Supreme Court of Canada
Industrial Teletype Electronics Corp. et al. v. City of Montreal, [1977] 1 S.C.R. 629
Date: 1975-10-07
Industrial Teletype Electronics Corporation
and
International Teletype Corporation Appellants;
and
City of Montreal Respondent.
1975: February 20 and 21; 1975: October 7.
Present: Judson, Spence, Pigeon, Dickson and Beetz JJ.
ON APPEAL FROM THE COURT OF APPEAL FOR QUEBEC
Damages—Quantum —Offer of damaged goods—Obligation to mitigate damages—Appeal —Contradictions in plaintiffs’ evidence—Obligation of trial judge to explain his conclusions.
Appellants stored electronic equipment parts, some teletype machines and several thousand teletype replacement parts in the basement of a building occupied by them in the City of Montreal. The replacement parts were sold as new parts. Water caused damage to part of the equipment following a flood in the basement. The Superior Court found respondent liable for the flood and ordered it to pay the full amount of the claim, that is $75,818.77. The Court of Appeal upheld the City’s liability but reduced the amount of damages to $28,510.83. Since respondent no longer denies its liability, the only point at issue in this Court is the reduction of the amount of damages by the Court of Appeal.
Held: The appeal should be dismissed.
Although it is well established that an appellate court should not intervene to vary the amount of damages awarded by the lower court save in exceptional circumstances, it must be noted that most cases referring to this rule concerned the liquidation of damages resulting from bodily injury, incapacity or loss of support. Such damages are usually more difficult to assess than those which may have been caused to personal effects or merchandise. On the other hand, when this Court finds intervention by the Court of Appeal to be justified, it generally does not review the latter’s assessment of the damages.
Moreover, “in order for the Court to give the findings of the trial judge their proper weight, he must be sufficiently explicit”. In the case at bar the lack of comment on the particular and important circumstances
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raised by the evidence justified the Court of Appeal in doubting whether the trial judge had fully assessed the evidence, and in proceeding to review it. These circumstances are the major contradictions in the record and appear largely in plaintiffs’ evidence. Thus, according to a defence expert the damages could have been substantially reduced by a simple operation after the flood. The offer made by appellants to give the damaged parts to the city surely cannot exempt them from mitigating their damages: if these increased after the flood because of appellants’ negligence, the claim could be reduced by the same extent. Given that the Court of Appeal had to review the evidence, it correctly made a complete review and there are no grounds to increase the damages which it set.
Finally, although it is not necessary for this Court to rule on the point of law raised by the offer of the damaged goods made to respondent by appellants, it should be noted that that would be equivalent to treating the party responsible for the damages as an insurer, and in so far as the trial judge may have treated respondent in this way, he erred in law. The Court of Appeal would have had an additional reason to intervene.
Dorval v. Bouvier, [1968] S.C.R. 288; Nance v. British Columbia Railway Company Ltd., [1951] A.C. 601; Fagnan v. Ure et al., [1958] S.C.R. 377; Gorman v. Hertz Drive Yourself Stations of Ontario Ltd. et al., [1966] S.C.R. 13; Watt v. Smith, [1968] S.C.R. 177; Alexandrof v. The Queen et al., [1970] S.C.R. 770; Lang et al. v. Pollard, [1957] S.C.R. 858; Hossack et al. v. Hertz Drive Yourself Stations of Ontario Ltd., [1966] S.C.R. 28; Martin Cable Stannard et al. v. Kidner, [1973] S.C.R. 493; Maryland Casualty v. Roy Fourrures Inc., [1974] S.C.R. 52; Alva Fashions Inc. v. Schwartz, [1962] C.S. 348; Belleza v. Cie des Autocars Blideens et al., Gaz. Pal. 1960.1.111, referred to.
APPEAL from a decision of the Court of Appeal, reducing the amount of damages awarded by the Superior Court. Appeal dismissed with costs.
Judah L. Wolofsky, for the appellants.
Neuville Lacroix and Jean Badeaux, Q.C., for the respondent.
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The judgment of the Court was delivered by
BEETZ J.—Appellants stored electronic equipment parts, some teletype machines and several thousand teletype replacement parts in the basement of a building occupied by them in the City of Montreal. They had purchased these stocks of replacement parts in the United States and Canada, and they resold them as new parts.
On March 31, 1968 the basement was flooded. The water caused damage to equipment belonging to appellants, and they brought an action against the City of Montreal, claiming $75,818.77 in damages. Puddicombe J. of the Superior Court found the City liable for the flood and ordered it to pay the full amount of the claim. The City’s appeal related to liability and to the quantum of damages. The Court of Appeal upheld the decision of the Superior Court on the question of liability, but reduced the amount of damages to $28,510.83. Appellants are asking this Court to reinstate the judgment of the Superior Court. The City no longer denies its liability. It therefore only remains to decide whether the Court of Appeal was justified in intervening to reduce the amount of damages awarded to appellants by the Superior Court.
A number of decisions of this Court have dealt with the practice regarding the intervention of an appellate court in matters which primarily come within the competency of the trial court, such as the credibility of witnesses, the findings of facts and the liquidation of damages. Those decisions have been reviewed more than once in recent years. There is no need to go over them again; a few examples will suffice. The general principles underlying the practice were stated by Fauteux J., as he then was, in Dorval v. Bouvier:
[TRANSLATION] By reason of the privileged position of the judge presiding at the hearing, who sees and hears the parties and the witnesses and appraises their behaviour, it is well established that his opinion must be treated with the greatest respect by the Court of Appeal, whose duty is not to re-try the case or to intervene in
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order to substitute its own view of the evidence for that of the trial judge, unless a manifest error appears in the reasons or in the conclusions under appeal. However, as Brossard J. noted after citing the remarks of Casey J. in Gagnon v. Gauthier, [1958] Que. Q.B. 401, these reasons must be in sufficiently clear terms to allow a court of appeal to evaluate them from a legal point of view. Moreover, if the reasons are not of this kind, or if they are but they are not valid, the Court must of necessity intervene, proceed to review the record, and form its own opinion on the evidence in the record (at pp. 293, 294).
More specifically, on the question of liquidation of damages, Viscount Simon set forth the following rule in Nance v. British Columbia Railway Company Ltd., at p. 613:
Whether the assessment of damages be by a judge or a jury, the appellate court is not justified in substituting a figure of its own for that awarded below simply because it would have awarded a different figure if it had tried the case at first instance. Even if the tribunal of first instance was a judge sitting alone, then, before the appellate court can properly intervene, it must be satisfied either that the judge, in assessing the damages, applied a wrong principle of law (as by taking into account some irrelevant factor or leaving out of account some relevant one); or, short of this, that the amount awarded is either so inordinately low or so inordinately high that it must be a wholly erroneous estimate of the damage.
This rule has been referred to and adopted by this Court in several cases, notably Fagnan v. Ure et al., and Gorman v. Hertz Drive Yourself Stations of Ontario Ltd. et al. In Fagnan v. Ure et al., Cartwright J., as he then was, makes the following observation:
The amount to be awarded in cases of fatal accident is not susceptible of precise arithmetical calculation, and, generally speaking, the Court of Appeal will not vary the assessment made by the trial judge unless it appears that it had been arrived at on a wrong principle, or in disregard of some element that should have been taken into account, or under a misapprehension as to some
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feature of the evidence, or that it is so much too high or too low as to bear no reasonable proportion to the loss suffered (at pp. 383, 384).
I believe this is the same rule which was applied by this Court in Watt v. Smith, and in Alexandrof v. The Queen et al.. However, it must be noted that most of these cases concerned liquidation of damages resulting from bodily injury, incapacity, loss of enjoyment of life or loss of support. Such damages are usually more difficult to assess accurately than those which may have been caused to personal effects or merchandise.
On the other hand, when this Court finds intervention by the Court of Appeal to be justified, it generally does not review the latter’s assessment of the damages: Lang et al. v. Pollard; Hossack et al. v. Hertz Drive Yourself Stations of Ontario Ltd.; Martin Cable Stannard et al. v. Kidner.
In the case at bar, appellants claim the following amounts from the City:
| 1—miscellaneous damages (machinery, equipment, accessories and overtime work): |
$ 5,113.00 |
| 2—replacement cost of 30,922 damaged teletype equipment parts: |
66,080.16 |
| 3—repackaging of these parts: |
4,625.61 |
| Total: |
$ 75,818.77 |
The president of appellant corporations submitted a list, with serial numbers, of the teletype parts which he claimed were damaged by the flood. In his opinion, it suffices that the parts were even slightly touched by water, to make it impossible to resell them as if they were new. He regards them as being a total loss, and is claiming the replacement value according to prices in the catalogue of the Teletype Corporation of America, plus fifty percent to cover certain costs such as custom
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duties and transportation. In paragraph two of their declaration, appellants offered the City all of the damaged teletype parts for which they claim the replacement cost.
The Superior Court gives in considerable detail the reasons for its ruling on the City’s liability. However, although the greater part of the evidence and the record was devoted to damages, the trial judge disposes of them rather summarily. His reasons deal with this entire question in a single paragraph of his judgment, the second to last:
Having fixed the responsibility for the damage to plaintiffs’ goods and machinery on the defendant the question of quantum remains. The proof shows that goods and machinery in question were for resale. Plaintiffs have not asked for speculative damages, i.e. for an amount equivalent to the difference between the cost price to them and what they expected to receive on resale; their claim is simply for the replacement at cost price to them as evidenced by catalogued prices. In the Court’s opinion the amount as claimed has been fully established representing the damages to them.
The trial judge says absolutely nothing about the extent of the loss sustained, which must be determined before compensation is liquidated by fixing the quantum of damages. Neither does he question whether all of the damage results from the fault of the City despite the fact that on these points the record contains major contradictions which, moreover, appear largely in plaintiffs’ evidence.
Plaintiff appellants called an engineer and a technician who, for several days after the flooding, in the presence of the president of appellant corporations, examined the damaged equipment to control the inventory and to evaluate the damage. To begin with, these witnesses contradict plaintiff on the very inventory of the damaged parts. The list of parts subject to their inspection is shorter than the list produced by the president of appellant corporations; the difference, expressed in the replacement value computed as plaintiff suggests, is $11,696.71. Counsel for the appellants contends that these two witnesses did not count each part. This is quite true for purposes of the assessment
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they made of the extent of damage since in this case they proceeded by taking random samples. However, for the inventory they were able to count by lots and state whether lots were missing, for the loss of which a claim was filed.
Moreover, the testimony and report of these two witnesses for the plaintiff revealed that a significant number of parts appearing in both inventories, and for which indemnity is being claimed, were not actually damaged. According to their computation, accomplished by way of random sampling, the replacement value of the parts actually damaged, computed according to the catalogue prices plus fifty percent, is $23,846.45.
Finally, according to a defence expert the damages could have been substantially reduced and some new parts still considered as such after the flood, had a cleaning and drying operation that was simple and inexpensive been diligently carried out. The parts exposed to water remained at the risk of appellants who continued to have custody and ownership of them. If this expert’s opinion is accurate, surely the offer made by appellants cannot exempt them from mitigating their damages, as would a reasonable man. Indeed, to allow a plaintiff to rid himself of this obligation by means of such an offer, and allow him the replacement value of the merchandise, would be equivalent to treating as an insurer the perpetrator of the damage. I do not believe that this is the state of our law. This aspect of the case is obviously such as, to affect the quantum of the damages, but it goes beyond the question of quantum; it concerns the causal relationship between the fault of the City and the loss sustained by appellants. Thus, the claim of the latter could be reduced to the extent that their own negligence after the flood contributed to increase the damage.
Such particular and important circumstances necessarily called for an explanation:
“In order for the court to give the findings of the trial judge their proper weight, he must be sufficiently explic-
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it”. (Pigeon J. in Maryland Casualty v. Roy Fourrures Inc., at p. 55).
The lack of comment on these circumstances by the trial judge suggests that he did not fully assess all the evidence submitted to him, and in my opinion this justified the Court of Appeal in proceeding to review the evidence. Since it had to make a review, there was no reason why it should not make a complete one, as it did.
The Court of Appeal based itself on the testimony of the engineer and the technician produced by plaintiff in reducing the larger part of the claim, the replacement cost of the teletype parts, from $66,080.16 to $23,846.45. This was the only other evidence on this point included in the record, which contained no information on the purchase price of these parts, and provided no basis for establishing appellants’ loss of profit.
As regards the first part of the claim ($5,113 for miscellaneous damages), it included a claim for $1,000 for greasing and packing teletypes and teletype parts not immersed in the water but affected by the humidity. The Court of Appeal disallowed this claim because the president of appellant corporations had, on this matter, confined himself “to the most banal generalities” and had not been able “to provide any precise details in support of his claim”. I do not see any manifest error in this opinion.
Finally, the Court of Appeal reduced the third part of the claim, the costs of packing the teletype parts, from $4,625.61 to $551.38. I would not necessarily have arrived at this exact amount if I had had to rule in the first place, but that is not a reason for intervention by this Court. The two witnesses for plaintiff, whose opinion was upheld by the Court of Appeal, had already allowed one third of the replacement value merely for the fact that the containers were opened, though the contents were not damaged.
Moreover, the Court of Appeal, while referring to the fact that the consequences of the flood could
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have been avoided in several cases by carrying out a drying and cleaning operation, deducted nothing from the damages claimed by appellants for this reason.
In short, I consider there is no reason for increasing the damages fixed by the Court of Appeal.
There is one matter which raises a point of law, and which appears in the exhibits, in the judgment of the Superior Court, in that of the Court of Appeal and in the briefs submitted to this Court by counsel. This is the offer of the damaged goods made by appellants to the City. It is not necessary to rule on the matter but it calls for certain observations. Puddicombe J. made a note of this offer:
The said goods were tendered to defendant and in consequence plaintiffs claim damages of $72,393.16. (Actually the damages, according to the Plaintiffs’ proof, amounted to $75,818.77).
By motion plaintiffs ask to amend their declaration by increasing the amount claimed to the said sum. The said motion is granted.
By granting appellants the full amount of their claim with scarcely any explanation, did not the trial judge think himself justified by the fact of this offer? Did he not give effect to it as requested by appellants although he did not order that the damaged parts be returned to the City? This offer was not intended to extinguish a debt but rather to maximize the victims’ claim for damages by likening their loss to a total loss, and relieving them of the damaged goods, which even before the controversy was settled was put at the City’s risk.
In an earlier judgment, Alva Fashions Inc. v. Schwartz, while the issue concerned a lease and contractual liability for damage to goods caused by water leaking from a defective roof, the same judge, after citing Mazeaud and Tunc on the
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theory of “laissé pour compte” (returned article), made the following observations:
In the opinion of the Court it would not be sound to formulate the rule that in all cases of damages the victim should have the right to tender them—(the damaged goods)—to the responsible party, demanding their value and leaving it to the latter to recover any value remaining.
For example, it would appear absurd to permit such tender in, for instance, a case where the thing damaged was deteriorated to, say, an amount only of five percent.
If this reasoning is well founded it would seem to follow that the right to tender damaged goods to the responsible party, demanding their full value in replacement, could only be opted in the case of total loss, or at least, to borrow an admiralty phrase, constructive total loss. (at pp. 350, 351).
In France, to ensure full compensation to the victim for losses suffered under certain circumstances, while preventing his obtaining additional benefit as compared to his earlier situation, the courts have relied in delictual and quasi-delictual proceedings on what is also known as the “returned article” theory: Belleza v. Cie des Autocars Blideens et al.. A car had been wrecked in a highway accident and the owner had claimed its market value. The Court of Appeal had deducted from the market value the value of the wreck returned to the victim. The decision of the Court of Appeal was quashed on the grounds, inter alia:
…that the victim of the damage who is entitled to full compensation for his loss, does not have to risk selling the wreck which, subject to the parties’ agreement on this point, must be “returned” to the person responsible. (at p. 112).
Be that as it may with that theory, it was not, to my knowledge, taken so far as to give the victim the choice of offering the wreck to the party whose liability is alleged. Otherwise the result would essentially be abandonment, which is possible in marine insurance proceedings in a case of total constructive loss. Puddicombe J. had emphasized this analogy in Alva Fashions Inc. v. Schwartz.
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Considerable theoretical and practical difficulties appear to stand in the way of this result. For example, in insurance proceedings generally, the obligation is certain though the damage resulting from non-performance is not always liquidated; on the other hand, in delictual and quasi-delictual proceedings the very cause of the debt, the liability, is usually disputed in addition to the quantum. Can the party whose liability is alleged accept the wreck before judgment without admitting liability? If he refuses to do so, can this be held against him? What happens if liability is shared and if there is more than one wreck? Would the offer of the wreck affect the victim’s obligation to minimize the damage?
Furthermore, even Belleza refers to another difficulty which it does not resolve: What principle enables the courts to transfer ownership of the wreck to the party responsible for the delict or quasi-delict, if he does not want it?
In marine insurance proceedings, the Civil Code resolves a number of difficulties of this sort in arts. 2647 and 2663 to 2675, which deal with total constructive loss and abandonment. However, it is significant that these provisions govern relations between the insurer and the insured, and not, for example, the damaged that may result in the liability of owners of two vessels that have collided.
In so far as the trial judge may have treated the City as the insurer of appellants, in my opinion he erred in law, and this would have justified the intervention of the Court of Appeal. This, however, is an additional reason which, once again, it is not necessary to rule upon.
I would dismiss the appeal with costs.
Appeal dismissed with costs.
Solicitor for the appellants: Judah L. Wolofsky, Montreal.
Solicitors for the respondent: Côté, Péloquin & Bouchard, Montreal.
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