Considering the Damages Based on Bhasin

The fundamental Bhasin duty is reviewed above.

In Bhasin itself, the court noted that a breach of the duty of honest contract performance leads to a claim for damages based on the traditional contract assessment of that which is reasonably likely. ¹ The trial judge in Bhasin did not apply this approach to her damage assessment, given tort findings.  The factual findings at trial were used by the Supreme Court to make this determination.

The principle used by the Supreme Court in this process was to look to find what the plaintiff’s economic position would have been, had the defendant be honest with him. The Court then assessed the damage claim based on the view that Bhasin would have been able to retain the value of his business, and not given to Hyrnew. That sum was set at $87,000:

  I have concluded that Can-Am’s breach of contract consisted of its failure to be honest with Mr. Bhasin about its contractual performance and, in particular, with respect to its settled intentions with respect to renewal. It is therefore liable for damages calculated on the basis of what Mr. Bhasin’s economic position would have been had Can-Am fulfilled that duty.

This view was also followed in Callow, to allow Callow to be in the same position, had the duty to him been performed fairly. ² These damages are then based on the basis of reasonable expectation. ³

This is distinct from the measurement of damages in tort, which is assessed by the reliance interest. This view requires the court to consider the sum required to place the plaintiff into the position which would have followed, had the tort not been committed. ⁴

This being said, there are situations in which the contract approach presents issues which make it difficult to prove the damage loss. The plaintiff may then elect to have the damages assessed by reliance interest. ⁵

This submission is based upon the plaintiff has somehow altered their position in the expectation that the contract would be performed, often referenced as “wasted expenditures”. Reliance damages cannot exceed the measurement of damages based on normal contract principles.

The default setting for the damage assessment based on Bhasin is one premised on the normal contract principle of that which is reasonably likely.  ⁶ In Callow, it was shown at trial that the plaintiff had opportunities to bid on other winter maintenance contracts but he chose not to pursue these contracts as he was not aware of his true status. This became the basis of the damage assessment used by the Supreme Court. The sum of lost profit was set at $64,000. The Court also allowed the sum of $14,000 which was the expense of leased equipment which the plaintiff had incurred, in reliance upon the contract with the defendant. The words “reliance interest” were not used by this is the apparent ratio:

I see no issue of double recovery in this case. The trial judge awarded the $64,306.96 as lost profit, not lost revenue. This is appropriate because Callow was not actually hired for the other contract on which it did not bid and therefore did not necessarily have to undertake all the expenses that would have been required to fulfill that contract. However, as Callow had already committed to this expense, the lease of the machinery, it too should be compensated for along with the lost profit. The trial judge was entitled to decide this point as she did, having the advantage of measuring losses first hand. I see no reviewable error in the trial judge’s approach on this issue.

This was an expensive obligation put to the defendant. It went from a 10 day termination clause, to which no discrete arguments were made as to its enforceability, to a successful claim for $78,000.