1990 S.H. No. 73433 IN THE SUPREME COURT OF NOVA SCOTIA TRIAL DIVISION BETWEEN: JAMES CLUNIE GOURLAY and EILEEN ELLEN GOURLAY and GERRY L. OSMOND and CATHY OSMOND Defendants HEARD: at Halifax, Nova Scotia, before the Honourable Mr. Justice Jamie W.S. Saunders, on June 11, 1991 (in Chambers) POST HEARING June 14, 1991 RECEIVED: DECISION: June 28, 1991 COUNSEL: R. Ritchie Wheeler, Esq. solicitor for the Plaintiffs Gerry L. Osmond and Cathy Osmond, the Defendants, representing themselves 1990 S.H. No. 73433 IN THE SUPREME COURT OF NOVA SCOTIA TRIAL DIVISION BETWEEN: JAMES CLUNIE GOURLAY and EILEEN ELLEN GOURLAY and GERRY L. OSMOND and CATHY OSMOND Defendants SAUNDERS, J.: This application involves damages claimed for mental distress following an aborted real estate transaction. The plaintiffs appeared before Mr. Justice Tidman on February 7, 1991 and obtained an Order striking out the defendants' defence and entering summary judgment against the defendants with the plaintiffs' damages to be assessed. Mr. R. Ritchie Wheeler appeared on behalf of the plaintiffs in Chambers on June 11 and after hearing his submissions and reviewing the lengthy affidavits and other documentation in the file allowed the application. first determined that all necessary requirements for service had been complied with under the C.P. Rules. allowed the plaintiffs' several claims for special damages (more particularly described, infra) but reserved on the issue of damages for mental distress until had chance to consider the authorities. asked Mr. Wheeler to file post‑hearing brief and am grateful for the very careful and thorough analysis provided in his memorandum of June 14th. Before commenting on the several heads of damage must first explain the background. Mr. and Mrs. Gourlay claim damages from Mr. and Mrs. Osmond due to the defendants' inability to complete the purchase of the plaintiffs' home on June 29, 1990. The circumstances arising both before and after the closing date are detailed in lengthy affidavit deposed to by James Gourlay on November 26, 1990, also referencing numerous exhibits appended thereto. The salient features are that an agreement of purchase and sale was entered into between the parties on April 6, 1990. The closing date was scheduled for June 29, 1990. This agreement was conditional upon the defendants' obtaining financing within twelve banking days of the date of the offer, and also conditional upon the defendants' selling their existing real property. As term of the agreement the plaintiffs were permitted to continue to list their home for sale and if they received another satisfactory offer, the defendants were permitted 12 hours to either waive the condition or the plaintiffs would be at liberty to accept the new offer. On April 18, 1990 the plaintiffs received another offer to purchase their home at sum greater than that promised by the defendants. Accordingly, notice was given to the defendants Later that day the defendants waived the conditional sale clause. The plaintiffs then considered the defendants' offer to be firm offer and accordingly, the next day April 19, 1990 Mrs. Gourlay submitted an offer to purchase condominium property. On May 4, 1990 the plaintiffs' solicitor wrote to the defendants' solicitor to confirm that Mrs. Gourlay was purchasing another property and would be moving into that other residence on the day of the closing. On June 28, 1990 the plaintiffs' solicitor was first notified by the defendants' solicitor that the defendants were having difficulties arranging financing. Later that day the plaintiffs' solicitor tendered closing documentation upon the defendants' solicitor. This documentation included an executed warranty deed. Through inadvertence the legal description of the plaintiffs' property was omitted from the deed. The plaintiffs' solicitor was advised by the defendants' solicitor on the closing date that the Osmonds had not obtained mortgage financing. Accordingly, no tender of closing proceeds was made. Mrs. Gourlay was devastated by the news. She broke down sobbing and had to be escorted to the staff room at her place of employment. She was so upset that her husband had to pick her up at noon and take her home. Mrs. Gourlay was so distraught that her husband had to physically carry her to the car. As noted earlier, Mrs. Gourlay was committed to purchase condominium property from Mr. Mark A. Johnson. Financing was all arranged. The plaintiffs' solicitor called Johnson's solicitor to advise of the potential problem with the sale of the plaintiffs' property as Mrs. Gourlay required funds from that sale in order to purchase the condominium. The domino effect was compounded because Johnson was scheduled to purchase lot of land and complete the construction of dwelling on that lot in contemplation of his sale of the condominium to Mrs. Gourlay. As well, Mr. Gourlay was the principal in company and expected to meet his payroll on June 29, 1990 from the proceeds of the sale of their home. All of these repercussions together with the anguish suffered by Mr. and Mrs. Gourlay were detailed in their lawyer's letter to the defendants' solicitor dated June 29, 1990. The plaintiffs made it clear that all of these circumstances would be included in their eventual claim for damages. On July 6, 1990 the plaintiffs and their solicitor met with Johnson and his lawyer in an attempt to salvage Mrs. Gourlay's purchase of the condominium property notwithstanding that the plaintiffs' sale had not been completed. During that meeting Johnson's solicitor served the plaintiffs with their Originating Notice (Action) and Statement of Claim whereby Johnson sued Gourlay for failure to complete. Finally, after much manoeuvering and considerable hardship Mrs. Gourlay completed her purchase of the condominium property on July 12. In order to do that, protracted negotiations led to the following arrangements: (a) She was required to quit claim her interest in their home to her husband because her employer (The Royal Bank of Canada), also the mortgagee for the condominium (Johnson) property would not allow her to be named on two mortgages on two separate properties; (b) The existing mortgage on the Gourlay residence had to be paid out; (c) Mr. Gourlay was required to remortage their home for an additional $19,650.00 in order to provide his wife with sufficient downpayment to purchase the condominium; (d) Mrs. Gourlay was required to enter into conventional mortgage for the condominium. On July 20, 1990 the plaintiffs received new offer to purchase their home from people named Chislett. The original offer was for $118,000.00 and the Gourlays countered at $120,000.00, which counter offer was accepted. However, the agreement was subject to the intended purchasers' completing an inspection, which disclosed problem with the chimney. Accordingly the purchase price was reduced to $118,500.00, and the deal closed on September 14, 1990 at that price. In the meantime the Gourlays sued the defendants on July 6, 1990. Service was effected upon the defendants' solicitor. On July 16, 1990 the Osmonds filed defence contending that the Gourlays were not in position to close on June 29 because the deed which was tendered did not contain description to the property. In September information came to the attention of the plaintiffs that the defendants were transferred with the Canadian Armed Forces and intent on relocating elsewhere in Canada. Their solicitor served series of Interrogatories upon the defendants' solicitor seeking to verify this and other particulars. These were served on September 21,1990. Later that day the defendants' solicitor filed Change of Solicitor form indicating that the defendants would henceforth represent their own interests and identifying their proper address in Borden, Ontario. Telephone inquiries between solicitors then confirmed that the defendants had sold their home in Lower Sackville on August 31, 1990 and moved to Ontario. All of this then caused the plaintiffs to serve Notice to Admit upon the defendants. This went unanswered and led to the plaintiffs' application for summary judgment in February, 1991. On the affidavit evidence before me was satisfied that the special damages claimed by Mr. and Mrs. Gourlay are entirely reasonable and fair. They are as follows: 1. Diminution of value $3,500.00 2. Property Taxes 390.48 3. Interest paid on mortgage 260.00 4. Interest paid on interim financing 1,767.04 5. Costs Interest re: Collins Grove 186.09 6. Legal Fees Disbursements 461.00 7. Title Searches 94.00 SUB‑TOTAL $6,658.61 and order these be paid by the defendants. As noted, the plaintiffs' claim damages for mental distress and they propose figure of $5,000.00. The upheaval and panic visited upon Mr. and Mrs. Gourlay by these defendants is graphically depicted in their affidavits. can do no better than quote from Mrs. Gourlay's own sentiments: "19. THAT during the afternoon of the day prior to the agreed closing date, received telephone call at work from my solicitor. He advised me that he had just received telephone call from the Osmonds' lawyer who had announced that his clients had no financing, nor had any realistic hope of financing and probably could not close the following day. was devastated. The movers were scheduled to arrive first thing the next morning. My furniture and appliances were disassembled and disconnected ready for the move. As stated, all of my possessions were in cardboard boxes. Even worse, was scheduled to complete purchase the following day, which could not close without my share of the equity from the Balsam Place property. 20. THAT was so shaken upon hearing this news from my solicitor that could not continue to work. broke down sobbing and had to be escorted to the staffroom where waited, while being tended to by another staff member, for my husband to arrive; 21. THAT my husband had to escort me home that day. was already scheduled to be off from work the following day on June 29th. Instead of completing my move as had planned, was unable to do anything but sit at home amid the cardboard boxes. did not want to unpack my possessions in the hopes that the sale of Balsam Place and the purchase of 83 Collins Grove, Unit #6 could be salvaged. My purchase of the condominium property did not complete the following day and became very depressed. could not sleep unless was tranquilized. did not eat, nor did even bother to get dressed in the morning. Friends had to tend me almost constantly. was unable to attend work the following week. Attached hereto and marked Exhibit "K" to this my Affidavit is true copy of letter from my employer advising the dates that missed from work. should note that June 29, 1990 was the day had scheduled to be off to move and June 30th, July 1st and July 2nd were the days of the Canada Day weekend; 22. THAT was so depressed bacause of the failure of the real estate transactions to close, that on June 29, 1990 attended my family doctor. He prescribed tranquilizers for me and in addition, in the following two (2) months, attended upon him for therapy. Attached hereto and marked Exhibit "L" to this my Affidavit is true copy of correspondence from my doctor; 23. THAT my stress and depression became even more heightened on July 6, 1990 when my solicitor advised me that the Johnsons were suing me. have never been sued before in my life. did not know what was going to do. had hoped that something could have been worked out with the Johnsons, however, understood that they were in the same position as me in that they had also been scheduled to purchase property on June 29, 1990; 24. THAT by July 12, 1990, was able to complete the purchase of the condominium and avoid having judgment against me. However, the purchase of the condominium was no easy matter. The purchase price of the condominium property was Eighty Thousand Dollars ($80,000.00). had already been approved for seventy‑five percent (75%) mortgage by my employer, the Royal Bank of Canada. However, still had to come up with downpayment of Twenty Thousand Dollars ($20,000.00) plus closing costs. had no money myself as had been relying on the proceeds from the sale of Balsam Place in order to complete my purchase. approached my employer in an effort to borrow the money in the interim and repay the loan once the Balsam Place property sold. However, my employer was unable to lend me interim financing for number of reasons. First, this would in effect have one hundred percent (100%) financed the purchase of the condominium. Given the market conditions at the time, there was simply no indication as to when the Balsam Place property would sell, and my employer simply could not agree to this proposal. Second, given my income and the amounts would have had to repay on the mortgage, plus interim financing, this was not an economically viable option; 25. THAT as result, had to turn to my husband for help. knew that things were very difficult for him. He is principal in publishing company in Dartmouth. was aware that in the months preceding the scheduled closing date there had been number of postal strikes which severely interrupted his business. He was under severe financial pressures and was on the brink of losing his business. He was going to use his share of the equity from the sale of Balsam Place to pay off certain business debts; 26. THAT nevertheless, my husband agreed to assist me in whatever way he could so that could complete the purchase of the condominium property. The only way that this could be done was to remortgage the Balsam Place property for higher amount and to use the excess proceeds for the downpayment on the condominium property. Unfortunately, my employer could not allow me to carry mortgage on both the Balsam Place property and the condominium. Accordingly, it was necessary to transfer title in Balsam Place to my husband alone and have him re‑mortgage Balsam Place for higher amount and higher interest rate. This was done, and as stated completed the purchase of the condominium property on July 12, 1990. However, was still suffering from stress resulting from the events of the previous two (2) weeks;" (the plaintiffs' joint affidavit deposed to May 24, 1991). There is no question but that her severe emotional stress requiring subsequent medication, medical treatment and professional therapy was causally linked to the aborted real estate transaction on June 29. Her physician, E.G. Nurse, M.D. described Mrs. Gourlay's "acute emotional breakdown" in his letter dated March 1, 1991 which reads: "March 1, 1991 RE: MRS. EILEEN GOURLAY 832 COLLINS GROVE UNIT #6 DARTMOUTH, NOVA SCOTIAB2W 4G3 TO WHOM IT MAY CONCERN: The above named is patient under my care. She has been patient of mine for many years and has always been very stable and confident individual. During the latter part of June she suffered severe emotional stress and on June 29 she was examined by myself and at that time felt that she was emotionally disabled, suffering from stress over the failed sale of the house. She required medication and was seen by myself on three separate occasions between June 29 and September 1, requiring relatively intense psychotherapy and very slow recovery period. feel this acute emotional breakdown was stimulated entirely by the failure of her home to sell and this precipitated the multitude of events that followed. If can be of further assistance, do not hesitate to let me know. Yours truly, E.G. Nurse, M.D. EGN/pb" While Mr. Gourlay's health was not affected, his inconvenience and personal sacrifice was no less exasperating. His sentiments are captured in para. 27ff. of his affidavit and quote: "27. THAT I, James Gourlay, also suffered stress as result of the Osmonds' failure to complete the transaction. am self‑employed principal in James Publications Limited, publishing company operating in Burnside Industrial Park in Dartmouth, Nova Scotia. In the sixteen (16) months prior to the scheduled closing date of June 29, 1990 there had been three (3) postal strikes. My company is very dependent on regular postal service and had been almost bankrupted by the strikes. It became necessary to lay off staff and restructure my company. The principals in the company had to divest themselves of the controlling interest. Salaries that had been paid to the principals were slashed. was required, to sell Balsam Place in order to obtain my share of the equity so could repay certain company loans and obligations that had incurred. This was made known to the Defendants by our solicitor by letter dated June 29, 1990, delivered to the Defendants' solicitor. Attached hereto and marked Exhibit "M" to this my Affidavit is true copy of that correspondence; 28. THAT as stated above, the Defendants' failure to close caused my wife significant stress and depression. This in turn had an adverse effect on me. My wife was so distraught on the afternoon preceding the closing date that had to attend her work to collect her and physically support her on the way out to the car. We did not know what we were going to do in the days following the Osmonds' failure to close. Things became much worse when our solicitor advised my wife that she was being sued by the owners of the condominium property. Although it was only my wife's name that appeared on this lawsuit, felt that was as much part of it as she was. Accordingly, in order to prevent the Judgment being taken against her, agreed to assume full title to the Balsam Place property and incur the full responsibility for higher mortgage in order to allow her to have sufficient equity to complete the purchase of the condominium. In effect, what this meant for me was that incurred further debt of approximately Twenty Thousand Dollars ($20,000.00) in order to allow my wife to purchase the condominium so as to avoid Judgment against her; 29. THAT in addition, had had an airplane flight scheduled within days of the proposed closing to attend my younger brother's wedding in Scotland. was unable to keep this flight due to the events surrounding the Defendants' failure to close. felt that had to remain home in the days following June 29, 1990, first to look after my wife, and second to see to the re‑listing of the property and to make efforts to complete the condominium purchase. The airline ticket was expensive and was not refundable on such short notice. This however was of minor concern to me compared to the disappointment for me and my family due to my inability to attend my brother's wedding. He is thy only brother and is the youngest member of our large family. He was the last to marry and therefore, there will be no future events such as wedding where the complete family gathers in one spot from all over the world. This was great source of disappointment for me. have been given framed portrait of the extended family from that wedding and am the only one missing from the picture; 30. THAT in addition, my absence caused me depression with respect to my mother. Since the scheduled closing date my mother has been diagnosed with Altzheimer's Disease. She has also suffered stroke since last summer. She is now incapable of speaking coherently on the telephone and now feel that have lost the opportunity to see my mother in state of mind where she was still functioning normally; 31. THAT in addition, we were caused further stress by the Defendants due to their apparent lack of regard for our circumstances. On August 2, 1990 our solicitor wrote the Defendants' solicitor to advise that we had received an offer to purchase the Balsam Place property and that there were series of counter offers but that final purchase price had been arrived at. Our solicitor received no reply from this correspondence. On September 4, 1990 our solicitor again wrote the Defendants' solicitor requesting reply to his letter of August 2nd and requesting possible discovery dates with respect to this matter. Again there was no reply from the defendants' solicitor. On September 20, 1990 our solicitor again wrote the Defendants' solicitor requesting replies to his correspondence and confirming telephone conversations that she had with the Defendants solicitor with interrogatories. He also confirmed the sale of the Balsam Place property. At that time he advised the Defendants' solicitor that we suspected that Mr. Osmond was going to be posted outside of the Province of Nova Scotia, and he requested confirmation. The reply to this letter from the Defendants' solicitor was letter dated September 25, 1990 simply advising that Mr. Rogers no longer represented the Defendants, and that Notice of Change of Solicitor was enclosed. This Notice stated that the Osmonds were going to represent themselves in the future and that their new address was in Borden, Ontario; 32. THAT subsequent to receiving this notice, our solicitor was advised by telephone by Mr. Rogers that the Defendants left the Province of Nova Scotia on or about August 31, 1990; 33. THAT we feel that the Defendants have been totally irresponsible with regard to this matter. They were the ones who removed the condition to our agreement of purchase and sale as early as April 18, 1990. We feel that if they did not have their financing confirmed, they ought not to have waived this condition so as to lead us to believe that the agreement was firm. This upsets us even more. considering that shortly after they waived the condition, we received another offer on Balsam Place for Two Thousand Dollars ($2,000.00) higher than the Osmonds' offer. We were unable to accept this subsequent offer because we already had an agreement with the Osmonds. Furthermore, it very much upsets us that the Osmonds waited until the afternoon prior to closing to advise us that they did not have their financing. We feel that they should have advised us much earlier so that we could have prepared for any possible contingencies. We feel that much of the stress and mental anguish caused to us subsequent to the scheduled closing date could have been avoided had we known earlier about their dishonesty with respect to financing. Finally, we feel that the failure on the part of their solicitor to respond to our solicitor's correspondence and telephone calls, and the fact that the Osmonds left the Province without advising us demonstrated that they never really had any intention of defending this matter or of honouring their commitment to us;" (affidavit deposed to May 24, 1991) The plaintiffs claim that other real estate transactions were dependent on their being able to close this purchase with Mr. and Mrs. Osmond. They were also pointedly told of the repercussions and considerable mental anguish already caused Mr. and Mrs. Gourlay in letter written to their solicitor by the Gourlay's lawyer dated June 29, 1990. What then of the plaintiffs' claim for mental distress? The law has changed and continues to evolve. At common law damages for breach of contract were traditionally limited to those related to compensation. The absolute rule was set out in Addis v. Gramophone Co. Ltd., [1909] A.C. 488 (H.L.) and Peso Silver Mines Ltd. (N.P.L.) v. Cropper (1966), 1966 CanLII 75 (SCC), 58 D.L.R. (2d) 1, [1966] S.C.R. 673 to the effect that damages for mental distress were not available in breach of contract cases because contractual damages must be tangible, estimable and compensatory. New ground was broken in Jarvis v. Swans Tours Ltd., [1973] Q.B. 233, [1973] All. E.R. 71 when Lord Denning awarded compensatory damages for "the disappointment, the distress, the upset and frustration" occasioned by ruined holiday. He dismissed the argument that because such damages were difficult to quantify they ought be declined. He recalled the principle that difficulty of assessment is no deterrent to legitimate claim. Lord Denning found that such damages were proper in breach of contract cases provided they conformed to the standard test for remoteness and foreseeability. As long as it could be said that the parties should reasonably have foreseen mental distress as consequence of their breach at the time the contract was entered into, damages for such mental suffering will be awarded. See also Cox v. Philips Industries Ltd., [1976] All. E.R. 161 (Q.B.) and Heywood v. Wellers (a firm), [1976] All. E.R. 300 (C.A.). All of these cases consider the proposition that when the parties entered their contract they considered that breach in certain circumstances would cause the plaintiff mental distress. That approach was taken by Linden, J. in Brown v. Walterloo Regional Board of Commissioners of Police (1982) 1982 CanLII 1939 (ON SC), 136 D.L.R. (3d) 49. An action was started by Brown, former chief of police claiming damages for wrongful dismissal. Linden, J. found for the plalintiff and included as damages further award of $10,000.00 for mental suffering. The Board of Police Commissioners appealed, successfully. For the purposes of this decision need only refer to certain portions of the judgment of Weatherston, J.A. writing for the Court of Appeal, and subsequent references to that decision by the Supreme Court of Canada and other courts as it relates to claim for mental distress. While allowing the appeal and striking the award for mental suffering, Weatherston, J.A. left open the door for such claim in other circumstances. In so doing, he referred to 1963 textbook on contracts (Corbin on Contracts, Volume (1963)(2d)) which in‑turn contained reference to the American Restatement. "The cases that have referred to show that there may be circumstnces where breach of contract will give rise to claim for damages for mental distress. In my opinion, the correct rule is stated in Corbin, supra, vol. 5, p. 429, citing the Restatement of the Law of Contracts, para. 341, as follows: 'There is sufficient authority to justify the statement that damages will be awarded for mental suffering caused by the wanton or reckless breach of contract to render performance of such character that the promisor had reason to know when the contract was made that breach would cause such suffering, for reasons other than pecuniary loss."( per Weatherston, J.A. at, D.L.R., pp. 735‑6) With respect, do not consider Weatherston, J.A.'s reference to Corbin, supra as imparting to the law in Canada requirement that in order for plaintiff to succeed in claim for compensatory damages for mental suffering, he must first establish that the defendant's conduct amounting to breach was "wanton or reckless". Both the trial decision and the judgment of the Court of Appeal in Brown, supra were referred to by the Supreme Court of Canada in Vorvis v. Insurance Incorporation of British Columbia (1989), 1989 CanLII 93 (SCC), 58 D.L.R. (4th) 193. The report indicates that Estey and LeDain, JJ. took no part in the judgment. In 3:2 decision McIntyre, J. (Beetz and Lamer, JJ. concurring) considered, inter alia, the appellant solicitor's claim for mental distress as result of the termination of his contract of employment. The trial judge awarded neither aggravated nor punitive damages. McIntyre, J. concisely stated the clear distinction between punitive and aggravated damages. ". Punitive damages, as the name would indicate, are designed to punish. In this, they constitute an exception to the general common law rule that damages are designed to compensate the injured, not to punish the wrongdoer. Aggravated damages will frequently cover conduct which could also be the subject to punitive damages, but the role of aggravated damages remains compensatory. Aggravated damages are awarded to compensate for aggravated damage Aggravated damages are compensatory in nature and may only be awarded for that purpose. Punitive damages, on the other hand, are punitive in nature and may only be employed in circumstnaces where the conduct giving the cause for complaint is of such nature that it merits punishment." (pp. 201‑2) Having clarified the distinction McIntyre, J. traced the law's evolution since Addis, supra and then referred to Brown, supra: This line of authority was followed by Linden, J. in Brown v. Waterloo Reginal Board of Com'rs of Police (1982), 1982 CanLII 1939 (ON SC), 136 D.L.R. (3d) 49,37 O.R. (2d) 277, 17 B.L.R. 299 (Ont. H.C.). In the Court of Appeal in that case, per Weatherston, J.A. writing for the court, 1983 CanLII 1697 (ON CA), 150 D.L.R. (3d) 729, 43 O.R. (2d) 113, 23 B.L.R. 41, the award of damages for mental distress was disallowed, but it may be said that the power of the court to award damages upon that basis in an appropriate case was implicitly accepted. find it very significant that there was no attempt by the majority to mention or adopt the "wanton or reckless breach of contract" language borrowed from the American Restatement. McIntyre, J. went on to state the ratio decidendi of the judgment: ". From the foregoing authorities, would conclude that while aggravated damages may be awarded in actions for breach of contract in appropriate cases, this is not case where they should be given. would not wish to be taken as saying that aggravated damages could never be awarded in case of wrongful dismissal, particularly where the acts complained of were also independently actionable, factor not present here. Furthermore, while the conduct complained of, that of Reid, was offensive and unjustified, any injury it may have caused the appellant cannot be said to have arisen out of the dismissal itself. The conduct complained of preceded the wrongful dismissal and therefore cannot be said to have aggravated the damage incurred as result of the dismissal. Accordingly, would refuse any claim for aggravated damages in respect of the wrongful dismissal."(emphasis mine) As punitive damages do not arise in the case before me, need not consider the Court's analysis of punitive damages in Vorvis, supra. In dissenting judgment Wilson, J. (L'Heureux‑Dube, J. concurring) disagreed with the majority's treatment of the appellant's claim for punitive damages as well as its approach to the law on mental suffering. Again, need not consider the minority's views on punitive damages. While Wilson, J. refers to the judgment of Weatherston, J.A. in Brown, supra (which in turn contained the extract from the American Restatement cited in Corbin) the Court does not adopt or even obliquely suggest its concurrence in the "wanton or reckless breach of contract" test. Wilson, J.'s preferred approach was to simply apply the twofold test of causation and foreseeability. "I agree with my colleague, McIntyre J., that in appropriate circumstances aggravated damages for mental suffering may be awarded in breach of contract cases and that they are, in distinction to punitive damages, essentially compensatory. However, take somewhat different approach from my colleague as to the test to be applied in determining whether or not to award them. The trial judge in this case applied the absolute rule The absolute rule has been whittled away by the numerous English and Canadian authorities referred to by my colleague in which damages have been awarded for mental suffering in variety of different contractual situations. It is my view, however, that what binds all these cases together, their common denominator so to speak, is the notion that the parties should reasonably have foreseen mental suffering as consequence of breach of the contract at the time the contract was entered into. (p. 212) and further: "I think the proper approach is to apply the basic principles of contract law relating to remoteness of damage. These were articulated by Baron Alderson of the Court of Exchequer Chamber in Hadley v. Baxendale (1854), Ex. 341 at pp. 354‑5, 156 E.R. 145 at p. 151, as follows: 'Now we think the proper rule in such case as the present is this: Where two parties have made contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it. Now, if the special circumstances under which the contract was actually made were communicated by the plaintiffs to the defendants, and thus known to both parties, the damages resulting from the breach of such contract, which they would reasonably contemplate, contract under these special circumstances so known and communicated. But, on the other hand, if these special circumstances were wholly unknown to the party breaking the contract, he at the most, could only supposed to have had in his contemplation the amount of injury which would arise generally, and in the great multitude of cases not affected by any special circumstances, from such breach of contract. For, had the special circumstances been known, the parties might have specially provided for the breach of contract by special terms as to the damages in that case; and of this advantage it would be very unjust to deprive them.'" Madame Justice Wilson declined to follow the majority's approach saying that it was restrictive in that it would only permit damages for mental suffering if it would constitute separate "actionable wrong". "I must respectfully disagree with my colleague's view that conduct advanced in support of claim for damages for mental suffering must constitute separate 'actionable wrong' from the breach itself."(per Wilson, J. at p. 215) With the greatest of respect do not think that's precisely what the majority held. "I would not wish to be taken as saying that aggravated damages could never be awarded in case of wrongful dismissal, particularly where the acts complained of were also independently actionable, factor not present here."(McIntyre, J. at p. 205. emphasis mine) believe that Mr. Justice McIntyre, in his use of the word "particularly" simply chose to comment upon those circumstances in some other cases where the acts complained of were, in themselves, actionable. He did not say that all claims for aggravated damages (whether to compensate for mental suffering or some other calamity) would be barred unless the impugned conduct were separately litigible. thus conclude there is no rule in Canada that in order for plaintiff to succeed in claim for damages to compensate for mental suffering following breach of contract, the plaintiff must first prove wanton or reckless breach on the part of the defendant(s). Rather, applying Vorvis, supra find this is an appropriate case to award damages to Mrs. Gourlay for the mental distress she suffered following the Osmonds' breach of contract. Her "acute emotional breakdown" was directly linked to the defendants' actions and arose out of the breach of contract itself. find it was within the reasonable contemplation of these parties when they executed their contract of purchase and sale that its breach would cause such distress. Her personal suffering may fairly be said to have arisen naturally from the defendants' breach and as well may reasonably be supposed to have been in the contemplation of both the Gourlays and the Osmonds when they signed their contract. Having agreed to buy the property, the Osmonds knew the Gourlays would be moving out and faced with the expense and significant disruption any relocation entails. And they knew more. There were special circumstances here. They were told on May 4, 1990 (7 weeks prior to closing) that the vendors were moving into another residence on the day of closing. They also knew that the plaintiffs had received another, better offer. By agreeing to waive the conditional sale clause the defendants not only signalled their intention to complete but also denied financial advantage to the vendors. The defendants failed to advise the plaintiffs of their inability to obtain financing until the eve of the closing. While the Agreement of Purchase and Sale was subject to financing, the financing was deemed to be arranged within 12 banking days of April 6, 1990. It was not until June 28, 1990 that the defendants informed the plaintiffs their financing had not been arranged. The defendants allowed the plaintiffs to rely on the expiration of the financing deadline and the removal of the condition respecting sale of the defendants' property. The plaintiffs' expectation that the deal would close was entirely reasonable and their sense of security and concomitant plan to buy condominium were fostered by the defendants' actions and expressed committments. There are obvious adverse consequences to any party who learns at the last minute that an anticipated sale will not take place. This is especially so when for period of months prior to sale, vendor has been given every indication that the purchaser intends to complete. It is interesting that in Addis, supra Lord Atkinson mentioned the three exceptions to the general common law rule that compensation for injured feelings could not be awarded in an action for breach of contract actions for breach of promise of marriage, actions taken against banker for refusing to pay customer's cheque when the bank has the customer's funds to meet it, and actions when the vendor of real estate, without fault, fails to pass title. The rationale for such exceptions were that such damages were clearly within the reasonable contemplation of the parties. One wonders why any greater relief was extended to disappointed purchaser than to as here, distressed and damaged vendor? have referred to the decisions of Nathanson, J. in Smith and Smith v. Fearon (1989), 87 N.S.R. (2d) 119 and Glube, C.J.T.D. in Blouin v. Maritime Life Assurance Company (1989), 88 N.S.R. (2d) 23 where general damages for mental suffering were refused apparently on the basis that the defendants' conduct did not amount to wanton or reckless action as referred to in Brown, supra. However, these two judgments were rendered in November and December, 1988 respectively without the benefit of the Supreme Court of Canada's reasons for judgement in Vorvis, supra delivered in May, 1989. In the so‑called "holiday cases" our courts have awarded general damages for inconvenience, distress and disappointment. See Elder et al v. Koppe (1975), 1974 CanLII 1301 (NS SC), 53 D.L.R. (3d) 705; Cameron and Cameron v. Maritime Travel (Halifax) Ltd., Skylark Holidays Ltd. and Flinn (1983), 58 N.S.R. (2d) 379. As well, in legion of employment cases, plaintiffs' claims for mental distress as result of wrongful dismissal have been allowed. McNair and Guy v. J.D. Bremner Son Limited (1983), 58 N.S.R. (2d) 222; McOine v. River Pub Ltd. and Rofhie (1987), 79 N.S.R. (2d) 379. There is no good reason in policy or logic that any greater burden be imposed upon disgruntled vendor who suffers damage as consequence of breach of contract to buy real property than upon former employee who claims aggravated damages following wrongful dismissal or an unhappy vacationer who sues to be compensated for his frustration when travel agent's breach ruins his holiday. The evidence establishing Mrs. Gourlay's mental suffering, considerable medical treatment and therapy is well documented and convincing. It is to be contrasted with the paucity of information before Morrison, J.A. when in writing for the Appeal Division in McBeth v. Governors of Dalhousie College and University (1986), 1986 CanLII 4007 (NS CA), 26 D.L.R. (4th) 321 he stated at p. 327: am unable to conclude that the trial judge committed any palpable error in his charge to the jury. My conclusion in this matter is buttressed by the fact that there is very little evidence to show that the appellant suffered any mental anxiety or that she required any treatment for such anxiety and in the absence of such evidence it would be very difficult in any event to determine damages." In Widdrington et al v. Dickinson et al (1982), 1982 CanLII 3106 (ON SC), 133 D.L.R. (3d) 472 (Ont. H.C.) the Plaintiff Vendors claimed general damages for their distress caused by the Defendant Purchasers' failure to close residential home transaction. Proceeds of sale were required by the Vendors to complete second transaction. Galligan, J. found at p. 47 that the Plaintiffs had suffered significant mental stress. He went on to state that: "I find that these Plaintiffs did suffer in that fashion and that it ought to have been and probably indeed was, within the contemplation of the Defendants that they would do so if the Defendants failed to close." Accordingly, general damages were awarded to the Plaintiffs. In Wilson et al v. Sooter Studios Ltd. (1988), 1988 CanLII 3100 (BC CA), 55 D.L.R. (4th) 303 (B.C.C.A.) the court rationalized damage awards for mental distress as "losses of non‑pecuniary benefit" which formed part of the plaintiffs' expectation and for which there should be compensation. The court affirmed the trial judge's award of $1,000.00 in addition to reimbursement of the sum previously paid by the plaintiffs. If am found to be wrong in the approach have taken and it be determined that wanton or reckless breach by defendant is prerequisite to sustain plaintiff's claim, then find that the Osmonds' conduct in this case amounts to wanton and reckless breach. Black's Law Dictionary (5th Edition) defines "wanton and reckless misconduct" as follows: "Occurs when person, with no intent to cause harm, intentionally performs an act so unreasonable and dangerous that he knows, or should know, that it is highly probable that harm will result." For the reasons already outlined, the defendants perpetuated in the minds of the plaintiffs firm commitment to buy their home. By only instructing their lawyer to disclose financing trouble on the eve of the closing they recklessly disregarded the obvious consequences and harm which would be suffered by Mr. and Mrs. Gourlay. The defendants knew or reasonably ought to have known that Mrs. Gourlay's mental suffering was a foreseeable consequence. This blatant breach and cavalier conduct was maintained by the Osmonds when they left the jurisdiction, thereby putting these plaintiffs to the considerable expense of Interrogatories, Notice to Admit and finally separate applications for summary judgment and an assessment of damages. The aborted real estate transaction affected Mr. and Mrs. Gourlay differently. Both were owners and mortgagors of the property and so each was party to the contract. While sympathize with Mr. Gourlay's frustration, particularly the anger and dismay he must have felt in having to cancel his attendance at younger brother's wedding in Scotland together with the missed opportunity to see relatives and his ailing mother, consider it beyond the realm of reasonable foreseeability to extend his claim to that extent. However, it was reasonable expectation that he would be. irritated and put to considerable bother (in terms of both time and added expense) by virtue of the defendants' breach. As in Swans Tours Limited, supra these damages are compensable and not too remote. I therefore award Mr. Gourlay $1,000.00 aggravated damages. need not repeat the suffering experienced by Mrs. Gourlay nor the extended treatment throughout the summer which her condition required. In McOnie, supra, Grant, J. awarded general damages of $6,500.00 for the plaintiff's mental distress in wrongful dismissal action. His symptoms were insomnia, withdrawal, paranoia, loss of energy, loss of confidence and loss of self‑esteem according to the psychiatrist who treated him. The plaintiff was placed on medication to return him to his normal mood level. Grant, J. was satisfied the injury suffered by the plaintiff was real and significant and had "substantially reduced the quality of his enjoyment of life". Similarly find that Mrs. Gourlay's health and enjoyment of life were significantly impaired by the defendants' breach. I award her aggravated damages for mental distress in the amount of $5,000.00, and I note this to be the same sum awarded by Galligan, J. in Widdrington, supra for the vexation, frustration, distress and anxiety caused the vendors as a result of the purchasers' failure to complete their Agreement of Purchase and Sale. In conclusion assess total damages and order judgment for the plaintiffs in the amount of $12,658.61. J. Halifax, Nova Scotia June 28 1991 1990 S.H. No. 73433 IN THE SUPREME COURT OF NOVA SCOTIA TRIAL DIVISION BETWEEN: JAMES CLUNIE GOURLAY and EILEEN ELLEN GOURLAY and GERRY L. OSMOND and CATHY OSMOND Defendants DECISION OF SAUNDERS, J.
The plaintiff vendors claimed damages for mental distress following an aborted real estate transaction. The breach of contract by the defendant purchasers had a domino effect as the plaintiffs had intended to buy a condominium and were sued by their intended vendor, who in turn was a party to a contingent real estate transaction. When the transaction fell apart, the female plaintiff broke down and needed medical treatment. For the plaintiffs and awarding aggravated damages in the amount of $1,000 to the male plaintiff for frustration/hardship and $5,000 to the female plaintiff for mental distress/follow up treatment. The court distinguished between punitive and aggravated damages and noted that the defendants' breach of contract did not have to be 'wanton or reckless' for the plaintiffs' claim in mental distress to succeed. These damages arose naturally from the breach and were foreseeable at the time the contract was executed.