"Bad Faith and Good Faith Claims", Harper Grey Commercial Litigation Group Seminar
October 10, 2002
Historically, it was a general rule that punitive damages were not available for breach of contract. As S.M. Waddams points out:
This rule is based on the assumption underlying much of contract law that a breach of contract, coupled with an offer to pay just compensation does no harm to the plaintiff, is not morally wrong and may be desirable on the grounds of efficiency.
However, in recent years, Canadian courts have indicated a greater willingness to award punitive damages as a means of censuring defendants whose breach of contract involves conduct that is particularly reprehensible.
In Vorvis v. Insurance Corporation of British Columbia, a 1989 decision of the Supreme Court of Canada, McIntyre J., writing for a 3-2 majority, declined to make an award of punitive damages in favour of an employee who was badly treated be his employer. He did not, however, endorse an absolute prohibition against punitive damage awards in cases of breach of contract, stating instead:
In my view, while it may be very unusual to do so, punitive damages may be awarded in cases of breach of contract. It would seem to me, however, that it will be rare to find a contractual breach which would be appropriate for such an award. In an action based on breach of contract, the only link between the parties for the purposes of defining their rights and obligations is the contract. Where the defendant has breached the contract, the remedies open to the plaintiff must arise from that contractual relationship, that “private law”, which the parties agreed to accept. The injured plaintiff then is not entitled to be made whole; he is entitled to have that which the contract provided for him or compensation for its loss. The distinction will not completely eliminate the award of punitive damages but it will make it very rare in contract cases.
(To read this article follow the link below.)
