Dear All

The history of punitive/exemplary damages does indeed extend long before the days of Lord Pratt CJ in the 18th c, and I argue that the roots lie in the 12th and 13th c English statutes and the interaction with the ius commune in my recently-published article: Jason Taliadoros, 'The Roots of Punitive Damages at Common Law: A Longer History', Cleveland State Law Review 64.2 (2016) 251-302.

Best
Jason
Jason Taliadoros
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-----Original Message-----
From: Harrington Matthew P. [mailto:matthew.p.harrington@umontreal.ca]
Sent: Saturday, 23 April 2016 5:06 AM
To: Andrew Spurgeon <aspurgeon@rossmcbride.com>; Angela Swan <aswan@airdberlis.com>; obligations@uwo.ca
Subject: RE: A Fundamental Right to Punitive Damages

I have to agree in large part with Angela on this, for at least three reasons:

1. The Supreme Court of Canada's jurisprudence on punitive damages in contract is entirely arbitrary and outside the norm of contract law in other Commonwealth jurisdictions. A close look at Whiten shows that the court completely misconstrued the availability of punitive damages in "pure" breach of contract. The court blithely asserts the importance of punitive damages as a means of punishment and deterrence, but a close look at the cases its cites were all tort cases, having nothing to do with contract. To my mind, it was a shoddy or deceptive piece of work. At the risk of appearing to be a self-promoter, I invite attention to my article , "A Lawless Science: Punitive Damages and Pure Breach of Contract in Canada," 60 SCLR 185 (2015). The fact remains that Canada's approach is out of step, even with the vast majority of the American states.

2. Even if one were to assume that punitive damages should be available in contract, Whiten in sore deficient in that it gives no basis whatsoever for determining when or how such damages ought to be awarded or in what amount. It's "11 point" list of factors is, again, entirely illusory, in that the factors can be contradictory and there is no priority or organisation among them. The idea that any judge is going to read these eleven points to a jury and expect them to coherently consider how they should be integrated is rather laughable. Other than saying damages should be "rational" and "proportionate" Whiten offers no real guidance on how to restrain juries or judges. In the end, we are where we began, with judges and juries making up awards based on their own particular sense of outrage. That this is the case is proved by the fact that a large number of punitive damage cases have numbers that go up and down depending on what level of court hears the case. Whiten itself is a good example. One set of judges says, $1 million, another says $100K. What basis do either have for their conclusion?

3. Finally, I wonder about the relationship between the aggravated and punitive damages. If the mental distress damages are only $30, how does it favour an award of almost 20 times as much. The court seems not to have thought much about his mental anguish and suffering if it's only giving $30K. On the other hand, a multiple of 20 times seems rather out of proportion in the context of Whiten. Bear in mind, that in that case, the actual damages were $345K, with punitives being set at $1 million, a multiple of three. After all, the Ontario Human Rights Commission this week gave a man $12K for "injury to his dignity, feelings, and self-respect" because a restaurant refused to give him water without a wedge of lemon in it. Now, I understand the legal principle behind the ruling and generally agree with it. However, if that sort if injury is worth 12K, the amount of aggravated damages in Zurich seems rather small. I wonder, therefore, that we aren't, in fact, seeing the Americanisation of damages but in an entirely inconsistent and arbitrary fashion.

Put more simply, I think Whiten's result is entirely predictable in that punitive damages in contract remain utterly unpredictable.

------------------------------------------
Matthew P Harrington
Professeur titulaire
Faculté de droit
Université de Montréal
514.343.6106
matthew.p.harrington@umontreal.ca
commonlaw.umontreal.ca
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From: Andrew Spurgeon<mailto:aspurgeon@rossmcbride.com>
Sent: April 22, 2016 1:24 PM
To: Angela Swan<mailto:aswan@airdberlis.com>; obligations@uwo.ca<mailto:obligations@uwo.ca>
Subject: RE: A Fundamental Right to Punitive Damages

Angela:

I must respectfully disagree with your point that punitive and aggravated damages have no place in the law of torts or contract. Insurance contracts are "peace of mind" agreements which in many circumstances - such as auto insurance - are compulsory. And if not compulsory necessary.
In the Province of Ontario, Canada where we live, we have an auto insurance and liability system that provides a hybrid of tort liability protection and first-party benefits through private insurance carriers. The Auto Policy is in a form proscribed by statute, and required by law to be purchased as a condition of driving on a public highway. In that Policy there are a series of no-fault benefits including: income replacement benefits, rehabilitation benefits, attendant care benefits and provision of medical aids and devices.
Aggressive and punitive adjustment of claims by insurers can have a devastating impact on vulnerable insured people who are badly injured. An example from our own practice was an auto insurer which refused to pay for new catheters for a person rendered tetraplegic in a car accident. Urinary tract infections can be a serious risk to the health and, indeed life of such persons. The insurer refused to pay for new (sterile) catheters for each insertion (which were prescribed by his physician). Rather, the injured person was supposed to reuse and sterilise his catheters by boiling them in water himself. This is a person who has reduced motor function in his hands and arms. The process of boiling catheters on the stove was a dangerous act for him in and of itself (we had to get an occupational therapist to make this self-evident point as a professional opinion in a written report). We fought this issue for some time. Without a reasonable response, we finally issued a claim alleging bad faith seeking punitive damages. That caused the insurer to finally do the right thing. Sometimes the threat of punitive damages is the only thing which will modify behaviour.
Insurance contracts represent a function which is a quasi -public utility. It is the pooling of risk and collective protection against individual misfortune. Though we allow for private actors to make profit on this activity, it still is partially a public good which cannot be abused for the purpose of profit. Insured people who are hurt or having suffered a devastating loss are vulnerable and likely at the lowest ebb in their lives when they are most in need and most at risk of abuse. They can't be forced (in the words of Sean Connery) to come with a knife to a gunfight!
On the issue of aggravated damages, imagine a disability insurer which is supposed to pay an income replacement benefit. The insured person is completely disabled. That person incurred a traumatic brain injury and suffers from severe major depression, with suicidal ideation. These facts are known to the insurer and supported by medical evidence. The adjuster, also aware that the insured is just getting by on his income replacement benefit, nevertheless, in the face of a medical report prepared by the insurer's physician which is supportive of the insured's claim that he is disabled from work, cuts the insured's income disability benefits off. The insured person consequently can't pay his mortgage. He loses his home. He and his family are forced out. Desperate, he commits suicide. What are his wife and children to do? If aggravated damages have no place in tort or contract, his family has no place to go. The obligation to pay an income disability benefit dies with the insured.
Punitive damages and aggravated damages for bad faith exhibited in circumstances like what is seen in the Zurich v. Branco case and Whiten v. Pilot (in which I was involved as counsel at the Supreme Court of Canada) are essential in protecting the public interest in the provision of 'peace of mind' and collective protection; which is the basis of all insurance contracts. Insurance is a form of transaction that serves not only the parties to the contract, but the public as a whole. No doubt, that thought was in the mind of the Court in Saskatchewan.
If there is no consequence for bad faith - why have a doctrine requiring good faith in insurance contracts?

Andrew Spurgeon


From: Angela Swan [mailto:aswan@airdberlis.com]
Sent: April-22-16 11:47 AM
To: obligations@uwo.ca
Subject: A Fundamental Right to Punitive Damages

A Canadian Court of Appeal has elevated the right to receive punitive damages for breach of contract to some kind of fundamental principle of the law of contracts.
In Zurich Life Insurance Company v. Branco<http://canlii.ca/t/gjm8s>, 2105 SKCA 71, leave to appeal denied, 21 April, 2016, the plaintiff, Branco, the respondent on the appeal, was a welder employed by Kumtor, an indirect subsidiary of Cameco, a corporation doing business in Saskatchewan, to work in Kyrgyzstan. He was injured at work there. He was covered by insurance policies issued to Kumtor by the defendants, Zurich and American Home. The plaintiff sued the two insurers in Saskatchewan to recover the benefits he believed he was entitled to. After his injury, the plaintiff returned to Portugal from where he had immigrated to Canada some years before. The trial judge had awarded punitive damages against Zurich of $3 million and $1.5 million against American Home, castigating them for callous and abusive conduct. In addition, he had awarded damages for mental distress for a total of $450,000. Punitive damages against American Home were reduced to $175,000 and damages for mental distress to $15,000. The punitive damages award against Zurich was reduced to $500,000 and damages for mental distress to $30,000.
The question relevant to this post is that a question arose of the law to govern the Zurich claim. The Zurich policy provided:
Article 12
Should any differences arise between the contracting parties of the present Group Insurance Policy, the Courts at the domicile of Zurich Life Insurance Company Limited [Switzerland] shall be considered competent and Swiss Law will be applicable.
The trial judge in his headlong pursuit of the evil insurers - who, admittedly, had behaved very badly - simply brushed the choice of law clause aside, and held that Saskatchewan law applied.
The Saskatchewan Court of Appeal held that the Zurich policy was governed by Swiss Law. Expert evidence on Swiss law tendered by Zurich established conclusively that that law did not permit punitive damages. Richards C.J.S. held, however, that it would be contrary to Saskatchewan public policy to let that detail stand in the way of such an award. He said:
[173] The concept of punitive damages is deeply rooted in our legal system. In [Whiten v. Pilot Insurance Co<http://canlii.ca/t/51vn>., 2002 SCC 18, [2002] 1 S.C.R. 595, 209 D.L.R. (4th) 257], Binnie J. explained the ancient lineage of such damages as follows:
41 Long before the days of Lord Pratt C.J., the related idea of condemning a defendant to a multiple of what is required for compensation (in the present appeal, as stated, the punitive damages were roughly triple the award of compensatory damages) reached back to the Code of Hammurabi, Babylonian law, Hittite law (1400 B.C.), the Hindu Code of Manu (200 B.C.), ancient Greek codes, the Ptolemaic law in Egypt and the Hebrew Covenant Code of Mosaic law (see Exodus 22:1 "If a man shall steal an ox, or a sheep, and kill it, or sell it; he shall restore five oxen for an ox, and four sheep for a sheep"). Roman law also included provisions for multiple damages. Admittedly, in these early systems, criminal law and civil law were not always clearly differentiated. The United States Supreme Court in BMW, supra, referred at p. 581 to "65 different enactments [in English statutes] during the period between 1275 and 1753 [that] provided for double, treble, or quadruple damages".
[174] Punitive damages serve to both affirm broad social values and to remedy specific wrongs. The wider function was explained by the Ontario Law Reform Commission in its Report on Exemplary Damages (Toronto: Ontario Law Reform Commission, 1991) .
[175] The narrower remedial role of punitive damages is reflected in the fact that they "straddle the frontier" between civil and criminal law. If the actions of a civil defendant are so outrageous, malicious, oppressive or high-handed that a court has no choice but to conclude that the actions are deserving of punishment, a remedy must be available. Accordingly, when criminal sanctions are not available, punitive damages can be used to address the relevant wrongdoing. Few cases require both remedies of this sort. However, their rarity should not be confused with their importance-punitive damages serve a vital function in sanctioning conduct that cries out for punishment where no other punitive remedy is available.
I have had occasion before, "Punitive Damages for Breach of Contract: A Remedy in Search of a Justification" (2003), 29 Queen's Law Journal 596, to point out that the laws of Hammurabi and Manu are not really good authority for Canadian law in the twenty-first century - moreover, both Hammurabi and Manu did very unpleasant things to people, things so cruel that even a Canadian court would hesitate to do them to the CEO of an insurance company! I further argue that awards of punitive damages have no place in either the law of contracts or the law of torts. It is more than a little distressing to me to find the right to such awards now elevated in Canada almost to the level of a fundamental constitutional principle.
It is also hard to see what Saskatchewan values are forwarded when the plaintiff never resided there after his injury and the defendant insurer is Swiss.
The case must be one of the very few modern cases - at least outside the domestic context - where public policy is allowed to trump an ordinary choice of law analysis and a conclusion that a foreign law applies. I am very sorry that the Supreme Court denied leave to appeal.
Angela Swan




Angela Swan
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