Mental Distress Damages in Contract Breach: Definitions, Distinctions, Exceptions, Study notes of Law

Download Mental Distress Damages in Contract Breach: Definitions, Distinctions, Exceptions and more Study notes Law in PDF only on Docsity! Shannon Kathleen O'Byrne* Damages for Mental Distress and Other Intangible Loss in a Breach of Contract Action As a general rule, contracts law does not permit an award of general damages for mental distress or other intangible loss. There are several rationales for this, including: plaintiffs are to bear their disappointment or upset with mental fortitude; without the rule, courts would be awash in litigation since every breach of contract brings with it some degree of emotional distress; without the rule, plaintiffs may fabricate or exaggerate the degree of their upset; and the rule simply reflects the lack of foreseeability of such loss under Hadley v. Baxendale. Notwithstanding the general rule, courts have awarded mental distress in a variety of circumstances by following one of three strategies to do so: permitting recovery when the contract is non-commercial; permitting recovery when the contract fits within a special or established category of exception to the general rule; and permitting recovery on the basis of foreseeability principles alone. There are a number of reasons to critique the general rule, particularly in light of the House of Lord's much more expansive approach in Farley v. Skinner, [2001] 3 WL.R. 899. In short, an under-inclusive approach to this question results in contracts only being partially enforceable - a result contrary to the foundational principles that parties should be held to their bargain. Based on Farley, this paper offers a proposed restatement of the general rule. It also offers a way of clearly distinguishing between aggravated damages, on the one hand, and general damages for mental distress, on the other En regle gen6rale, le droit des contrats ne permet pas I'adjudication de dommages-inter~ts g6n6raux pour la souffrance morale ou autre pr6judice moral. II y a pour cela plusieurs raisons, notamment: les parties demanderesses doivent supporter leur deception ou leurs ennuis avec grandeur d'#me; sans cette regle, les tribunaux seraient inond6s de reclamations puisque chaque violation de contrat cause une certaine detresse psychologique; sans cette r~gle, les parties demanderesses pourraient inventer des ennuis ou exag~rer leur importance; et la r~gle ne fait que refl~ter I'imprevisibilit6 des pertes, comme le tout a dtd 6noncd dans Hadley v. Baxendale. Par d6rogation j la r~gle gdn~rale, les tribunaux ont accord6 des dommages- inter~ts pour souffrance morale dans diverses circonstances en adoptant I'une des trois strat6gies suivantes : ils ont permis le recouvrement lorsqu'il s'agit d'un contrat non commercial; lorsque le contrat s'inscrit dans une categorie sp6ciale ou etablit des exceptions a la r~gle g~n~rale; et exclusivement sur la base des principes de previsibilit6. II y a de nombreuses raisons pour critiquer la regle gen~rale, en particulier 6 la lumi~re de l'interprdtation beaucoup plus liberale de la House of Lord dans Farley v. Skinner, [2001] 3 WL.R. 899. En bref, une interpr6tation trop limitative de la question a pour resultat que les contrats ne sont que partiellement ex6cutoires, resultat contraire au principe fondamental que les parties sont tenues de respecter leurs engagements. Sappuyant sur I'arr6t Farley cet article propose une nouvelle formulation de la regle g6n~rale. II presente en outre une m6thode pour 6tablir une distinction claire entre, d'une part, les dommages-int6r~ts majores et, d'autre part, les dommages pour souffrance morale. 312 The Dalhousie Law Journal Introduction I. Definitions and distinctions: punitive damages, aggravated damages, and general damages for mental distress in the contractual arena 1. Punitive damages 2. Aggravated damages 3. General damages for mental distress II. Exceptions to the rule of no recovery for mental distress 1. Recovery when the contract is non-commercial 2. Recovery based on the contract fitting within an established category of exceptions to the general rule a. Established categories or exceptions vacations weddings employment (wrongful dismissal) insurance luxury chattels solicitor-client b. Objections to the categories approach 3. Recovery based onforeseeability alone a. Current law b. Objections to the foreseeability approach III. Over-arching rules regardless of approach 1. Corporate plaintiffs cannot recover 2. Plaintiff must prove that distress is more than fleeting 3. Difficulty in assessing quantum no reason to deny the plaintiff a remedy 4. Quantum must be restrained and modest IV. Critique of the general rule against mental distress damages V. Proposed restatement of the general rule Conclusion 1. Punitive damages 2. Aggravated damages 3. General damages for mental distress 4. Over-arching rules regardless of approach to general damages for mental distress Introduction The general rule in contracts is that a plaintiff is not entitled to general damages for mental distress and other intangibles such as annoyance, humiliation, upset, disappointment, frustration, anguish, or anxiety in the Damages for Mental Distress article in the Advocates' Quarterly,9 the court in Whiten provided a set of principles governing the award of punitive damages as follows: 1. The attempt to limit punitive damages to "categories" does not work and "was rightly rejected in Canada in Vorvis." 2. The general objectives of punitive damages are "punishment (in the sense of retribution), deterrence of the wrongdoer and others, and denunciation." 3. The main venue for punishment is criminal law so that "punitive damages should be resorted to only in exceptional cases and with restraint." 4. Merely reciting the "time-honoured pejoratives ('high-handed', 'oppressive', 'vindictive', etc.)" does not provide adequate guidance to judges and juries setting quantum. 5. Punitive damages must be awarded rationally. The award must further at least one objective of the law of punitive damages and at the lowest amount that would serve that purpose ("because any higher award would be irrational"). 6. Wrongdoers should be disgorged of profits via punitive damages where compensatory damages would not provide adequate deterrence for "outrageous disregard of the legal or equitable rights of others." 7. Courts should not engage in a mechanical or formulaic approach - such as a fixed cap - to punitive damages as this does not provide sufficient flexibility. As Justice Binnie admonished: the "proper focus is not on the plaintiff's loss but on the defendant's misconduct." 8. Quantum must be directly tied to proportionality. According to the court, the overall award, that is to say compensatory damages plus punitive damages plus any other punishment related to the same misconduct should be rationally related to the objectives for which the punitive damages are awarded (retribution, deterrence and denunciation). 9. Juries should receive considerable guidance from the trial judge, including being told "in some detail" about the function of punitive damages and the factors to assess. 9. See Shannon Kathleen O'Byrne and Evaristus Oshionebo, "Punitive Damages and the Requirement for an Independent Actionable Wrong: Whitten v. Pilot Insurance Co." (2002) 25 Advocates' Q. 496 at 499-501. (footnotes omitted) 315 316 The Dalhousie Law Journal 10. Punitive damages are not at large and for this reason, appellate courts are entitled to intervene "if the award exceeds the outer boundaries of a rational and measured response to the facts of the case." 0 In addition to establishing that the defendant conducted itself outrageously, the plaintiff must also show that the defendant has committed an independent actionable wrong. Put another way, the defendant must have committed a wrong separate and distinct from the breach being sued upon." This independent actionable wrong can be a tort or a breach of contract though the latter circumstance would be admittedly rare. 12 As for the appeal in Whiten, the Supreme Court of Canada affirmed a jury award of $1 million in punitive damages because the insurer wrongfully and maliciously denied cover under a fire insurance policy, alleging arson when all evidence pointed to the fire being accidental. The breach of contract sued upon was the insurer's refusal to pay out on the policy. The separate actionable wrong was in the insurer's failure to handle the claim according to the standard of good faith. The malicious conduct was in the insurer's unfounded allegation of arson. More recently, in Triple 3 Holdings Inc. v. Jan the court awarded the franchisee $350,000 in punitive damages due to the defendants' stunningly outrageous behaviour which included: physically pushing around one of the franchisees; demanding rental arrears which did not exist; locking the franchisee out of the premises without justification; and proceeding with sale of the franchise despite the plaintiffs' pending application for 10. Whiten, supra note 8 at paras. 67-76. There have been a number of other case comments on the Whiten. See for example: St6phane Beaulac, "Les Donmnages-int~rfts punitifs depuis l'affaire Whiten et les leqons A en tirer pour le droit civil qu~b~cois"(2002) 36 R.J.T. 637; David Debenham. "Coming armed with Spiers: insuring good faith processing of policy claims in the post-Whiten age" (2003) 27 Advocates' Q. 5; Craig E. Jones and John C. Kleefeld, "Whiten v. Pilot: safe harbour for punitive contract damages?" (2002) 60 Advocate (Van.) 507; G.E. (Gerry) Kruk, "The Supreme Court in Whiten v. Pilot Insurance: judicial rationality or supreme outrage?" (2002) 35 C.C.L.I. (3d) 112; Rudy V. Buller, "Whiten v. Pilot: Controlling jury awards of punitive damages" (2003) 36 U.B.C. L. Rev. 357; Kathryn L. Seely, "Punitive damage awards in Canada: enlarging in scope and size" (2002) Ann. Rev. Civil Lit. 147; St6phane Beaulac, "A Comparative look at punitive damages in Canada" (2002) 17 Sup. Ct. L. Rev. (2d) 351. 11. Whiten, supra note 8 at para. 78. 1 have argued elsewhere that the requirement for a separate actionable wrong is based on a misreading of Vorvis v. Insurance Corporation of British Columbia, [1989] 1 S.C.R. 1085. See Shannon O'Byrne and Evaristus Oshionebo, "Punitive Damages and the Requirement of an Independent Actionable Wrong," supra note 9. 12. Per Justice Binnie in Whiten, supra note 8 at para. 81, citing Royal Bank of Canada v. W Got & Associates Electric Ltd., [1999] 3 S.C.R. 408 [Got] at para. 26, as well as Vorvis, supra note 11. Damages for Mental Distress relief against forfeiture. As Justice Taliano stated: "[c]ommercial activities cannot be conducted like piracy on the high seas."' 3 Other examples of when punitive damages are awarded in a commercial context include oppression in corporate law, 14 wrongful receiverships, 5 13. Triple 3 Holdings Inc. v. Jan, (2004), 48 B.L.R. (3d) 296 (Ont. S.C.J.) at para. 39 [Triple 3 Holdings Inc.]. For another example of a court awarding punitive damages in a franchise context, see Katotikidis v. Mr Submarine Ltd. (2002), 26 B.L.R. (3d) 140 and (2002), 29 B.L.R. (3d) 258 (Ont. S.C.J.) [Mr. Sub.]. The Ontario Superior Court awarded $10,000 in punitive damages against the franchisor because it had "betrayed the trust that epitomizes the relationship between a franchisor and franchisee" ((2002), 26 B.L.R. (3d) 140 at para. 75), including abandoning its franchisee at a failing outlet. 14. The law in this area is somewhat unsettled. See, for example, Waxman v. Waxman (2002), 25 B.L.R. (3d) 1 (Ont. S.C.J.), varied on other, very minor grounds at (2004), 44 B.L.R. (3d) 165 (C.A.), leave to appeal refused [2004] S.C.C. No. 291. According to Justice Sanderson at trial, punitive damages "may also be awarded under the oppression remedy ...." See too Justice Dilks in Beck v. Dumais (2003), 33 B.L.R. (3d) 118 (Ont. Sup. Ct. Jus.) at para. 134 who states: "[p]unitive damages are awarded in the discretion of the court in cases where the conduct of the defendant is so egregious that normal damages will not adequately express society's disapproval. A large component of the damages in the instant case is as a result of a finding of oppression which requires conduct of almost the same nature. This is not one of those cases where an additional sanction is necessary." Finally, see White v. True North Spring Ltd. (2002), 219 Nfld. & P.E.I.R. I (S.C.(T.D)) at para. 66, wherein the trial judge notes that the oppression remedy is corrective, not punitive. 15. Got, supra note 12, wherein the Supreme Court of Canada affirmed the lower court's award of $100,0000 punitive damages in a case where the bank appointed a receiver on insufficient notice. From a punitive perspective, of particular concern was that the bank tendered a misleading affadavit to secure the receivership order, including the suggestion that the bank had reason to believe that Got would move inventory. Affirming the award of punitive damages, the Supreme Court of Canada stated at para. 29: "[v]iewing the trial judge's concerns cumulatively, and giving due weight to the advantage he had to assess the need for deterrence and condemnation of the abuse of the court's process, as well as the need to maintain proper business practices, we are not prepared to interfere with the award for exemplary damages in this case." Note that in Got, the Supreme Court of Canada took the very unusual step of permitting punitive damages even absent an independent actionable wrong. For discussion of this point, see Jamie Edelman, "Exemplary Damages for Breach of Contract" (2001) 117 L.Q.R. 539. See too Ronald Elwyn Lister Ltd v. Dayton Tire Canada Ltd (1985), 52 O.R. (2d) 88 (C.A.) where the franchisee's punitive damages award for a wrongful receivership was reduced to $20,000. 320 The Dalhousie Law Journal actionable wrong is not necessarily onerous given that the Supreme Court of Canada in Whiten has confirmed that a good faith obligation is distinct from the obligation to honour the contract.2 9 Aggravated damages are rare in the commercial arena if only for one simple reason. The bulk of the case law suggests that only individual plaintiffs - as opposed to corporate ones - are entitled to secure such damages. As Justice Edwards notes in Sunwolf Holdings Ltd. v. Rivers and Oceans Unlimited Expeditions Inc.: Since there were no employees of Sunwolf [the plaintiff] present when McCutcheon took the equipment none can be said to have experienced "pain, anguish, grief, humiliation, wounded pride" etc. which the Court of Appeal indicated were factors which might give rise to an award of aggravated damages. Even if Sunwolf employees had been so traumatized they are not plaintiffs. I am unaware of any principle which permits a corporate plaintiff to obtain aggravated damages for indignities its officers or employees suffer as a result of the conduct of a defendant.3" 3. General damages for mental distress General damages for mental distress are similar to aggravated damages in that both seek to compensate for non-pecuniary loss rather than punish the defendant. Furthermore, courts sometimes tend to "blend" these terms. 3' However, there is a good argument that these two forms of damages are distinct because they measure the defendant's conduct from different perspectives and at different times. 32 One head of damages (i.e., aggravated damages) assesses the conduct of defendant at the time of breach and compensates the plaintiff for the additional emotional harm caused by the defendant's outrageous conduct. Aggravated damages also require that 29. Whiten, supra note 8. See too Craig Brown et al., Insurance Law in Canada looseleaf (Scarborough: Thomson Canada Ltd., 2002) at 10-26. 30. Sunwolf Holdings Ltd. v. Rivers and Oceans Unlimited Expeditions Inc., [1998] B.C.J. No. 2881, [1998] G.S.T.C. 127 at para. 42 (S.C.). See too the cases cited in footnote 5. Note that the court in Corporate Classic Caterers v. Dynapro Systems Inc. (1997), 33 C.C.E.L. (2d) 58; [1997] B.C.J. No. 2764 observed at para. 55 that "While it is possible that aggravated damages can be awarded to a corporate plaintiff, it is most common to see them awarded to a personal plaintiff in actions such as wrongful dismissal." 31. Bruce Feldthusen, "Contract - Punitive Damages - Aggravated Damages- Damages for Mental Distress in Contract: Vorvis v. Insurance Corporation of British Columbia" (1990) 69 Can. Bar Rev. 169 at 172. 32. For discussion within the context of franchise law, see Shannon O'Byrne, "Breach of Good Faith in Performance of the Franchise Contract: Punitive Damages and Damages for Intangibles" (2004) 83 Can. Bar Rev. 431. See too Franchising: Latest Legal and Business Strategies (Toronto: Insight Information Co., 2003). Damages for Mental Distress the defendant commit an independent actionable wrong.33 The other head of damages (i.e., general damages for mental distress) assesses the matter from the perspective of the parties at the time of contract. According to Harvin Pitch and Ronald Synder, general damages for mental distress will only be awarded when such damages pass the test for remoteness stated in Hadley v. Baxendale.3 4 That is, in certain contracts, it is reasonably foreseeable that should one party breach, the other party will suffer mental distress. In this way, general damages for mental distress flow from the fact of breach as opposed to outrageous conduct at the time of breach. By way of contrast, aggravated damages are appropriate whether or not mental distress arising from breach was in the parties' reasonable contemplation at time of contract.35 Remoteness would presumably be assessed taking into account the circumstances present on date of breach only.3 6 In short, aggravated damages compensate for humiliation and distress derived from the "mode of and motive for the defendant's conduct,"37 while general damages for mental distress are derived from the breach itself. These distinctions are subtle but meaningful. The approach suggested here - namely, insisting on the conceptual difference between aggravated damages and general damages for mental distress - is not free from controversy. As the British Columbia Court of Appeal notes in Warrington v. Great- West Life Assurance Co.: [i]n Canada, it is problematic to define the relationship between damages for mental distress and so-called "aggravated damages", and to differentiate between those and punitive damages. This difficulty seems to be the result of the intertwining of punitive and aggravated damages in various judicial and academic pronouncements, even after the two were authoritatively severed -- in England by the House of Lords in Rookes v. Barnard [1964] A.C. 1129 and in Canada by the Supreme Court in Vorvis, supra. Speaking for the majority in Vorvis, McIntyre, J. first of all equated damages for mental distress with aggravated damages: see the reference at p. 1092 to "damages for mental distress, properly characterized as aggravated damages". This pronouncement has sometimes been overlooked in subsequent cases... 3 33. Per Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701 at para. 73. Note in this paragraph that the reference to mental distress appears to be treated as synonymous with aggravated damages. 34. Harvin Pitch and Ronald Synder, Damages for Breach of Contract, 2d ed., loose-leaf (Scarborough: Thomson-Carswell, 1989) at para. 4.3(a). 35. Ibid. 36. This is how aggravated damages are assessed according to employment law, for example. See Geoffrey England and Roderick Wood, updating authors, Employment Law in Canada, 3d ed., vol. 2, loose-leaf (Toronto: Butterworths, 1988) at para. 16.51. 37. Bruce Feldthusen and Neil Vidmar, "Recent Developments in the Canadian Law of Punitive Damages" (1990) 16 Can. Bus. L.J. 241 at 256. 38. Warrington, supra note 3 at para. 16. 322 The Dalhousie Law Journal As I have argued elsewhere, while one can understand the appellate court's desire to follow the terminology espoused by the Supreme Court of Canada on point, the move to collapse mental distress into aggravated damages is perhaps problematic since it uses the same term ("aggravated damages") for two different phenomena.39 In Warrington, for example, the plaintiff was given aggravated damages for mental distress not because he had established a separate actionable wrong but because a disability insurance policy, in the court's words, "is one of the few contracts in which damages for mental distress are recoverable when they are proven to result from the breach of contract."40 This suggests that the plaintiff is receiving non- pecuniary damages not because of abusive conduct on breach sounding in aggravated damages but because - given the kind of contract at issue - mental distress was a reasonably foreseeable consequence of breach. Put another way, it was the fact of breach (which founds general damages for mental distress) not the manner of breach (which founds aggravated damages) on which the decision focussed. In order to keep the distinctions clear between these two forms of non- pecuniary loss, this paper will use "aggravated damages" to refer to distress which arises due to the defendant's behaviour on breach and which must be accompanied by an independent actionable wrong. It will refer to general damages for mental distress as damages which are recoverable because, at the time of contract, they were a reasonably foreseeable consequence of breach. Whether general damages for mental distress has requirements beyond reasonable foreseeability is the subject of the next section of this paper. II. Exceptions to the rule of no recovery for mental distress Courts have taken three paths to compensate the deserving plaintiff for mental distress flowing from the defendant's breach, notwithstanding the general rule against recovery: determine whether the contract is commercial or non-commercial, permitting recovery only in the latter case; on a related front, determine whether the contract fits within a category of exceptions to the general rule such that mental distress damages would be recoverable; or, thirdly, apply the simple principles of foreseeability without preliminary regard to the type of contract or its classification. These strategies have not yet been reconciled by the courts and therefore make this area of law problematic to summarize. 39. Supra note 32. 40. Warrington, supra note 3 at para. 22. Damages for Mental Distress 2. Recovery based on contract fitting within an established category of exceptions to the general rule Even the earliest cases which articulate the rule against recovery for mental distress recognize exceptions. In the 1865 decision of Hamlin, for example, the court acknowledged that breach of contract to marry is an exception to the general rule and accordingly, "injury to the feelings of the party may be taken into consideration."45 This is because the contract has a personal quality to it, or, in the words of counsel for the plaintiff, "a contract affecting the person."46 Other established exceptions included mental distress consequent on physical inconvenience 47 ; actions against a banker for wrongfully refusing to honour a cheque48 ; and contracts where, in the words of Lord Bingham in Watts v. Morrow: the very object of a contract is to provide pleasure, relaxation, peace of mind or freedom from molestation.... If the law did not cater for this exceptional category of case it would be defective...41 Beyond this, it is relevant to note that one of the law lords in Farley v. Skinner 0 has functionally created a new exception to the general rule. According to Lord Steyn, mental distress should be recoverable not only when peace of mind is the very object of the contract, as noted by Lord Bingham in Watts quoted above, but also when peace of mind is simply an important part of the contract.51 A summary of the case follows because it illustrates an increasing judicial willingness in England's highest court to enforce the non-pecuniary content of a contract. In Farley, the plaintiff was interested in purchasing a countryside retirement home and therefore hired a surveyor to determine, inter alia, whether the property was affected by aircraft noise. Unfortunately, the surveyor conducted himself negligently and in breach of contract when 45. Supra note I at 1262. 46. Ibid. 47. Hobbs v. London & Southwestern Railway (1875), 10 L.R. Q.B. 111 [Hobbs]. Per Mellor J at 122: "for the mere inconvenience, such as annoyance and loss of temper, or vexation, or for being disappointed in a particular thing which you have set your mind upon, without real physical inconvenience resulting, you cannot recover damages" [emphasis added]. 48. Rolin v. Steward (1854), 14 C.B. 595. As Jamie Cassels points out in Remedies: The Law of Damages, supra note 26 at 204, however, recovery in such a case could also be justified as pecuniary loss since there is injury to the plaintiff's business or trade. 49. Watts, supra note 3 at 1445. Watts has been followed in Canada, including by the Supreme Court of Canada which stated in Wallace, supra note 33 at para. 73, that in the ordinary course, mental distress will only be awarded where "peace of mind is the very matter contracted for." See too Turczinski v. Dupont Heating & Air Conditioning, (2004), 246 D.L.R. (4th) 95 at para. 26, leave to appeal to S.C.C. refused, [2004] S.C.C.A. No. 581. 50. Farley v. Skinner, [2001] 3 W.L.R. 899 (H.L.) [Farley]. 51. Ibid. at para. 24. For discussion of this, see Andrew Bowen, "Watts v. Morrow and the Consumer Surplus: Farley v. Skinner" [2003] S.L.T. 1. 326 The Dalhousie Law Journal he advised the plaintiff that there was no significant aircraft noise. Upon purchasing the home, the plaintiff determined that the property was very noisy due to the nearby airport, particularly because the property was near a navigation beacon. The House of Lords restored the trial judge's award of general damages for mental distress, with four of the five judges offering separate reasons for that outcome.12 Building on Watts, Lord Steyn determined that loss of intangibles (such as pleasure, relaxation or peace of mind) are recoverable not just when they are the very object of the contract. It is sufficient if they are a "major or important object of the contract."53 Put another way, the contract at bar fell within the "very object of the contract" exception when an important part of the contract related to pleasure, relaxation or peace of mind.5 Lord Steyn's decision was particularly influenced by David Capper's analysis, as follows: A ruling that intangible interests only qualify for legal protection where they are the 'very object of the contract' [per Watts] is tantamount to a ruling that contracts where these interest are merely important, but not the central object of the contract, are in part unenforceable. It is very difficult to see what policy objection there can be to parties to a contract agreeing that these interests are to be protected via contracts where the central object is something else...55 Farley is a tremendously important development in the English common law because the House of Lords scrutinized and enforced all the promises that were contained in the contract at bar, not just some of them. First and foremost, the defendant's contract was to provide survey services in relation to the residential property, but the contract contained more than just that. Part of what the surveyor promised was an intangible interest - in this case peace of mind that the property in question was suitable to the plaintiff's aesthetic or personal requirements. When that promise was 52. While the other law lords offered separate judgments, all agreed that the case fell within an exception to the general rule such that mental distress damages were recoverable. See Bowen, ibid. And as Andrew Bowen also remarks, at 6: "A close examination of all four speeches in Farley can make your head spin.....[T]he interplay between the different judicial views could soak up days of debate on the relevancy of any particular claim." 53. Farley, supra note 50 at para. 24. Note Farley has already been noticed, inter alia, by the British Columbia Court of Appeal in Wharton v. Tom Harris Chevrolet Oldsmobile Cadillac Ltd., [2002] B.C.J. No. 233, 2002 B.C.C.A. 78 [Wharton]. (discussed infra at footnote 74 and surrounding text) and by the Ontario Court of Appeal in Prinzo v. Baycrest Centre for Geriatric Care (2002), 60 O.R. (3d) 474 (C.A.) [Prinzo]. 54. Farley, supra note 50 at para. 18 55. Lord Steyn, ibid. at para. 24, quoting David Capper, "Damages for Distress and Disappointment - The Limits of Watts v. Morrow," supra note 4 at 556. Damages for Mental Distress breached, and the plaintiff suffered mental distress as a foreseeable result, there is every argument that the plaintiff is entitled to some recovery. Put another way, the defendant made significant, non-pecuniary promises. How can he be taken by surprise when the plaintiff suffers emotional distress when there is a failure to deliver on those promises? In restoring the trial judge's award for "discomfort" in the amount of £ 10,000, Lord Steyn did warn that such a sum was on the higher end of what would be appropriate and that awards in this area should be "restrained and modest."56 Andrew Bowen is correct to note that Lord Steyn's judgment in Farley amounts to a "significant redefining of the exceptional category" articulated in Watts, and "gives scope for many more claims which, pre- Farley, would have been viewed as insufficiently central to the contract. 5 7 Interestingly, however, Lord Steyn couched his analysis in very traditional language, insisting that "entitlement to damages for mental distress caused by a breach of contract is not established by mere foreseeability: the right to recovery is dependent on the case falling fairly within the principles governing the special exceptions."58 What follows is a discussion of the special exceptions to the rule of no recovery for mental distress. It will be seen that through these exceptions, courts refuse to apply the general rule in a blanket fashion because to do so would produce an injustice. a. Established categories or exceptions to the general rule vacations One of the most important and well-known decisions in the entire area of recovery for mental distress is Jarvis v. Swans Tours Ltd.,5 9 wherein Lord Denning permitted a sorely disappointed vacationer to recover general damages for mental distress. In Jarvis, the plaintiff booked his annual holiday with the defendants but the vacation delivered fell well short of what was promised. To set the stage for recovery of mental distress damages, Lord Denning outlined all the problems with the vacation, both large and small. While acknowledging the general rule against recovery for mental distress set forth in Hamlin, Lord Denning also stated that such limitations were out of date and that in the proper case, mental distress damages were 56. Farley, supra note 50 at para. 28. 57. Andrew Bowen, supra note 51 at 4. 58. Farley, supra note 50 at para. 16. 59. Jarvis v. Swans Tours Ltd., [1973] 2 Q.B. 233 (C.A.) [Jarvis]. 330 The Dalhousie Law Journal Vorvis v. Insurance Corp. of British Columbia has been interpreted. 66 Accordingly, at least until the Supreme Court of Canada's more recent decision in Wallace,67 the plaintiff would not recover any compensation for rough handling by the employer on dismissal when it was less than independently actionable. Wallace now accords legal significance to the employee's vulnerability at the particular moment of job loss. Though, as Mr. Justice lacobucci observed, "an employment contract is not one in which peace of mind is the very matter contracted for"68 (and therefore mental distress damages could not sound on that basis), there was nonetheless recourse for the employee: [A]t a minimum, ... in the course of dismissal employers ought to be candid, reasonable, honest and forthright with their employees and should refrain from engaging in conduct that is unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive.69 The recovery for mental distress suffered by the plaintiff is accomplished through the remedy of extending the notice period. In this way, the Supreme Court of Canada compensates for non-pecuniary loss but under another guise. While there have been serious objections to this approach,7" it does provide some relief to the plaintiff and does effectively cap the size of the award, thereby serving some indirect public policy objectives.7 insurance Mental distress damages can be awarded for breach of a disability insurance policy because, as already noted, such a contract "is one of the few contracts in which damages for mental distress are recoverable when 66. Supra note II. See, for example, Prinzo, supra note 53, and Wallace, supra note 33 at para. 73. 67. Supra note 33. 68. Ibid. at para. 73. Whether this characterization will be revisited in light of Farley, supra note 50, remains an open question. Another ground upon which to revisit Wallace concerns whether the employment contract contains a term of good faith and fair dealing. The House of Lords in Malik v. Bank of Credit Commerce International, [1997] 3 All E.R. I contends that it does. So does the Ontario Court of Appeal in Prinzo, supra note 53 at para. 34. For a contrary view, see Babcock v. Canada (A.G.) (2005), 139 A.C.W.S. (3d) 481 (B.C.S.C.) at para. 210. 69. Wallace, supra note 33 at para. 98. 70. See, for example, Lee Stuesser, "Wrongful Dismissal - Playing Hardball: Wallace v. United Grain Growers" (1997-98) 25 Man. L.J. 547; John Swan, "Damages for Wrongful Dismissal: Lessons from Wallace v. United Grain Growers Ltd." (1998) Can. Lab. & Emp. L.J. 313; Shannon O'Byrne, "Bad Faith - Contexts of Employment - Wallace v. United Grain Growers Ltd." (1998) 77 Can. Bar Rev. 492; and Jamie Cassells, supra note 26 at 222. 71. Feldthusen, "Punitive Damages in Canada," supra note 7. Damages for Mental Distress they are proven to result from the breach of contract.""2 This is because the subject matter of the contract is to provide peace of mind or freedom from distress and therefore falls within an exceptional category.73 A strong argument can be made that mental distress damages should be available in relation to insurance contracts of all kinds since peace of mind is their inevitable subject matter. luxury chattels In Wharton v. Tom Harris Chevrolet Oldsmobile Cadillac Ltd., the sound system in the appellant's luxury vehicle failed to function properly for over two and a half years.74 At trial, the court awarded $5,000 in non-pecuniary damages for "loss of enjoyment of their luxury vehicle and for inconvenience."75 According to Justice Levine (Rowles and Smith JJ.A. concurring) the trial judge was correct in doing so. Furthermore, the appellate court adopted the analysis in Farley, stating: where a major or important part of the contract is to give peace of mind, damages will be awarded if the fruit of the contract is not provided or if the contrary is instead procured.76 Wharton has recently been followed in Vavra v. Victoria FordA lliance Ltd., wherein the court awarded $5,000 to the plaintiff for "frustration, anxiety, and interference with, and loss of amenity, of her leisure lifestyle."77 In this case, the deficiently performing vehicle did not have the towing capacity 72. Warrington, supra note 3 at para. 22. Note that in Petersen v. Power, [1997] B.C.J. No. 2998 (S.C.), the court refused to award mental distress damages absent an independent actionable wrong based on Wallace, supra note 33, but this is likely a misreading of Wallace. In Wallace, the Supreme Court of Canada recognized that in certain contracts, peace of mind was the very matter contracted for, at para. 73, but that an employment contract was not one of those contracts. It therefore recognized that mental distress damages were recoverable even absent an independent actionable wrong. It also went on to create a special analysis for employment contracts. For discussion of Wallace, see footnote 68 and surrounding text. See too the British Columbia Court of Appeal's analysis in Warrington, in footnote 38 and surrounding text. Warrington's analysis has been followed by a number of courts, including: Gerber v. Telus Corp., [2003] 10 W.W.R. 82 (Alta. Q.B.) at para. 118, affirmed [2004] 6 W.W.R. 205 (C.A.); Mclsaac v. Sun Life Co. of Canada (c.o.b. Sun Life of Canada) (1999), 173 D.L.R. (4th) 649 (B.C.C.A.) at para. 14; Wharton, supra note 53 at para. 4; Anderson v. Peters (2000), 152 Man. R. (2d) 113 (Man. Q.B.) at paras 32-33; and Fidler v. Sunlife Assurance Co. of Canada (2004), 239 D.L.R. (4th) 547 (B.C.C.A.), leave to appeal granted [2004] S.C.C.A. No. 335. 73. Warrington, ibid. at para. 19 and following. For similar analysis, see Thompson et al. v. Zurich Insurance Co. (1984), 7 D.L.R. (4th) 664 (Ont. H.C.J.). See Whiten, supra note 8 at para. 129 which identifies fire insurance policies as peace of mind contracts. 74. Supra note 53. 75. Ibid. at para. 15. 76. Ibid. at para. 57. 77. Vavra v. Victoria Ford Alliance Ltd., (2003), 124 A.C.W.S. (3d) 924 (B.C.S.C.) at paras. 58. Wharton has also recently been followed in a case involving a real estate transaction. See Bontorin v. Greenway Land Corp. (2004), 25 R.P.R. (4th) 21 (B.C.S.C.) wherein the court awarded $35,000 in "aggravated damages" but what this paper would call "general damages for mental distress." 332 The Dalhousie Law Journal that it was warranted to have, with the defendant unwilling or unable to remedy the problem over a period of two years.78 Wharton and Vavra reach the outcomes which are entirely consistent with what Lord Steyn lays down. That is, in both of the contracts at bar, peace of mind was not the very thing contracted for but was an important component in them. On this basis, the plaintiff was entitled to some compensation for mental distress suffered. solicitor-client There would appear to be only one reported case in Canada which expressly considers whether the solicitor-client contract fits within a special category permitting recovery for mental distress, namely Maillot v. Murray Lott Law Corp.79 In this case, the plaintiff sued for general damages for mental distress and aggravated damages related to breach of a contingency fee agreement relating to a work-related disability claim against the Workers Compensation Board. The defendant counterclaimed for payment of fees on a quantum meruit basis. The court agreed that the defendant had wrongfully repudiated the contingency agreement and that therefore no fees were payable at all by the client. As for intangible damages, the court was left in somewhat of a quandary because the plaintiff abandoned his claim for mental distress at the discovery stage and had only pressed the claim for aggravated damages. In response, the court stated: While I am not persuaded that a claim for damages for mental distress and a claim for aggravated damages necessarily constitute overlapping claims, it is nevertheless the case that there is no compelling evidence to establish that the specific object of the contingency fee agreement was to ensure Maillot's peace of mind or to free him from mental or financial anxiety. Accordingly, I find there is no foundation for any award of aggravated damages." In reaching this decision, the court relied on both Farley and Warrington but it could be argued that the court is asking more of the contract than certainly Farley did. Recall that in Farley, the contract in question was 78. Vavra at para 61. Note in Chambers v. Ryan Warranty Services, (2003), A.C.W.S. (3d) 355 (Ont. Sup. Ct.), affirmed [2004] O.J. No. 5360 (Sup. Ct.), the trial judge refised to award mental distress damages on a consumer product warranty contract on the basis that the plaintiff had damaged his own vehicle by driving it when it was overheated, thereby causing his own loss. Furthermore, even if the defendants were liable for the loss, damages for mental distress would not be recoverable because a consumer product warranty "does not fall within the category of cases where 'peace of mind' is the very matter contracted for between the parties" at para. 47. Note, however, that Farley, supra note 50, is not mentioned in the decision and may not have been argued in that case. 79. Maillot v. Murray Lott Law Corp. (2002), 99 B.C.L.R. (3d) 170 [Maillot]. 80. Ibid. at para. 92. Damages for Mental Distress plaintiffs took turns administering oxygen to Patachou [the dog which arrived alive, but barely] and it would appear that this saved his life." 9° Though Judge Borins referred to Lord Denning's decision inJarvis and related case law, the ratio of Borins J.'s decision is based on the principles of foreseeability. The court stated: To return to the facts of the case before me the question that must be asked is this: Was the contract such that the parties must have contemplated that its breach might entail mental distress, such as frustration, annoyance or disappointment? I would answer the question in the affirmative. The contract was to safely carry the plaintiff's pet dogs from Toronto to Mexico City. On the evidence it is abundantly clear that the defendant was aware of the plaintiffs' concern for the welfare of their pets....I find that the contract was such that the plaintiffs and the defendant must have contemplated that if injury or death were to befall the dogs this might result in the plaintiffs suffering mental distress. The plaintiffs are therefore entitled to recover general damages in the sum of $500.9' Following Newell, there have been multiple instances of the courts awarding mental distress damages based on foreseeability alone. See, for example, the Alberta Court of Appeal in Kempling v. Hearthstone Manor Corp.92 In this case, the husband and wife respondents sought damages - including damages for mental suffering - when the appellants wrongfully terminated their contract for a condominium purchase in Calgary. As was known to the vendors, the condo was to have been a home for the respondents as well as for the wife's elderly father. Delays in approval, cost-overruns, and construction delays which plagued the project also greatly upset the respondents and the father. The appellant's wrongful repudiation was simply the ultimate installment. At trial, the court awarded, inter alia, damages for mental distress because the defendant caused the plaintiffs a great deal of upheaval and treated them "very shabbily." 93 A majority of the Court of Appeal affirmed the trial judge's award not on the basis of a "special categories" analysis but simply on the basis of foreseeability. According to Madam Justice Picard (Harradence J.A. concurring with respect to the matter of damages): 90. Ibid. at para. 4. Cases involving animals which have followed Newell include Weinberg v. Connors (1994), 21 O.R. (3d) 62 (Gen. Div.) (where defendant was in breach of contract for failing to keep plaintiff aware of location of adopted cat. Court awarded $ 1,000 in general damages ) and Surette v. Kingsley (c.o.b. Paw for Thoughts!), [2000] N.B.J. No. 532. (Sm. Cl. Ct.) (where cat was injured by an incompetent groomer employed by the defendant. Court awarded $250 general damages). 91. Newell, supra note 89 at para. 39. 92. Kempling v. Hearthstone Manor Corp. (1996), 137 D.L.R. (4th) 12 (Alta. C.A.) [Kempling], cited with approval by the Ontario Court of Appeal in Turczinski, supra note 49. 93. Kemplingv. Hearthstone Manor Corp. (1992) 136A.R. 339 (Q.B.). 335 336 The Dalhousie Law Journal Justice Wilson [dissenting in Vorvis v. Insurance Corp. of British Columbia, (1989] 2 S.C.R. 1085] found a "common denominator" in the cases where damages [for mental distress] were awarded, that being that the parties should reasonably have foreseen mental suffering as a consequence of a breach of contract at the time the contract was entered into. She concluded at p. 301: "It is my view, that the established principles of contract law set out in Hadley v. Baxendale provide the proper test for the recovery of damages for mental suffering. The principles are well-settled and their broad application would appear preferable to decision-making based on a priori and inflexible categories of damage. The issue in assessing damages is not whether the plaintiff got what he bargained for, i.e. pleasure or peace of mind (although this is obviously relevant to whether or not there was a breach), but whether he should be compensated for damage the defendant should reasonably have anticipated that he would suffer as a consequence of the breach."94 Justice Picard went on to observe that there was no need to fear opening of the floodgates because the rule in Hadley v. Baxendale "has within it the means to test and limit liability."95 She agreed that there were special circumstances communicated to the respondent (including that the condo was being purchased to house the respondent's elderly father) and that mental distress damages were reasonably foreseeable. 96 The judge's quantum of general damages of $7,500 was affirmed. A review of the case law reveals numerous other examples where courts have awarded general damages for mental distress based on simple foreseeability in a failed contract for the purchase and sale of residential real 94. Supra note 92 at para. 67. 95. Ibid. at para. 69. 96. Ibid. at para. 17. While Justice Picard is correct to note that mental suffering is most likely to be established based on the second arm of Hadley, it would seem logical that a claim could also be established under the first - as, for example, vacation contracts. Damages for Mental Distress estate or failed home repair.97 The foreseeability approach has been applied in other kinds of contracts as well. In the 1996 Ontario Superior Court decision of Mason v. Westside Cemeteries Ltd., for example, the plaintiff sued the defendant for breach of a bailment contract (or alternatively, in negligence) because the defendant lost the ashes of his deceased parents. Not surprisingly, the plaintiff also sought general damages for mental distress. Justice Molloy awarded $1,000 under this heading because it must have been contemplated that the loss of the ashes would cause the plaintiff mental distress. As the court succinctly summarizes the matter: "If damages are recoverable for upset over the loss of a dog [as in Newell] or for the disappointment of a ruined holiday [as in Jarvis], surely the distress caused by the loss of the remains of someone's deceased parents is likewise compensable."98 Not all claims assessed under the Hadley approach are successful, of course. In Cunningham v. Dowling General Construction Ltd., the court agreed that there had been an improvident sale by the mortgagee 97. See, for example: Stoddard v. Atwil Enterprises Ltd. (1991), 105 N.S.R. (2d) 315 (S.C.(T.D.)), supplementary reasons for judgment at [1991] N.S.J. No. 686, in which the plaintiff was awarded $3,000 for mental distress by Justice Saunders; Shillingford v. Dalbridge Group Inc., [1996] A.J. No. 1063 (Q.B.) at para. 33, wherein Justice Perras awarded mental distress damages against some corporate directors in a breach of contract action in the amount of $6,000; Cudmore v. Home Chec Canada Ltd., [2001] 3 W.W.R. 541 (Man. Q.B.) at para. 50 where Justice Schwartz awarded the plaintiff $5,000 for "anxiety, stress, emotional disturbance and inconvenience" due to the defendant's abject failure to complete home repairs; Page v. Russell (2001), 305 A.R. 352 (Q.B.) at para. 39 wherein Justice Gallant awarded the plaintiffs $1,000 for their "unhappiness, frustration, inconvenience and anger" as a result of defendant's construction delays; Gill supra note 42, wherein Justice Deyell awarded the plaintiffs $7,500 for mental suffering arising from the breach of contract for the sale of a house and Gourlay v. Osmond (1991), 104 N.S.R. (2d) 155 (S.C.(T.D.)) where $5,000 was awarded for mental distress arising from another failed real estate transaction. Note that in Gourlay, the full extent of the male plaintiff's mental distress - including upset at having to miss his brother's wedding in Scotland - was not recoverable because it was too remote. For a contrary result, see Turczinski, supra note 49. At trial, the court awarded the plaintiff $35,000 for mental distress in a breach of contract action based on foreseeability. That is, Dupont knew that Turczinski suffered from an obvious and long-standing mental disorder and that breach of contract would worsen her condition beyond the extent of the pecuniary loss, at paras. 175-176. On appeal, the court reversed, inter alia, based on a lack of foreseeability, at para. 37. The appellate court said that clearer evidence was needed that the contracting parties were specifically aware of the potential for significant mental distress, at para. 40. Note, finally, that there is a smaller line of authority suggesting that recovery for mental distress related to failed construction contracts and associated matters can proceed by way of the "special categories" approach of Jarvis, supra note 59. See Novak v. Poiler (1985), 12 C.L.R. 295 (Ont. Dist. Ct.) at para. 10 and following. See too Tucci v. City Concepts Construction Ltd. (2000), 2 C.L.R. (3d) 291 (Ont. Sup. Ct. Jus.) which awards $15,000 in mental distress damages based on Novak. As a final example, see Johnston & Associates Ltd. v. Wade [1994] O.J. No. 662 (Gen. Div.) at para. 15, which relies on Novak to award $10,000 in mental distress. 98. Mason v. Westside Cemeteries Ltd. (1996), 135 D.L.R. (4th) 361 (Ont. Gen. Div.) [Mason] at para. 53. See too McLoughlin v. Arbor Memorial Services Inc., (2004), 36 C.C.L.T. (3d) 158 (Ont. Sup. Ct. Jus.). 340 The Dalhousie Law Journal This said, Mason C.J. felt he had no choice in the end but to endorse the traditional categories approach: as a matter of ordinary experience, it is evident that, while the innocent party to a contract will generally be disappointed if the defendant does not perform the contract, the innocent party's disappointment and distress are seldom so significant as to attract an award of damages on that score. For that reason, if no other, it is preferable to adopt the rule that damages for disappointment and distress are not recoverable unless they proceed from physical inconvenience caused by the breach or unless the contract is one the object of which is to provide enjoyment, relaxation or freedom from molestation. 0 6 As Elizabeth MacDonald points out, however, Justice Mason seems to assume "some underlying reason why it is not better simply to comply with basic principles and allow there to be nominal awards of damages in those cases where the mental distress was not 'significant." ' 07 That is, if the plaintiff's mental distress is minimal, the court can simply award a small amount under this head or no damages at all. On this footing, there is no need for the court to take shelter behind the protection ostensibly afforded by the special categories approach. Ordinary contract law principles will provide the tried and true gate-keeper. Though the foreseeability approach has the very important strength of avoiding inflexible categories, it arguably presents a potential difficulty of its own. Courts must be careful not to collapse an important first step in contractual analysis - namely, determining what was promised by the contract - into the foreseeability test alone. In Newell, for example, the defendant agreed to go ahead and enter into a contract for the transport of the plaintiff's animals knowing full well that the plaintiffs' special circumstances made competent performance absolutely essential. It could be argued that, on this basis, the defendant was implicitly promising peace of mind to the plaintiffs. Hadley would then assess whether the plaintiff's emotional reaction in face of breach was reasonably foreseeable or not. In short, Hadley would not be used to determine the content of the contract but only whether the consequences of breach of that content should be recoverable or not. While the foregoing analysis is advancing an admittedly subtle distinction (which in many cases may lead to no difference in the outcome of the case), it may be preferable nonetheless. In this case, courts can 106. Ibid. at 365. 107. MacDonald, supra note 44 at 149. See too K.B. Soh, "Anguish, Foreseeability and Policy" (1989) 105 L.Q.R. 43 at 45 who states: "small claims for mental distress will probably not be made and the ones that are can be dispatched by nominal damages." Damages for Mental Distress systematically revisit contract law's classical presumption that contractual terms relate to pecuniary loss only. By assessing the contract for its non- pecuniary content as an initial step, the court ensures that the defendant is held to his or her full bargain, whatever that might be. Regardless of the approach a court takes to the question of mental distress recovery, there are some constants as the following section illustrates. III. Over-arching rules regardless of approach 1. Corporate plaintiffs cannot recover As already noted, when a plaintiff is a corporation, it cannot receive damages based on distress and humiliation. 108 A corporation cannot experience human emotions and therefore is not entitled to recovery for damages for non-pecuniary loss. 109 2. Plaintiff must prove that distress is more than fleeting The introduction to this paper referenced David Capper's view that judicial reticence to permit recovery for intangible losses is partly justifiable because claimants may artificially inflate their damages and allege "all kinds of minor losses to which they are largely indifferent.""' This concern, however, goes to the question of proof of damages and can be tackled by the court directly."' In short, the plaintiff must prove his case on the balance of probabilities, including the general damages claim. If the plaintiff fails to do so - or if quantum is negligible - the claim under this head of damages must be denied. Though medical proof of mental distress would likely function to increase quantum, most courts do not require such evidence before mental distress damages are available in a breach of contract situation. Courts tend to be content to weigh the plaintiff's testimony on the emotional repercussions of breach and set quantum accordingly. In Stoddard v. 108. See cases cited in footnotes 5 and 30. For an American case to the contrary, see Smith v. Hoyer, 697 P.2d 761 (Colo. 1984) wherein both the individual and corporate plaintiff were awarded damages for mental distress for the bank's conduct in foreclosing on properties after agreeing not to. Note, however, that the determination of mental anguish was based entirely on the individual plaintiff's symptoms, at 765. Note that even corporations can recover for loss of business reputation. See, for example, Ascot Holdings Ltd v. Wilkie (1993), 49 C.P.R. (3d) 188 (B.C.S.C.). 109. It is beyond the scope of this paper to consider whether the principals behind the plaintiff corporation may be so entitled. For a discussion of this possibility in relation to franchise law, see Shannon O'Byrne, "Breach of Good Faith in Performance of the Franchise Contract: Punitive Damages and Damages for Intangibles," supra note 32. 110. Supra note 4. 111. A.S. Burrows, "Mental Distress Damages in Contract-A Decade of Change" (1984) L.M.C.L.Q. 119 at 133 notes: "as regards the problems of bogus claims, surely the courts are competent to judge whether the plaintiff has satisfied the burden of proving that he has suffered the mental distress alleged." 342 The Dalhousie Law Journal Atwil Enterprises Ltd., for example, damages were available because the plaintiffs' stress was real and continuous. 12 In Gill, there was proof of the plaintiff's suffering, in the court's words "as attested to by herself and Mr. Taylor, in that she was too ill to attend work on a number of occasions. She broke out in hives and she experienced facial swelling.""' 3 In Page v. Russell, it was sufficient that the plaintiffs experienced "unhappiness, frustration, inconvenience and anger" to secure general damages for mental distress. 114 In Mason, the Ontario Superior Court awarded general damages for mental distress based on the plaintiff's testimony that he had experienced considerable emotional upset due to defendant's negligence and breach of contract in losing the parents' ashes. The court noted that evidence of psychiatric illness should not be required to found the claim even if the matter proceeded in tort - an area of law where such a strict form of evidence is classically required. As the court observed: In tort cases, courts have for the most part refused to award damages for emotional upset unless this has caused physical symptoms or some recognizable psychiatric illness. It has repeatedly been said that grief alone is not compensable in damages.... It is difficult to rationalize awarding damages for physical scratches and bruises of a minor nature but refusing damages for deep emotional distress which falls short of a psychiatric condition. Trivial physical injury attracts trivial damages. It would seem logical to deal with trivial emotional injury on the same basis, rather than by denying the claim altogether. Judges and juries are routinely required to fix monetary damages based on pain and suffering even though it is well known that the degree of pain is a subjective thing incapable of concrete measurement. It is recognized that emotional pain is just as real as physical pain and may, indeed, be more debilitating. I cannot see any reason to deny compensation for the emotional pain of a person who, although suffering, does not degenerate emotionally to the point of actual psychiatric illness. Surely emotional distress is a more foreseeable result from a negligent act than is a psychiatric illness.... But what is the logical difference between a scar on the flesh and a scar on the mind? If a scar on the flesh is compensable although it causes no pecuniary loss why should a scar on the mind be any less compensable? "5 Perhaps exceptionally, the Nova Scotia Supreme Court in Trim v. Beaudet, required proof of more substantial emotional distress, stating that there must "be compelling evidence of mental suffering having been inflicted 112. Supra note 97. 113. Supra note 42 at para. 59. 114. Supra note 97 at para. 39. 115. Supra note 98 at para. 54. Damages for Mental Distress But how descriptively robust is the generic "widget" contract outlined above and the conclusions that flow from it? There are many contracts, as discussed in this paper, which contain important, non-pecuniary assurances. And, in further opposition to the assumptions informing the generic contract, these are precisely the kind of contracts which are not subject to mitigation. Mrs. Newell's little dog is dead and that cannot be changed; Mr. Jarvis's annual vacation is over and he has to wait another year before he can take a holiday again; the photographer has failed to turn up at Ms. Wilson's wedding and that moment can never be recaptured; the cemetery has lost the ashes of Mr. Mason's parents and there is absolutely nothing the plaintiff can do about that now; Mr. Wallace has been humiliated and derided by his employers - the marketplace cannot undo that devastating experience; and Mr. Warrington's disability insurance policy was not honoured by the insurer at the time he needed it most but he could not mitigate by purchasing a replacement policy - he was already disabled at that point. In such circumstances, as Michael Bridge observes, mental distress is not merely a "possible consequence of a breach of contract by the defendant but the very kind of consequence that a breach of contract was likely to bring about." '25 The difficulty with the general rule is that it assumes that the generic contract contains only pecuniary content. It then tautologically declares - as a general rule - that non-pecuniary loss is unforeseeable or not part of the risk assumed by the defendant. As Mr. Justice Weatherston points out in Brown, "[t]here may be a measure of policy in denying damages for mental distress in cases when there is nothing more than pecuniary loss. But I think this is not so much an exception to the rule in Hadley v. Baxendale as a practical application of it."'1 26 As this paper has illustrated, under the "categories" approach to recovery of mental distress damages, the plaintiff must not only show that non-pecuniary damages are reasonably foreseeable. The plaintiff must show "something more" - namely that the contract fits with an established exception to the general rule. In this way, fear of floodgates is kept in check but in a way that needlessly compromises ordinary contract law principles. As Justice Molloy observes in Mason, It is important in our society that all citizens have access to our courts of civil justice to redress wrongs committed against them. That does not mean that a civil action for damages is the appropriate solution to every instance of emotional upset or hurt feelings caused by somebody else's 125. Michael Bridge, "Contractual Damages for Intangible Loss: A Comparative Analysis" (1984)62 Can. Bar Rev. 323 at 370. 126. Brown, supra note 41 at 118. 346 The Dalhousie Law Journal civil wrong. While those claims may, on the application of general legal principles, be valid, if the injury suffered is trivial in nature the damages awarded should reflect that fact.'27 Though ostensibly following a special categories approach, Lord Steyn's analysis in Farley is broad and makes room for non-pecuniary claims in a much more generalized way than earlier case law did. It asks the court to scrutinize the contract and measure its non-pecuniary content. Provided that non-pecuniary content is major or important, breach of that content will sound in damages for mental distress. When non-pecuniary content is a significant part of what has been promised, non-pecuniary loss is almost certainly reasonably foreseeable. There is no injustice done to the defendant nor has it been taken by surprise. The defendant is simply being held to its contract. In this way, Lord Steyn's analysis accords with the reasonable foreseeability approach espoused by several courts across Canada. If the foreseeability approach discussed earlier offers a demonstrably palatable and fair approach to breach of contract claims sounding in non-pecuniary loss, there is no requirement for a general rule against recovery for intangibles. Indeed, the general rule has probably needlessly complicated the common law by spawning a category-based group of exceptions. Though the policy behind such a special category approach helps to provide a buffer against traditional fears that mental distress claims might be fabricated, inflated, vexingly small, or too remote, it is better to deal with such concerns directly and systematically under the ordinary principles of contract law. If the plaintiff cannot prove her mental distress, the claim under that head of damages should be dismissed. If the plaintiff has exaggerated her claim, the court can award a reduced quantum. Where the amount of distress suffered has been small and insignificant, the court can invoke the de minimis maxim. And if mental distress is not a 127. Supra note 98 at para. 58. Accord Lord Steyn in Farley, supra note 50, and K.B. Soh in "Anguish, Foreseeability and Policy," supra note 107. Damages for Mental Distress reasonably foreseeable consequence of breach, the claim is not sustainable under the Hadley principle. As already noted, however, there is a danger in applying the foreseeability approach alone that the non-pecuniary content of the contract will go undetected and be marginalized in relation to its traditionally- recognized, non-pecuniary content. On the footing that claims for intangibles should be treated like any other claim, the following section provides a proposed restatement of the general rule. V. Proposed restatement of the general rule The proposed restatement of the general rule against recovery for mental distress damages is in fact a repeal of it. Instead of a court invoking the general rule and then determining whether the contract fits within an exceptional category, the court would instead pose the following questions: 1. Did the defendant promise the individual plaintiff important intangible, non-pecuniary benefits under the contract? [per Farley, was pleasure, relaxation, peace of mind or freedom of molestation an important or significant part of the contract?] 2. If yes, did the defendant fail to deliver those benefits, either in whole or in part? 3. If yes, did the plaintiff suffer any loss, including non-pecuniary loss such as mental suffering? 4. Ifyes, is there proofthat the mental distress is more than simplyfleeting? [i.e., was the distress beyond disappointment or hurt feelings?] 5. If yes, did the defendant's breach cause that loss? 6. If yes, was the plaintiff's loss reasonably foreseeable? In the words of Judge Borins in Newell, the court would simply ask "[w]as the contract such that the parties must have contemplated that its breach might entail mental distress, such as frustration, annoyance or disappointment?" 128 If the answer to all these questions is 'yes', then the plaintiff is entitled to general damages for mental distress. The court must then proceed to assess quantum, keeping in mind that recovery for mental distress should, at least in the ordinary case, be restrained. The above restatement is offered as a replacement for the special categories approach which puts the judiciary in an unnecessary strait- jacket. But this is not to suggest that the foreseeability test deployed by 128. Supra note 89 at para. 39. 350 The Dalhousie Law Journal 6. The approach based on the contract being commercial or non- commercial breaks down on analysis (Gill). 7. The approach based on the contract fitting within an establish categories requires the plaintiff to go beyond demonstrating that general damages for mental distress were reasonably foreseeable. The plaintiff must establish that the contract at bar fits with an exception. Examples of contracts within the exceptions include: vacation contracts (Jarvis et al); contracts associated with a wedding (Diesen et al); employment contracts (Wallace); insurance contracts (Warrington); and contracts for luxury chattels (Wharton et al). Contracts between solicitor and client may also be a category but this is less certain. The Ontario Court of Appeal in Benaiah permitted recovery for mental distress damages due to the solicitor's incompetence, but under the law of negligence. The Saskatchewan Court of Appeal in Hagblom permitted recovery but was not required to choose a basis for that determination. In Maillot, mental distress damages were disallowed based on the categories approach. 8. This "special categories" approach can be criticized on several grounds: * the law of contracts ordinarily permits recovery for reasonably foreseeable loss. Why have a special rule for intangible loss? (Gill) * once intangible harm is accepted as being compensable, there is no logical reason to artificially restrict it (Professor Veitch) * though the categories approach has a gate-keeping function to stave off a floodgate of inflated claims, trivial complaints, and fictitious allegations, this function can be performed by ordinary contract law principles (i.e., the plaintiff must prove her claim and establish quantum; if the quantum is minimal, the court should award only nominal damages or no damages at all) * on this basis, the special categories approach needlessly complicates the law 9. The third approach is to permit recovery based on foreseeability alone (Newell, Gill, Kempling). Was mental distress a reasonably foreseeable consequence of breach? Damages for Mental Distress 10. Instead of gate-keeping through categories of cases, ordinary contract law principles would perform that function, including, of course the principle of Hadley but also such doctrines as de minimis non curat lex. 11. No matter what theory the court applies to recovery, the plaintiff seeking general damages or mental distress does not have to establish an independent, actionable wrong Warrington). 4. Over-arching rules regardless of approach to general damages for mental distress 1. Corporate plaintiffs cannot recover under this head of damage because corporations cannot experience human emotions (Walker). 2. The plaintiff must prove that distress is more than fleeting. 3. Quantum must be restrained and modest. To reiterate Lord Steyn's warning: "It is important that logical and beneficial developments in this corner of the law should not contribute to the creation of a society bent on litigation."'' 131. Farley, supra note 50 at para. 28.