what she is getting in
the end. On the minority’s reasoning, the court could give a house
in Alaska so long as it compensates the plaintiff. Even on the
majority’s reasoning, the plaintiff could get a right to the house,
even if her contributions went to other things. So that every time
she contributed her labour, she “acquires” more of an interest.
The court seems to be exercising its discretion when it creates this
constructive trust.
Rawluck v. Rawluck (1990) SCC on appeal from OCA
Facts: The parties had been married for 30 years. They acquired
several parcels of real property and the husband took title to most of
them. The wife applied for equalization when the parties separated.
The value of the husband’s portion increased significantly between
the date of separation and the trial.
Issues: Is the wife entitled to a half-interest in the increase? Does
the Family Law Act oust constructive trusts declared after the date
of separation?
Holding: No.
Reasoning: Justice Cory held that the legislation did not expressly
oust the constructive trust for questions of ownership following the
separation. Section 10 of the Act allows the court to determine
questions of ownership. A constructive trust arises when the unjust
enrichment arises.
Rationale: Matrimonial legislation does not necessarily oust
constructive trusts.
Critique: Justice McLachlin held that the right to equalization was a
legislative substitution for the constructive trust. The constructive
trust is a remedy – which arises not when the duty to make
restitution arises, but when the court orders it.
The dissent in this case shows that, like injunctions, specific relief
does not automatically arise from a finding of liability. The court
must order the constructive trust – as the plaintiff does not have a
right to it.
Summary
If the plaintiff can demonstrate that property was transferred by
mistake (i.e. by voided contract), the title never passes, and the
plaintiff can make a claim in replevin. There is no unjust
enrichment, because the title never passes.
If the plaintiff has a special attachment to property (family property
cases), the plaintiff will ask for a proprietary remedy. Courts will
order proprietary remedies in the form of a constructive trust, and
they do so regularly in these cases. The rights are created by the
court order.
Plaintiffs may seek a proprietary remedy to get ahead of other
creditors.
Perhaps, like the civil law, the courts should not give proprietary
remedies. Some cases should give rise to proprietary remedies:
those in which the transfer was defective initially (non-consensual
transfer). In cases, where the transfer is subsequently defective
(i.e. cases for failure to pay) – and therefore, proprietary remedies
are not appropriate. Plaintiffs meant that defendants have the
property (unlike initial defects27) and it takes the risk that the
defendant will go insolvent.
The plaintiff had a right to be paid and the court has given the
plaintiff a property right instead.
Declarations
This is the last section on the enforcement of primary rights – where
the courts replicate primary rights. When the court is giving a
proprietary remedy, it is essentially declaring who owns
something.
It is not ordering the defendant to do anything – it merely states the
rights (i.e. by stating that the defendant holds the property on
constructive trust). If the defendant does not perform its obligations,
the plaintiff will have to go back to court to ask for an order to
enforce the trust.
Until the spouse went to court, it was not clear what the other
spouse was supposed to do. Perhaps this declaration led to the
creation (or at least the definition) of a new right.
Summary
You need proof that the defendant has not performed or is not going
to perform. Specific relief is secondary. The plaintiff will get it when
damages are inadequate. The court is ordering the defendant what
it is supposed to do.
27
The plaintiffs never meant the defendant to have the property.
Is this true? Specific relief is actually very common (i.e. claims for
debt). Unjust enrichment claims fit under this heading as well.
Nuisance, trespass and sale of land claims commonly involve
specific relief.
The courts have two problems: supervision and liberty. Can
damages get the plaintiff what it wants?
Should the courts have discretion as to whether or not to award
specific relief [the Birks question]? How much discretion does a
court have? At a minimum, we might question the broad claims of
discretion, given that many cases involving monetary forms of
specific relief do not involve discretion. Cases, like Beblow, may
support the argument that the moment that he defendant bought the
house, it was held on constructive trust. This looks more like a
discretionary remedy. The plaintiff is not going the court to say that
she is getting the house that she already owned. She asked for
the court to find her a remedy.
Courts either create rights28 or they replicate them – either a
primary right or a secondary right.
The suggestion is that there is something special about specific
relief that they should have discretion. Courts will look at hardship,
special attachment, whether damages are appropriate, the relative
positions of the parties, etc. In cases of non-monetary specific
relief, these factors do not arise. In Patel or in Beblow, the court
considered the plaintiff’s attachment.
What we are talking about in specific relief cases, is that the
particular kind of relief causes an inconvenience to the
defendant. This is going to happen dealing with pieces of property.
The discretion occurs during the consideration of the balance of
convenience. If we allow the courts to use their discretion, it is not
surprising that these arguments come up only in real (or personal)
property cases.
Another set of questions deals with the moralizing aspect in this
area of the law. The questions may relate to equitable defences.
28
You owe me $100 and the court orders a horse. Perhaps in Beblow,
this is a matter of quantification, because the plaintiff had some right in the
defendant’s property.
DAMAGES
The duty to pay damages is pre-existing, but it arises from the
commission of a wrong. The court is enforcing a secondary right:
the right to compensatory damages.
Textbooks distinguish between specific relief and damages.
Damages can act as “specific relief.” The duty is to pay
compensation, because the defendant was under a secondary duty
to pay damages.
The general rule is that the party will always get damages (except
debt and unjust enrichment).29 Rules on remoteness, causation,
mitigation is about the substantive law of secondary rights.
We award damages because: the duty to pay damages as an
incentive to act efficiently (utilitarian view). Other tortfeasers and
potential victims must take the right level of care. This is forward-
looking. The corrective justice view is backward looking. The court
is a correction of the injustice that occurred (restituo in integrum).
The wrong led to an injustice or an inequality between them
General Rules on Damages
• Remoteness of damages – the courts look for reasonable
foreseeability. Certainly in tort cases, the defendant does not
think about possible risks. Hindsight is always 20-20. The court
does not make a decision based on statistical probabilities. The
nature of the defendant’s duty is relevant. What sort of
losses of injury was this duty meant to protect against.
Kienzle v. Stringer (1981) OCA
Facts: As a result of the plaintiff thinking that he owned the
property, due to an error in a title search by the defendant, his
solicitor, he sold that property and an adjoining one. When he
found out that the principal property was not his, he had already
sold off the adjoining property. Therefore, the principal property
was not worth as much.
The plaintiff wanted to buy a third property, but he could not afford
29
All the plaintiff can ask for is the money, but not damages in addition to
the money.
it.
Issues: Can the plaintiff recover for the loss resultant from the
diminution of sale value of the principal property? Can the plaintiff
recover from the rise in value from the third property?
Holding: Yes. No.
Reasoning: Justice Zuger explained lawyers cannot insure good
title, in order to make a profit on something else. The defendant did
not cause the loss of profit for the third property.
“The range of secondary transactions is unpredictable and limitless
and so are the losses that flow therefrom.” It is impossible for the
court to state which failed transactions result from the failure to
secure the proper title.
Rationale: The court will limit the scope of damages to primary
transactions, when the number of secondary opportunities lost
cannot be delimited.
H. Parsons Ltd. v. Uttley Ingham & Co. Ltd. (1978) QBCA
Facts: The defendant failed to open a ventilator during the
installation of a hooper. This caused the pignuts to become
mouldy, which led to the death of the pigs
Issues: Is the defendant liable for the loss of profit?
Holding: Yes.
Reasoning: Lord Scarman explained the damage arose “from the
ordinary course of the breach.” The hopper was supposed to keep
the pignuts in a condition that would not make the pigs sick (the
scope of the duty). The parties could not foresee exactly how injury
might arise, but it was within their reasonable contemplation that
some injury could likely arise.
Lord Denning explained that the court will award damages for loss
of profit is the defendant “ought reasonably to have contemplated
as a serious possibility or real danger.”
The test is vague. Lord Denning says that the remoteness test is
easier to satisfy when the injury is physical or proprietary. This
might just be a policy argument.
This is a kind of “all things considered reasoning.” The factors
include: the nature of the injury, the culpability of the defendant, the
statistical likelihood, actual foreseeability, deterrence, etc.
Economic loss cases are typically contract cases. The nature of the
duty is very specific. The parties are already in a relationship. They
have certain expectations about each other behaves. The plaintiff
chose to rely upon the defendant. This is different from a tort case,
where the parties are not necessarily in a relationship. The court
must first “find” a duty of care.
• Causation - Remoteness is really about the chain of causation.
Schrump v. Koot (1977) OCA
Facts: The plaintiff suffers a serious back injury. There is a less
than a fifty percent likelihood that the plaintiff will need future
surgery.
Issues: Can the plaintiff recover damages for the possibility that
she would require further surgery?
Holding: Yes.
Reasoning: Justice Lacourcière explained while it is true that the
injury has to be shown beyond the balance of probabilities, it is not
necessary that the plaintiff show that the likelihood of future surgery
is beyond the balance.
“The plaintiff need only establish that he has a reasonable, as
distinct from a speculative, chance of suffering such loss or
damage.”
Courts will still consider remoteness of the damage.
Rationale: When the court makes a general award of damages,
it can account for future injury and compensate appropriately.
The future injury must link by the chain of causation to the
fault of the defendant.
In Farrell v. Snell, on the traditional test for causation, the plaintiff
would have lost. The parties have presented all of the evidence.
The court drew an inference that the defendant was a problem; the
defendant has the obligation to rebut that inference.
Loss of chance is a type of injury. The loss is the probability of
winning x the amount of the potential loss.
Sunrise Co. Ltd. v. The “Lake Winnipeg” (1991) SCC
Facts: The defendant caused an accident to the plaintiff’s boat.
The boat also suffered from another accident, caused by a natural
occurrence. The time in the dry dock took 27 days. The repairs for
the first incident would have taken 27 days; however, if the boat
was damages only by the second accident, it would have taken only
14 days.
Issues: Given the subsequent accident, is the defendant liable for
loss of profit for the full amount of time that the boat spent in the dry
dock?
Holding: Yes.
Reasoning: Justice L’Heureux-Dubé explained that the “repairs due
to the second incident were completed within the 27 days’ detention
required by the first incident.” The second incident, therefore, did
not have as a consequence the diminution in profit-making. There
is no causal link between the second incident and the loss of profit.
Rationale: A defendant can use causation to reduce its
quantum of lost profit, only if the defendant can show that
another incident has resulted in the loss of profit.
• Avoided Loss [responsibility to mitigate] – in both contract
and tort cases, the court will say that it is trying to put the victim
in the position it would have been in the position that the wrong
has not occurred.
There is an ambiguity in how courts go about doing this. A court
can compensate the victim for its loss, or the courts can give
the victim the very thing had the wrong not occurred
(substitute specific performance).
Often these two values are the same, with the exception of cases
like Radford v. Defroberville or Ruxley Electronics.
When the courts talk about damages, there seems to be one set of
rules that apply to all damages. Remoteness, however, only
matters with compensation for loss, not so much for substitute
specific performance.
Recovery for losses that the plaintiff could have mitigated generally
are not recoverable. Mitigation, perhaps, is part of remoteness.
Mitigation, like remoteness, is a much broader test of responsibility.
Cunningham v. Wheeler SCC
Facts: This case is about compensation. We have three personal
injury claims. In each case, the parties received disability benefits
from their employers.
Issues: Should those payments be deducted for a claim for
damages?
Holding: No.
Reasoning: Justice Cory held if the employee has indirectly or
directly paid for the benefits, then the do not get deducted. A series
of precedent cases have held that private insurance payments are
not deducted from damages. The evidentiary inquiry becomes: did
the employees pay for the benefits. This can include a deduction
from a pay slip or a reduction of salary.
The case is based upon a moral argument: the court wants the
plaintiff to benefit from the insurance scheme and not the
defendant.
This is money that the person would have accrued otherwise. The
accident was merely a condition precedent for receiving the payout.
Why should the plaintiff be worse off that if he had never insured?
Rationale: The court will never deduct when there is private
insurance.
Critique: Tort law is principally about corrective justice – to insure
compensation. One needs an injury to correct to find a tort.
Economically, there is an incentive not to take care of oneself,
because the person can collect double wages.
McLachlin says that ultimately damages must reflect a “restoration”
of the plaintiff to his pre-accident position.
If the employer will sue the tortfeasor (right of subrogation), then
there should be no deduction. If the employer will not sue the
tortfeasor and the plaintiff does, there should be a deduction, so
that no party double recovers.
The insurance contract is like gambling. The employee pays into a
pool and can cash out once the condition precedent of the injury
occurs. The only link between the insurance contract and the tort
claim is the fact that the tort was the triggering event for both.
Are these case just about luck?
Asamera Oil Corp. Ltd.; Baud Corp. v. Brook (1979) SCC
Facts: The defendant breached a contract of return of shares to the
plaintiff. At the time of the breach, the shares were worth $0.29. At
the end of the trial, the shares were worth $45.00.
Issues: Is the plaintiff entitled to specific performance? What is the
quantum of damages (based on the time to buy the shares)?
Holding: No. The shares are not unique. The plaintiff was
awarded the value of the shares at $22.
Reasoning: The plaintiff should have mitigated by going out and
buying shares. Prima facie, the plaintiff gets $0.29/share. There
were complicating factors; however. The plaintiff received an
injunction to go out and buy shares. During the period of the
injunction, the plaintiff did not have to buy the shares.
The plaintiff knew that the defendant sold the shares, and therefore,
it should have gone out and bought more.
The court distinguishes White and Carter by saying that the plaintiff
did not have a legitimate interest in treating the contract as
continued and thus performing as is.
Rationale: The plaintiff has a responsibility to avoid piling up
losses during extended litigation. It cannot rely on an
injunction for the return of property as an excuse for indefinite
inaction.
The court seems to be trying to give substitute specific
performance. Then, are remoteness and mitigation still relevant?
At the moment of the breach, the plaintiff has lost a share or $0.29.
If the court awards for the loss, it should give $0.29. If the court
awards substitutes specific performance, it should give $45.00.
What facts, after the time of breach, are relevant? The courts
have struggled to try to find an answer. The basic rule is that
damages are assessed at the time of breach. Judgments do not
occur right away, and situations can change between breach and
judgment.
At some point, performance is no longer possible or desired. The
plaintiff wants compensation. At some point, there is a duty to
compensate. If the plaintiff has to go to court – the defendant is in
continuing breach to compensate you. If losses arise from that
breach, then those losses should be compensatable.
Roth v. Tyler (1974) Chancery Division
Facts: A husband owned a house, which he contracted to sell to
the plaintiff purchaser for £6500. The wife refuses to leave, and she
registers an interest, per the Matrimonial Property Act. The
purchaser then sues for specific performance or for damages in the
alternative.
Issues: When will the court assess the damages?
Holding: The court assessed damages at the time of the order: the
loss was £5500.
Reasoning: The court could order specific performance, but the
husband has to go to court to have his wife evicted from the house.
The court decided to give damages.
The actual value of the house at the time of sale was £7500 and
now, the value of the house is £11500. The purchaser, therefore,
wants £5500 (£11500-£6000). The purchaser wants his profit. The
defendant argued that it should not get any profit, because of the
rule in Bain v. Fothergill.
Where you could not give good title, the vendor only has to
reimburse the expenses associated with the sale. This rule
is very sympathetic to vendors.
The court did not apply this rule in the case. The rule was designed
to deal with land registry title problems, and it was not meant to deal
with problems related to matrimonial property.
The plaintiff could have gone out and mitigated. He could have
purchased another house worth £7500. However, the plaintiff did
not have the money to do so. This is not like a sale of goods case,
because the plaintiff could not go out and buy another house just
like the defendants. The plaintiff is also asking for specific
performance. Although the court denied the plaintiff’s claim for
specific performance, it did so using its discretion.
The purchaser is asking for money for the house.
The vendor argued that the rise in price is not reasonably
foreseeable (remoteness). The parties merely had to realize the
general type of injury – even if the quantum of the rise is
unexpected.
What are the damages in this case? Are they common law
damages or equitable damages (substitute for specific performance,
per the Lord Cairns’ Act).30 Under this case, the court worked under
Lord Cairns’ Act, since it refused specific performance, and gave
damages instead. Therefore, the court ignored the common law
rule, that damages are awarded at the date of breach.
The court adjourned the case – so that the parties could work out
the arrangement, so that the parties could make the sale (the wife
never revoked her interest).
Rationale: The court can award damages up until the date of
the court order, if it could otherwise award specific
performance, because of the nature of the claim.
What is substitute specific performance in these cases? All the
court can do is give money for another piece of land. However, all
pieces of land are unique. The court therefore should compensate
the plaintiff for his loss. In such a case, the court will give the
plaintiff £7500 and interest. The plaintiff gets “substitute” specific
performance, but he does not get the house.
Johnson v. Agnew (1980) House of Lords
Facts: The vendors agree to sell the house to the purchasers. This
time, however, the purchasers fail to perform. The purchase price
would have been used to pay off the mortgage. The vendor seeks
an action for specific performance.
30
We have seen this already. A court can give equitable damages for a
trespass that has yet to happen (quia timet), so that a party can get
damages to pre-empt a solution.
Getting an order for specific performance does not give title to the
land. The purchaser is under a duty to pay the money. The
purchaser did not pay. The mortgagee seized the house and sold
it.
It is now no longer possible to get specific performance, since the
vendor cannot complete. The vendor wants to sue for damages.
Issues: At what point does the court assess damages?
Holding: The date when the mortgagee took the property.
Reasoning: When a purchaser defaults, the vendor has a choice.
The vendor can try to keep the contract alive and ask for specific
performance, or the vendor can terminate and then claim for
damages.
The purchaser elected for specific performance. Therefore, the
vendor claimed that it was too late. The court blatantly rejected this
argument. There was a breach: the defendant purchaser failed to
specifically perform.
The vendor could be awarded in lieu of specific performance or for
breach of contract. The court says that the amount of damages is
the same. This implies that the holding in Roth v. Tyler stands for
the proposition that the court can use the date of trial to assess
damages – either common law or equitable damages.
Every time the court is confronted with rising prices, the court will
use the trial date. We have to think about subsequent events. If it
is worse, the defendant can plead remoteness. If it betters the
damage, the defendant can use this to off-set.
• Efficient Breach – we want people to breach contracts when
the value of performance is less than the cost of performance.
We have already considered Radford v. Defroberville. The
plaintiff did not asked for specific performance. It asked for
damages, in the amount to construct the wall. The defendant
argued that the wall decreases the value of the house. If the
plaintiff really wants the work to be done, then the plaintiff can
obtain the money.
This seems to counter the theory of efficient breach. Economists
appreciate the value of idiosyncratic preferences.

Groves v. Wunder (1939) Supreme Court of Minn.
Facts: The defendant lessee extracted minerals from land and was
supposed to grade the land. It did not. The value of the land was
$12000, but the cost to repair the land was $60000. The plaintiff
wanted the land for commercial purposes.
Issues: Is the plaintiff entitled to the cost of performance?
Holding: The court awarded the $60000. This is the opposite result
to Tito v. Waddell and Peevyhouse v. Garland.
If we do not want to order specific performance, the court can
always award substitute specific performance – i.e. cost of cure.
The decision is bothersome, because it seems inefficient.
The plaintiff should not get cost of cure, when the plaintiff is not
intending to remedy an injury. Perhaps, per Ruxley, it is not
reasonable to ask for the cost of cure.
May it is not “inefficient” if the plaintiff does not use the money to re-
grade. If the defendant would always face an order of specific
performance, it might be inefficient, because the defendant will
perform – and not give the money to the plaintiff. “I will re-grade
your land, but feel free to buy me out for less. Unless you let me
off, we will both suffer.”
The defendant has gotten something for nothing – because the
obligation to re-grade affected the price. Is this a claim in unjust
enrichment? Courts are not willing to split up contracts. This
might help to explain why they give cost of cure.
Ruxley Electronics v Forsyth (1995) House of Lords
Facts: Forsyth hires Ruxley to build a pool. Ruxley fails to build the
pool deep enough according to specifications, but expert testimony
claims that this breach has no effect the use of the pool or the value
of the property. Forsyth demanded specific performance – which
would involve replacing the pool at a high cost.
Issue: Can Forsyth claim for specific performance?
Held: No. The court awards £2500 for loss of amenity.
Reasoning:
Reasonableness and Intention
Forsyth suffered no commercial loss; his loss was purely
idiosyncratic. The court considers whether it is reasonable to
compensate for total reinstatement where the breach did not
necessarily result in the total failure of the contract. Forsyth got
what he contracted for – with some discrepancies. The
reasonableness of an award must take into consideration questions
of fact and degree. How do we measure the personal preferences
of the plaintiff?
It seems unreasonable to demolish the whole pool since the cost of
reinstatement is relatively high. Damages in contract are generally
compensatory, but since Forsyth had not intention of re-constructing
the pool, the awarding of damages would make no difference in
resolving the failed performance on Ruxley’s part. However, failing
to give any award would seem to be unjust since it would condone
breach of contract (policy consideration).
Loss of Amenity
The rule established in Addis holds that plaintiffs cannot claim for
injured feelings, subject to certain exceptions (Jarvis). The court
allows the claim for loss of enjoyment/disappointment following the
same reasoning in Jarvis; however, the court is reluctant to apply
this approach generally.
Rationale: Where if a breach of contract is established without
any pecuniary damage, only in cases where the contract
provides for a pleasurable amenity and goes unfulfilled, may
the court award damages for breach.
The “reasonableness” intention is puzzling. It is not reasonable to
ask for cost of cure when it is much greater than the loss.
The “reasonableness” requirement seems to be similar in the
nuisance and trespass cases. The court will give damages instead.
The courts considered the behaviour of the parties. In some
situations, it is just unreasonable to ask for specific relief.
At a certain point, even if the plaintiff has idiosyncrasies, the
court will not make an award when the cost to the defendant is
too high.
Non-Pecuniary Damages
In Ruxley, the court awarded damages for non-pecuniary loss,
because the pool did not actually have a diminution of market value.
If the purpose of the contract is to give pleasure, then the plaintiff
can recover for non-pecuniary loss (Jarvis v. Swan Tours). This
may be an aspect of the remoteness rules.
It is not reasonably foreseeable that people do not get their money
on time. Most cases heard before the court are commercial in
nature. As the courts began to hear non-commercial cases, they
began to make exceptions, as in Ruxley.
The wrong in employment cases is failing to give notice. Wrongful
dismissal is really just wrongful lack of notice. Is it now reasonable
that the plaintiff would suffer non-pecuniary damages because of
lack of wrongful notice? The manner of dismissal might make a
difference; however, dismissing the plaintiff or waiting three months,
probably makes no difference – because the harm results from the
termination – which the plaintiff is entitled to do.
The way the court will give compensation is to increase the notice
period, per Iacobucci. McLachlin found a duty as a matter of law.
Double Recovery
McLean v. Vickers
Facts: The plaintiff bought a copier from the defendant. It held on
to the copier and tried to fix it. It was a very long time before it gave
up.
Issues: Is the plaintiff entitled to loss of profit?
Holding: Yes. The plaintiff had to deduct the price of the
machine.
Reasoning: Arnup held that the defendant vendors could not locate
the problem by 1966 and at that point, the plaintiff should have cut
its losses and returned the machine (and sued for damages).
Arnup held that if the contract was performed, the plaintiff would
have to deduct the purchase price.31
31
M.G. Baer offers a critique of this judgment. The court should have
deducted the operating cost and not the purchase price. The plaintiff
should be able to keep the machine at the end of the two years.
Consider: if the plaintiff accepted repudiation, it should receive: the loss of
profits from the sale date until the date of repudiation/offer to refund (gross
revenue – operating costs), and losses incurred in the repair of the
Equitable Damages
This is not traditionally seen as damages.
Once the courts fused, does Lord Cairns’ Act do anything? The
principles in which the court awards damages are generally the
same. Even in a common law court, the court retains the flexibility
to change the date in the assessment.
There are situations in which the common law would not give
damages at all. These are cases in which the damage has not
happened yet – cases in which the plaintiff is entitled to an
injunction (Hooper v. Rogers). This is a substitute
injunction/specific performance. In Boomer v. Atlantic, the
neighbouring land owner received compensation instead of the
injunction. These are damages are not available at common law,
because the damages were for future pollution. See also Miller v.
Jackson.
It is like the defendants took something – and the court is trying to
determine the value of what was taken. The defendant in these
cases can cease causing the harm and restore the plaintiff back to
its pre-fault state.
Courts give damages for equitable torts, like the breach of
compensation.
Most cases are trust cases or they are contract cases. No one
really worried about trying to sue for something else. Canadian
machine. The plaintiff would then have to return the machine to the
defendant.
If the plaintiff treats the contract as continuing, then the plaintiff will receive
compensation as if the contract was performed (subject to mitigation). In
this case, the plaintiff should receive: the loss of profits from the sale date
until the date of mitigation (which should be the same as the offer to
refund), and damages for the difference between a broken machine and a
new one.
The two damage awards would be very similar in this case. In no
calculation, though, should the plaintiff have to pay for the whole machine!
courts have held, where there is a breach of an equitable duty,
there is a second basis upon which damages can be given,
separate from a breach of contract or breach of extra-
contractual obligation (such as a negligent misrepresentation
case).
We already know that the date of assessment is flexible. What
about remoteness, mitigation, or causation? The court will not use
these limiting factors (see Norberg v. Wynrib)
Canson Enterprises v. Boughton & Co. (1991) SCC
Facts: A solicitor failed to disclose that he was acting as a middle-
man for a purchase of property. The solicitor took a cut. This is a
breach of contract and fiduciary duty. The plaintiff did not take a
loss, because he did not overpay for the land. He lost money
subsequently, when the soil engineers did a bad job. Even if we
treat this as an ordinary breach of contract case, this satisfied the
“but for” test. This seems too remote.
Issues: Are the plaintiffs entitled to recover for breach of fiduciary
duty? Are the plaintiff’s entitled to damages for the damage
resultant from the fault of soil engineer?
Holding: The plaintiffs are entitled to recover for the solicitor’s profit.
Reasoning: La Forest explained that “the remedy of compensation
is not resorted to frequently.” Plaintiffs plead for equitable
compensation when the value of the property in question decreases
– and there is a net general loss that is not recoverable by
“restitution” or disgorgement. The loss must result from the failure
to perform the equitable duty. Therefore, in a trust case, the trustee
can lose all of the gains made in associated with the trust and be
forced to repay all of the losses incurred.
The court will have to put the plaintiff in the position that it would
have been but for the breach of the relevant duty. Equity is not so
rigid, however, that it cannot resort to principles such as causation,
remoteness, and mitigation. An award of damages for the
negligence of the soil engineers falls outside of the scope of the
relevant duty of the solicitor.
McLachlin held that we should look to this situation as we would
examine a trust. The approach to equitable duties must be different
to that of common law duties. Liability in equity is not unlimited.
The loss flows from the interests that the trustee undertook to
protect. When there is no link between the wrong of the third
parties and the breach of duty, the loss resulting from the wrong is
not compensatable.
Rationale: A defendant may be liable for compensation, if the
loss results from the breach of the equitable duty.
In cases of fraud, the rules on remoteness are different. Even the
common law does not use the same rules on remoteness.
The next case, Hodgkinson v. Simms, follows similar facts to the
Canson case. In this case, like the former, the court looks beyond
the remoteness issue. The plaintiff can recover because the
defendant’s breach was causally linked to the defendant’s loss, per
La Forest J (but not per McLachlin J or Sopinka J).
Summary
1. Common law damages – damages for breach of contract and
tort.
We have focused on the limits that the courts impose on such
awards: remoteness, causation, mitigation, and date of assessment.
We have also tried to draw the distinction between damages as
compensation and substitute specific performance.
2. Equitable damages (under Lord Cairns’ Act)
Courts can award damages in lieu or, or in addition to, specific
relief. Will the plaintiff get the same amount as common law
damages. We saw that, after Johnson v. Agnew, the courts have
assimilated the rules on damages.
Damages in lieu of a quia timet injunction are equitable damages.
3. Equitable compensation
This is an award made for breach of an equitable duty. This
remedy grew out of the accounting for loss. Is this really
compensation or specific relief? We seem to be forcing the trustee
to restore the trust fund.
The debate in Hodgkinson was about what is going on with
equitable compensation? La Forest held in Canson that in some
equitable duties, the common law rules still apply. What McLachlin
says in Canson is a fundamentally differently area of the law.
Equity can borrow from the common law, but is not bound by the
rules of the common law. The rules on remoteness should not
apply if we think that equitable compensation is different. In the
end, however, they reach the same result.
When we look at Guerin v. The Queen, however, we see that the
court awarded the plaintiff the subsequent increase in the value of
the land. None of the parties could have foreseen this increase and
had this been damages in common law, the plaintiff might not have
been able to recover to the same extent.
Is it different when a fiduciary lies to you? Should your own
contributory negligence count against you?
Maybe there is a third way – all of the breaches are torts, but there
are different rules on remoteness are different. Look at remoteness
rule in the common law related to deceit.
How much should the defendant be responsible for? This question
of responsibility in the broader sense sets the difference between
the common law and equitable damages claims.
From the perspective of the plaintiff, the plaintiff suffers the same
loss in cases of deceit as in breach of contract; yet, the court
applies different rules on remoteness.
There seems to be something about the relationships to which the
court has extended the “fiduciary” relationship, in order to ease the
rules on remoteness.
Common law courts are looking for a category – but it does not
seem to be the right fit. If we try to build a general theory of
fiduciary law based on cases of sexual abuse or Aboriginal issues,
then we have a problem trying to fit the categories together.
Perhaps the courts should be able to punish these people, instead
of making the fiduciary duty more severe.
Gain-based Awards
The word “restitution” means “giving back.” In these cases,
restitution means “giving up.”
Is this really a gain based award – distinct from damages or an
ordinary award for unjust enrichment?
The court can award an account of the fiduciary duty. If the trustee
breaches the duty, the court can make the trustee give back the
profits. The beneficiary does not lose any money, but the
trustee, if he is caught, must hand over the property. This is
different from ordinary restitution, since the trustee is giving back
more than it took.
Is this a replica of a right or is this a new kind of duty created by the
court? Here, we are stripping someone of its profits. Why should
the plaintiff get the money?
In tort and in contract, the rules seem to be different for tort and
breach of contract. In tort, the court awards gain based awards for
breach of copyright, in trespass (way-leave cases)32, and
interference with goods. 33
The court is stripping the savings that the defendant has made by
committing the wrong. This means that it might look like
compensation.
In breach of contract, however, the courts have generally not
awarded gain-based awards.
United Australia v. Barclays Bank
Facts: The cheque was supposed to stay with the original
company, UA, but ended up at Barclays Bank. UA sued MFG for
“money had an received” – a claim for restitution. UA then sued
Barclays Bank. The cheque was fraudulently signed, and Barclays
Bank gave away the money to MFG.
UA switched its claim from one defendant for restitution, to Barclays
for conversion.
Issues: Has UA waived the tort against Barclays?
Holding: No.
32
Give a sum for the rent that the defendant would have had to pay.
33
Ibid.
Reasoning: The defendant claimed that when UA asked for money
back from MFG, it waived the wrong against Barclays. The court
denied this claim. This does not mean waiver in any sense.
The plaintiff just wants its money back; it is not condoning MFG’s
actions. The reason that this language arose because of the writ
system for filing claims. Courts tried to fit restitution claims into the
writ of assumpsit indebiti. This was a legal fiction. If the plaintiff
sued in contract, it would have to waive the tort.
Now, the plaintiff can bring an action in both contract and tort and it
can then elect its remedy at the end of the action.
Rationale: A wrong can give rise to more than one remedy.
The standard response to a wrong is compensation. In other cases,
there is another secondary duty to give up gains.
Some people think that gain based awards are really just restitution.
In United Australia, the judges use the language of restitution.
The choice in this case might have been the choice in causes of
action.
Birks would say that if we call these rights, arising from non-wrongs,
then we should not strip the defendants of their profits. This is not
restitution. The remedy is “giving up” not “giving back.”
Philips v. Pomphrey
Facts: The defendant accessed a mine under the plaintiff’s land. It
used the passageways under the plaintiff’s land.
Issues: Is the plaintiff entitled to payment for the use of the roads?
Holding: This is a case of trespass; however, the plaintiff could not
go after the estate.
Reasoning: When making a claim for compensation for a wrong,
you cannot follow it into the estate. If the claim is in a property right,
as in an unjust enrichment case, then the plaintiff can take from the
estate.
The plaintiff’s claim is for compensation. It is a personal claim.
Defenders of gain based remedies do not like this case.
The court is compensating for the lost opportunity to bargain. The
plaintiff lost the opportunity to charge rent. It is not a gain based
award, but it is just a form of compensation. See also Roth v. Park,
below.
We are compensating the plaintiff for the ability to charge rent. This
does not seem to make too much sense. The compensation seems
to be a removal of the gain by the defendant.
Proprietary Gain-based Awards
What is the loss in this case? The Crown really did not suffer a
loss. The breach of the fiduciary duty will never cause a
measurable loss.
AG for HK v. Reid (1994) HL on appeal from NZCA
Facts: The defendant, Reid, accepted bribes while a prosecutor in
Hong Kong. Reid invested the money in land in New Zealand and
earned a profit.
Issues: Can Reid keep the profit?
Holding: No.
Reasoning: Lord Templeman explained that the recipient of a bribe
acts as a “false fiduciary.” The bribe is an inducement by a third
party to break the fiduciary’s trust with another. The money, in
common law, belongs to the recipient and it cannot be returned to
the giver. The person whose trust has been broken becomes the
creditor of the bribe in equity. Equity assumes that the false
fiduciary holds the bribe in constructive trust.
Although this approach is subject to criticism, the recipient of the
bribe should not be able to benefit from his own wrongdoing.
A review of New Zealand authorities on bribery reveals that
previous decisions, including Lister & Co. v. Stubbs were wrongly
decided. The money is held in trust, not as a debtor-creditor
relationship. Equity treats the fiduciary as having acted as if he has
performed his duty (although this is a legal fiction, because the
fiduciary has breached the trust – an act, which cannot be undone).
Rationale: If a person discovers a breach of duty due to a
bribe, that person is entitled to recover the amount of the bribe
and interest, if any is accrued. The recipient holds the bribe in
constructive trust for the offended party.
This provides a proprietary remedy – a link between the
property and the profits.
Third party creditors are not considered. Right from a moment that
the plaintiff took the bribes, he never held the property to begin with.
This case probably does not make sense for cases where the
third party creditors have a legitimate claim against the
defendant’s estate.
This case is an example of how proprietary remedies can be unfair
– especially to 3rd parties, who hold a legitimate claim. In Soulos v.
Korkontzilas, the court leaves itself plenty of room to manoeuver.
It makes sense to give a proprietary remedy in two-party cases, but
not so much in third-party cases.
Soulos wanted the property – to be the landlord of his banker, even
though it decreased in value. This is not really a gain based award,
because the defendant did not make a gain. This case is sort of
like specific performance of the fiduciary duty.
Soulos v. Korkontzilas (1997) SCC on appeal from OCA
Facts: A real estate broker, the plaintiff’s agent, made an offer from
a piece of property. The vendor made a counter-offer, which the
purchaser rejected. The vendor then told the broker the price that
the vendor would accept; however, the broker did not tell the
purchaser. The broker’s wife holds the title to the property.
Issues: Is the broker in breach of contract or breach of fiduciary
duty? Does the wife now hold the property on constructive trust?
Holding: Yes.
Reasoning: Justice McLachlin held a constructive trust may arise
when:
1. It is a remedy, or
2. Condemns wrongful conduct to preserve the integrity of
certain relationships.
Courts have the discretion to ensure that parties do no behave in
such a way that they retain property that offends good conscience.
Unjust enrichment does not explain all of the situations in which a
constructive trust may arise. A constructive trust may arise from
different situations: through the tort of the breach of confidence,
breach of contract, unjust enrichment, etc. Good conscience,
therefore, may be a unifying principle that links the use of the
constructive trust together.
As in Hodgkinson v. Simms, the imposition of a constructive trust
“holds people in positions of trust to high standards of trust and
probity.”34
McLachlin used the language of “remedy” in this case. She says,
“equitable remedies are flexible.”
She applies the test laid out by the court in Pettkus v. Becker to
consider whether the court should impose a constructive trust
based upon the defendant’s wrongful conduct.
Disgorgement of Wrongful Gains
1. The defendant must have been under an equitable
obligation in relation to the activities giving rise to the assets
in his hands,
2. The assets have resulted from agency activity, because the
agent was acting, or should have been acting for the benefit
of the principal,
3. The plaintiff must show a legitimate reason from the
proprietary remedy,35 and
4. Other considerations must not render the imposition of
the trust unjust on third parties.
McLachlin found that the plaintiff satisfied the test. The broker
owed the plaintiff a duty of loyalty, but he acted in conflict of
interest with the plaintiff’s interest. Secondly, the broker obtained
the property as a direct result of his breach of loyalty. Thirdly,
although the property did not result in a gain, if the broker was
allowed to keep the property, it would compromise the institution of
real estate brokerage, because clients would have no claim unless
the agent made a profit. Fourthly, no third parties would suffer from
the plaintiff’s acquisition of the property.
34
Personal obligations may be able to do the same.
35
Maybe if the breach was not intentional.
Rationale: Even if the fiduciary does not incur a benefit from its
breach of loyalty, the fiduciary may still hold the property on
constructive trust for the beneficiary.

Critique: This leaves the law very unclear as to when the court will
award a proprietary remedy, says Sopinka.

Summary/Review

Court orders can do the following:

1. Replicate pre-existing duties

a. Primary duties (arise on non-wrongs, like the duty to
perform a contract or give back a mistaken payment,
not to trespass or create a nuisance, duty to account
for a trust; e.g. specific performance, injunction)
b. Secondary duties (arise from wrongs, like torts to the
body; e.g. duty to compensate)36

2. Create new duties or transform them

a. Some (all?) proprietary remedies (e.g. constructive
trusts arising out of co-habitational disputes, gain-
based awards37, punitive damages38)

36
A party cannot sue someone for damages if property is not returned
after an unjust enrichment.
37
Maybe this is punishment? Some people claim that it is like unjust
enrichment. They may merely replicate pre-existing duties.
38
Punishment requires a court order.