Civil Litigation

Contractor gets undeserved second chance to prove damages

By Staff

A commercial contractor will get a second kick at the can to prove his damages after a puzzling Ontario Court of Appeal (OCA) decision, says Toronto senior litigation lawyer Jeffrey Silver.

A unanimous three-judge panel of the province’s top court ordered a new trial on the issue of damages in a lease dispute between a commercial contractor and his landlord, despite finding that the tenant was responsible for the lack of evidence before the court.

“I find it peculiar that the Court of Appeal would give him a second kick at the can in circumstances where he likely didn’t deserve it — given he seemed to have made no effort to assemble the evidence of damages the first time around,” says Silver, principal of Jeffrey C. Silver Barrister.

“The Court of Appeal noted that the tenant could have, for example, asked his clients and customers for documents or contracts to support a revenue stream, as well as documentary materials from his suppliers. The court concluded it was convinced it would not have been difficult to produce the necessary evidence to properly quantify the loss of income,” he says.

“It’s not fair to the opposing side, which went to trial on the basis that the plaintiff had no evidence on its damages.”

According to the decision, the tenant, who ran a sole proprietorship business out of the premises in question, ran into trouble when the landlord terminated their lease agreement and seized some of his operating equipment, before suing the contractor for rent owing, as well as damage to his property.

The contractor then counter-sued for damages as a result of lost income and the seized property, which resulted in offset awards of damages to both parties at trial. However, the trial judge was unable to assess the contractor’s damages because of a lack of evidence about his lost income — the man only produced personal tax return summaries for some of the years in question to back up his claim that he ran a successful business.

Silver, who was not involved in this case and comments generally, tells that plaintiffs have the onus to prove their losses, and are normally only entitled to nominal damages when they were unable to produce enough evidence for a judge to assess damages.

But in this case, the trial judge erroneously set the contractor’s damages for loss of income at $100,000, according to the OCA panel.

“On this record, there was an absence of evidence that made it impossible to assess damages for loss of income. The trial judge could not simply pick a number, as he appears to have done,” they wrote.

But they added that it would be inappropriate for the appeal court to impose nominal damages because of the contractor’s claim to have suffered a substantial loss.

“In these circumstances, it would be unjust to deprive [him] of the opportunity to establish the quantum of his damages,” they concluded, ordering a new trial on the issue.

But Silver says the ruling could have significant repercussions for lawyers developing litigation strategy for defendants, particularly in light of the growing body of Ontario case law suggesting counsel must present cost-benefit analyses of litigation decisions as part of their duty to clients.

In another case, the province’s top court ordered a full trial on the issue of a law firm’s outstanding $180,000 bill for unpaid fees after a dissatisfied client claimed they would have cut their court action short had their lawyers provided a meaningful assessment of their potential damages.

Meanwhile, another Ontario Superior Court decision saw a law firm’s bill cut to just $30,000 from more than $100,000 for pursuing a client’s unsuccessful wrongful dismissal claim after the judge expressed concern that there was no discussion between lawyer and client about the financial risks of proceeding with an action that was never going to be worth more than $100,000 in damages.

“It’s difficult to advise defendants about how much to invest in a case, or how generous to make offers to settle, when the plaintiff has produced no evidence of damages,” Silver says. “Obviously, the possibility they will get a second chance to prove their damages is going to affect those decisions.”

He says the appeal court’s judgment appears contrary by analogy to existing and long-standing evidentiary principles regarding admission of fresh evidence set out in a landmark 1979 judgment of the Supreme Court of Canada. According to that case, fresh evidence is generally not admitted if it could have been, by due diligence, adduced at trial.

“Here, it was clear that the contractor could easily have produced this evidence at trial, but now he’s getting a second chance,” Silver says.

To Read More Jeffrey C. Silver Posts Click Here