Canada: Exemplary Damages Of Every Shape And Form

What with the economic climate of recent years, we are witnessing an increase in judicial proceedings containing questionable claims, the sole purpose of which is to destabilize an adversary in an attempt to get a quick settlement to a conflictive situation. With the exception of claims for legal fees, intended to indemnify actual damages, exemplary damages take the proverbial cake as regards extraordinary claims. To a large extent, this situation is due to the widespread and sometimes unreasonable use of such claims by our neighbours to the south and to the impact created by the large amounts claimed which, at first glance, have a shocking effect.

In fact, it is not uncommon to see a claim for $100,000 and more as exemplary damages for the wrongful and cavalier breach of a contract of employment or contract for services. People, infuriated by this type of behaviour, feel that they are injured and try, by all means available to them, to recover amounts supposedly lost because of their co-contracting party’s default. Before throwing in the towel, running to the trustee in bankruptcy or to the bank to take out a loan and settle the matter, the validity of this type of claim must be studied at length to understand certain aspects. Reading this brief article may help you avoid many anxious hours and needless expenses.

For ten years or so now, we have been seeing a plethora of claims for exemplary damages that have no legal basis and the amounts that are claimed are out of line with the experiences under Quebec law. These claims are coined "false exemplary damages".

To start with, any claim for exemplary damages must rest on the wording of a statute that allows for the specific awarding of such damages. Whether invoking the Charter of Human Rights and Freedoms ¹ , the Copyright Act ² , or certain specific provisions under the heading of Lease in the Civil Code, the person claiming such damages must clearly show which text of the statute enables him or her to do so.

Another important aspect is that exemplary damages are dissuasive and repressive, the objective of which is not to compensate a sustained prejudice that can be measured, for instance, by an economic loss. A claim for exemplary damages, the amount of which does not correspond to a round figure should therefore seem suspect because amounts claimed and awarded as such generally correspond to lump sums. If the claimed amounts are significant, such as, for instance, $25,000 and more, there is no need to panic because Quebec courts do not, as a general rule, award large amounts as such. A study over the last seven years shows that 50% of amounts awarded by the courts do not exceed $2,500. Sometimes, larger amounts are awarded, like in certain defamation cases, but this is not the rule.

Also, even if the actions alleged in support of such a claim appear repugnant and seem to merit an award that is dissuasive in nature, in addition to any other award for the prejudice sustained, this does not mean that the case is in the bag. The claimant must also show that the aggressor hoped to and wanted to adversely affect his or her rights or that the aggressor could not ignore the fact that his or her actions would serve to violate the claimant’s fundamental rights, if the claim is based on the Charter of Human Rights and Freedoms.

The typical cases where such damages are awarded in Quebec are based essentially on the Charter of Human Rights and Freedoms. Exemplary damages may be awarded in cases of loss of reputation, sexual harassment, physical assault, discrimination in hiring and where the owner of a housing unit illegally enters the tenant’s dwelling, thereby violating the tenant’s right to privacy.

However, the court did not uphold a claim for exemplary damages against an insurance company on the grounds that it was not fast enough in paying its insured further to a loss. This was also the case for the non-payment of a real estate agent’s commission. Steps to appropriate a third-party contract did not give rise to any award in exemplary damages or the abusive breach of a contract for services or contract of employment.

The moral of the story: as tasteless dishes are often smothered in gravy, exaggerated sums claimed as exemplary damages usually veil claims that have no judicial merit in Quebec especially where a breach of contract is concerned, regardless of the nature of the contract. Unfortunately, certain decisions have allowed this type of award, which could lead some lawyers to bring more of these cases that are unfounded. Bear in mind however that, on numerous occasions, the Court of Appeal has ruled that these are erroneous decisions and that this practice has no basis in Quebec.

We must be able to recognize and expose cases of false exemplary damages so that this barely subtle practice of intimidation used by some people stops.

1 R.S.Q., c. C-12

2 R.S.C., c. C-42