IBM Canada Limited (appellant) v. Richard Waterman (respondent) (34472; 2013 SCC 70; 2013 CSC 70) Indexed As: Waterman v. IBM Canada Ltd.

Transcription

1 IBM Canada Limited (appellant) v. Richard Waterman (respondent) (34472; 2013 SCC 70; 2013 CSC 70) Indexed As: Waterman v. IBM Canada Ltd. Supreme Court of Canada McLachlin, C.J.C., LeBel, Fish, Abella, Rothstein, Cromwell, Moldaver, Karakatsanis and Wagner, JJ. December 13, Summary: An employer dismissed an employee. The employee's fully paid up pension was triggered by the dismissal. The employee sued for wrongful dismissal. At issue included whether the pension benefits paid to the employee after his dismissal should be deducted from his award. The matter was determined by way of summary trial. The British Columbia Supreme Court, in a decision reported at [2010] B.C.T.C. Uned. 376, awarded the employee damages totalling $93, based on a reasonable notice period of 20 months. The court refused to deduct the pension benefits, holding that he was bound by Girling v. Crown Cork & Seal Canada Inc. et al. (B.C.C.A.). The employer appealed. The British Columbia Court of Appeal, in a decision reported at 308 B.C.A.C. 304; 521 W.A.C. 304, dismissed the appeal. The employer appealed. The Supreme Court of Canada, McLachlin, C.J.C., and Rothstein, J., dissenting, dismissed the appeal. Contracts - Topic 4023 Remedies for breach - Damages - Extent of liability - Losses attributable to breach - The Supreme Court of Canada, in the context of a case dealing with contract damages, stated that "Considerations other than the extent of the plaintiff's actual loss shape the way the compensation principle is applied and there are well-established exceptions to it. For example, the rule that contract damages compensate only the plaintiff's actual loss is not the only rule that applies to assessing contract damages. As a leading English case put it, 'Damages are measured by the plaintiff's loss, not the defendant's gain. But the common law, pragmatic as ever, has long recognised that there are many commonplace situations where a strict application of this principle would not do justice between the parties. Then compensation for the wrong done to the plaintiff is measured by a different yardstick'... In some cases, for example, an award of damages in contract may be based on the advantage gained by the defendant as a result of the breach rather than the loss suffered by the plaintiff... The rule that damages are measured by the plaintiff's actual loss, while the general rule, does not cover all cases. In addition, through the doctrines of remoteness and mitigation, the compensation principle gives way to considerations of reasonableness in relation to whether the plaintiff's expectations of the contract and his or her conduct in response to the breach of it were reasonable.... Finally, there are well-recognized exceptions in which benefits flowing to plaintiffs are not taken into account even though

2 the result is that they are better off, economically speaking, after the breach than they would have been had there been no breach. These exceptions are ultimately based on factors other than strict compensatory considerations...." - See paragraphs 36 and 37. Damages - Topic 1691 Deductions for payments or assistance by third parties - General - The Supreme Court of Canada, in the context of a case dealing with contract damages, stated that "... a potential compensating advantage [i.e., collateral benefit] problem exists if the plaintiff receives a benefit that would result in compensation of the plaintiff beyond his or her actual loss and either (a) the plaintiff would not have received the benefit but for the defendant's breach, or (b) the benefit is intended to be an indemnity for the sort of loss resulting from the defendant's breach. These factors identify a potential problem with a compensating advantage, but do not decide how it should be resolved." - See paragraph 32. Damages - Topic 1691 Deductions for payments or assistance by third parties - General - The Supreme Court of Canada, in the context of a case dealing with contract damages, stated that a review of the jurisprudence supported the following general propositions (subject to statutory or contractual provisions to the contrary) as to when a compensating advantage (i.e., collateral benefit) should reduce damages otherwise payable by a defendant: "- Benefits have not been deducted if (a) they are not intended to be an indemnity for the sort of loss caused by the breach and (b) the plaintiff has contributed to the entitlement to the benefit... - Benefits have not been deducted where the plaintiff has contributed to an indemnity benefit... - Benefits have been deducted when they are intended to be an indemnity for the sort of loss caused by the breach but the plaintiff has not contributed in order to obtain entitlement to the benefit..." - See paragraph 56. Damages - Topic 1691 Deductions for payments or assistance by third parties - General - The Supreme Court Canada, in the context of a case dealing with whether a "collateral benefit" or a "compensating advantage" received by a plaintiff should reduce contract damages, set out the following conclusions: "(a) There is no single marker to sort which benefits fall within the private insurance exception [to the compensation principle]. (b) One widely accepted factor relates to the nature and purpose of the benefit. The more closely the benefit is, in nature and purpose, an indemnity against the type of loss caused by the defendant's breach, the stronger the case for deduction. The converse is also true. (c) Whether the plaintiff has contributed to the benefit remains a relevant consideration, although the basis for this is debatable. (d) In general, a benefit will not be deducted if it is not an indemnity for the loss caused by the breach and the plaintiff has contributed in order to obtain entitlement to it. (e) There is room in the analysis of the deduction issue for broader policy considerations such as the desirability of equal treatment of those in similar situations, the possibility of providing incentives for socially desirable conduct, and the need for clear rules that are easy to apply." - See paragraph 76. Damages - Topic 1730 Deductions for payments or assistance by third parties - Contractually from employer -

3 General - The Supreme Court of Canada, in the context of a case dealing with contract damages, stated that there were exceptions to the strict application of the principle that the defendant should compensate the plaintiff only for his or her actual loss, the most important of which was the exception for private insurance and other benefits which, for this purpose, were considered analogous to private insurance - That exception applied not only to insurance benefits in the strict sense, but also to other benefits such as pension payments to which an employee had contributed and which were not intended to be an indemnity for the type of loss suffered as a result of the defendant's breach - See paragraph 16. Damages - Topic 1742 Deductions for payments or assistance by third parties - Contractually - From employer - Pensions - [See Damages - Topic 1730]. Damages - Topic 1742 Deductions for payments or assistance by third parties - Contractually - From employer - Pensions - An employee's dismissal triggered his fully paid up pension - The trial judge awarded the employee damages for wrongful dismissal - On appeal, the employer asserted that the judge erred in not deducting the pension benefits from the award - The Supreme Court of Canada affirmed the dismissal of the appeal - Employee pension payments, including payments from a defined benefits plans, as was the case here, were a type of benefit that should generally not reduce the damages otherwise payable for wrongful dismissal - They fell within the private insurance exception to the compensation principle - Both the nature of the benefit and the parties' intention supported that conclusion - Pension benefits were a form of deferred compensation for the employee's service and constituted a type of retirement savings - They were not intended to be an indemnity for wage los due to unemployment - The parties could not have intended that the employee's retirement savings would be used to subsidize the employee's wrongful dismissal - There was no decision of the court that required deduction of a non-indemnity benefit to which the plaintiff had contributed, like the pension benefits here - See paragraphs 4 and 77 to 98. Damages - Topic 1745 Deductions for payments or assistance by third parties - Contractually - Insurance - General - [See third Damages - Topic 1691 and Damages - Topic 1730]. Damages - Topic 1745 Deductions for payments or assistance by third parties - Contractually - Insurance - General - The Supreme Court of Canada stated that three main policy considerations had often been advanced to explain why a compensating advantage (i.e., collateral benefit) should or should not be deducted: punishment, deterrence and the provision of incentives for socially responsible behaviour - The private insurance exception was often justified on the basis that deducting the benefit from damages reduced their punitive and deterrent value - The court concluded that it was unsound to rely on a punitive or deterrent justification for the private insurance exception, particularly in breach of contract cases where fault was not an operating concept - See paragraphs 70 and 71.

4 Damages - Topic 5702 Contracts - Breach of contract - Based on loss to the plaintiff - [See Contracts - Topic 4023]. Master and Servant - Topic 8073 Dismissal without cause - Damages - Deduction for pension benefits - [See Damages - Topic 1730 and second Damages - Topic 1742]. Cases Noticed: Sylvester v. British Columbia, [1997] 2 S.C.R. 315; 212 N.R. 51; 91 B.C.A.C. 124; 148 W.A.C. 124, dist. [paras. 10, 110]. Cooper v. Miller (No. 1), [1994] 1 S.C.R. 359; 164 N.R. 81; 41 B.C.A.C. 1; 66 W.A.C. 1, refd to. [paras. 24, 115]. Cunningham v. Wheeler - see Cooper v. Miller (No. 1). Phillips v. Western Co. of North America (1992), 953 F.2d 923 (5th Cir.), dist. [paras. 27, 146]. United States of America v. Price (1961), 288 F.2d 448 (4th Cir.), dist. [paras. 27, 146]. Sloas v. CSX Transportation Inc. (2010), 616 F.3d 380 (4th Cir.), refd to. [para. 27]. Parry v. Cleaver, [1970] A.C. 1 (H.L.), refd to. [paras. 31, 141]. Ratych v. Bloomer, [1990] 1 S.C.R. 940; 107 N.R. 335; 39 O.A.C. 103, refd to. [para. 31]. Attorney General v. Blake, [2001] 1 A.C. 268 (H.L.), refd to. [para. 36]. Bank of America Canada v. Mutual Trust Co. et al., [2002] 2 S.C.R. 601; 287 N.R. 171; 159 O.A.C. 1; 2002 SCC 43, refd to. [paras. 36, 153]. Redpath v. Belfast and County Down Railway, [1947] N.I. 167 (K.B.), refd to. [para. 39]. Jorgenson v. Cewe (Jack) Ltd., [1980] 1 S.C.R. 812; 32 N.R. 1, dist. [paras. 41, 143]. Canadian Pacific Ltd. v. Gill Estate, [1973] S.C.R. 654, dist. [paras. 43, 142]. Grand Trunk Railway v. Beckett (1887), 16 S.C.R. 713, refd to. [para. 43]. Quebec Workmen's Compensation Commission v. Lachance, [1973] S.C.R. 428, refd to. [para. 43]. Guy v. Trizec Equities Ltd., [1979] 2 S.C.R. 756; 27 N.R. 301; 32 N.S.R.(2d) 345; 54 A.P.R. 345, dist. [paras. 44, 142]. Chandler v. Ball Packaging Products Canada Ltd. (1992), 2 C.C.P.B 101 (Ont. Gen. Div.), affd. (1993), 2 C.C.P.B. 99 (Ont. Div. Ct.), refd to. [paras. 47, 125]. Emery v. Royal Oak Mines Inc. (1995), 24 O.R.(3d) 302 (Gen. Div.), refd to. [para. 47]. Canadian Human Rights Commission v. Canada (Attorney General) (2003), 301 N.R. 321; 2003 FCA 86, dist. [para. 48]. Bradburn v. Great Western Railway Co. (1874), L.R. 10 Ex. 1, refd to. [para. 54]. National Insurance Co. of New Zealand v. Espagne (1961), 105 C.L.R. 569 (Aust. H.C.), refd to. [para. 60]. Graham v. Baker (1961), 106 C.L.R. 340 (Aust. H.C.), refd to. [para. 60]. Smoker et al. v. London Fire and Civil Defence Authority et al., [1991] 2 A.C. 502; 139 N.R. 380 (H.L.), refd to. [para. 60]. Hopkins v. Norcross plc, [1993] 1 All E.R. 565 (Q.B.), refd to. [para. 60]. Knapton v. ECC Card Clothing Ltd., [2006] I.C.R. 1084, refd to. [para. 60].

5 Gilbert v. Attorney General, [2010] NZCA 421; 8 N.Z.E.L.R. 72, refd to. [para. 60]. Girling v. Crown Cork & Seal Canada Inc. et al. (1995), 63 B.C.A.C. 176; 104 W.A.C. 176; 9 B.C.L.R.(3d) 1 (C.A.), refd to. [para. 110]. Authors and Works Noticed: Burrows, Andrew, Remedies for Torts and Breach of Contract (3rd Ed. 2004), pp. 156 [paras. 26, 29]; 162 [paras. 54, 71]; 163 [para. 71]. Cassels, Jamie, and Adjin-Tettey, Elizabeth, Remedies: The Law of Damages (2nd Ed. 2008), pp. 416 [para. 20]; 420, 421 [para. 39]. Fleming, John G., The Collateral Source Rule and Contract Damages (1983), 71 Cal. L. Rev. 56, pp. 58, 59 [para. 71]. Kaplan, Ari, and Frazer, Mitch, Pension Law (2nd Ed. 2013), pp. 89 [para. 123]; 203 [para. 84]. Marks, John, Symmetrical Use of Universal Damages Principles - Such as the Principles Underlying the Doctrine of Proximate Cause - to Distinguish Breach-Induced Benefits That Offset Liability From Those That Do Not (2009), 55 Wayne L. Rev. 1387, p [para. 71]. McCamus, John D., The Law of Contracts (2nd Ed. 2012), p. 871 [para. 118]. Ogus, A.I., The Law of Damages (1973), pp. 87, 88 [para. 22]; 93 [para. 26]; 94 [paras. 26, 54]; 223 [paras. 39, 77]; 225 [paras. 31, 71]; 226 [paras. 31, 67, 73]; 227 [paras. 67, 73]. Perillo, Joseph M., The Collateral Source Rule in Contract Cases (2009), 46 San Diego L. Rev. 705, pp. 706 [para. 126]; 716 [para. 71]. Sproat, John R., Wrongful Dismissal Handbook (6th Ed. 2012), pp to [para. 90]. Swan, Angela, and Adamski, Jakub, Canadian Contract Law (3rd Ed. 2012), 1.27 [para. 72]. Waddams, Stephen M., The Law of Damages (5th Ed. 2012), ss to [para. 39]; [para. 26]. Counsel: D. Geoffrey Cowper, Q.C., and Lorene A. Novakowski, for the appellant; Christopher J. Watson and Matthew G. Siren, for the respondent. Solicitors of Record: Fasken Martineau DuMoulin, Vancouver, British Columbia, for the appellant; MacKenzie Fujisawa, Vancouver, British Columbia, for the respondent. This appeal was heard on December 14, 2012, by McLachlin, C.J.C., LeBel, Fish, Abella, Rothstein, Cromwell, Moldaver, Karakatsanis and Wagner, JJ., of the Supreme Court of Canada. The decision of the court was released in both official languages on December 13, 2013, with the following opinions: Cromwell, J., (LeBel, Fish, Abella, Moldaver, Karakatsanis and Wagner, JJ., concurring) - see paragraphs 1 to 99; Rothstein, J., dissenting (McLachlin, C.J.C., concurring) - see paragraphs 100 to

6 155. Appeal dismissed. Editor: Gary W. McLaughlin Damages - Topic 1742 Deductions for payments or assistance by third parties - Contractually - From employer - Pensions - The Supreme Court of Canada, in the context of a case dealing with contract damages, stated that there were exceptions to the strict application of the principle that the defendant should compensate the plaintiff only for his or her actual loss, the most important of which was the exception for private insurance and other benefits which, for this purpose, were considered analogous to private insurance - That exception applied not only to insurance benefits in the strict sense, but also to other benefits such as pension payments to which an employee had contributed and which were not intended to be an indemnity for the type of loss suffered as a result of the defendant's breach - See paragraph 16. Damages - Topic 1745 Deductions for payments or assistance by third parties - Contractually - Insurance - General - The Supreme Court Canada, in the context of a case dealing with whether a "collateral benefit" or a "compensating advantage" received by a plaintiff should reduce contract damages, set out the following conclusions: "(a) There is no single marker to sort which benefits fall within the private insurance exception [to the compensation principle]. (b) One widely accepted factor relates to the nature and purpose of the benefit. The more closely the benefit is, in nature and purpose, an indemnity against the type of loss caused by the defendant's breach, the stronger the case for deduction. The converse is also true. (c) Whether the plaintiff has contributed to the benefit remains a relevant consideration, although the basis for this is debatable. (d) In general, a benefit will not be deducted if it is not an indemnity for the loss caused by the breach and the plaintiff has contributed in order to obtain entitlement to it. (e) There is room in the analysis of the deduction issue for broader policy considerations such as the desirability of equal treatment of those in similar situations, the possibility of providing incentives for socially desirable conduct, and the need for clear rules that are easy to apply." - See paragraph 76. Damages - Topic 1745 Deductions for payments or assistance by third parties - Contractually - Insurance - General - The Supreme Court of Canada, in the context of a case dealing with contract damages, stated that there were exceptions to the strict application of the principle that the defendant should compensate the plaintiff only for his or her actual loss, the most important of which was the exception for private insurance and other benefits which, for this purpose, were considered analogous to private insurance - That exception applied not only to insurance benefits in the strict sense, but also to other benefits such as pension payments to which an employee had contributed and which were not intended to be an indemnity for the type of loss suffered as a result of the defendant's breach - See

7 paragraph 16. Damages - Topic 5702 Contracts - Breach of contract - Based on loss to the plaintiff - The Supreme Court of Canada, in the context of a case dealing with contract damages, stated that "Considerations other than the extent of the plaintiff's actual loss shape the way the compensation principle is applied and there are well-established exceptions to it. For example, the rule that contract damages compensate only the plaintiff's actual loss is not the only rule that applies to assessing contract damages. As a leading English case put it, 'Damages are measured by the plaintiff's loss, not the defendant's gain. But the common law, pragmatic as ever, has long recognised that there are many commonplace situations where a strict application of this principle would not do justice between the parties. Then compensation for the wrong done to the plaintiff is measured by a different yardstick'... In some cases, for example, an award of damages in contract may be based on the advantage gained by the defendant as a result of the breach rather than the loss suffered by the plaintiff... The rule that damages are measured by the plaintiff's actual loss, while the general rule, does not cover all cases. In addition, through the doctrines of remoteness and mitigation, the compensation principle gives way to considerations of reasonableness in relation to whether the plaintiff's expectations of the contract and his or her conduct in response to the breach of it were reasonable.... Finally, there are well-recognized exceptions in which benefits flowing to plaintiffs are not taken into account even though the result is that they are better off, economically speaking, after the breach than they would have been had there been no breach. These exceptions are ultimately based on factors other than strict compensatory considerations...." - See paragraphs 36 and 37. Master and Servant - Topic 8073 Dismissal without cause - Damages - Deduction for pension benefits - The Supreme Court of Canada, in the context of a case dealing with contract damages, stated that there were exceptions to the strict application of the principle that the defendant should compensate the plaintiff only for his or her actual loss, the most important of which was the exception for private insurance and other benefits which, for this purpose, were considered analogous to private insurance - That exception applied not only to insurance benefits in the strict sense, but also to other benefits such as pension payments to which an employee had contributed and which were not intended to be an indemnity for the type of loss suffered as a result of the defendant's breach - See paragraph 16. Master and Servant - Topic 8073 Dismissal without cause - Damages - Deduction for pension benefits - An employee's dismissal triggered his fully paid up pension - The trial judge awarded the employee damages for wrongful dismissal - On appeal, the employer asserted that the judge erred in not deducting the pension benefits from the award - The Supreme Court of Canada affirmed the dismissal of the appeal - Employee pension payments, including payments from a defined benefits plans, as was the case here, were a type of benefit that should generally not reduce the damages otherwise payable for wrongful dismissal - They fell within the private insurance exception to the compensation principle - Both the nature of the benefit and the parties' intention supported that conclusion - Pension benefits were a

8 form of deferred compensation for the employee's service and constituted a type of retirement savings - They were not intended to be an indemnity for wage los due to unemployment - The parties could not have intended that the employee's retirement savings would be used to subsidize the employee's wrongful dismissal - There was no decision of the court that required deduction of a non-indemnity benefit to which the plaintiff had contributed, like the pension benefits here - See paragraphs 4 and 77 to 98.