Plaintiffs allowed to defer decision on head of damages

In Islip v SSI Equipment Inc (2008 wl 2612798, June 30 2008), the Superior Court of Justice of Ontario has permitted the plaintiffs by counterclaim to defer making an election as to which head of damages they wished to pursue until after judgment was rendered.

Plaintiffs in Canada can claim two alternative, mutually exclusive, heads of damages - namely:

damages (to restore the plaintiff to the position in which it would have been absent the wrongdoing); or
in trademark cases, an accounting of the defendant’s profits.

Before the Ontario Superior Court of Justice, which has jurisdiction to hear trademark cases (as does the Federal Court of Canada), bifurcation of the issues of liability and damages is unusual. Counsel need either an order from the trial judge to divide the issues or, at least, consent from the trial judge to lead a case on the issue of liability and, subsequently, put in the case on damages. The latter route is elected in the hope of facilitating settlement.

Therefore, the usual course of a trial before the Ontario Superior Court of Justice entails a full trial, including disclosure of all information during the trial to prove damages. Typically, a plaintiff elects fairly early on in the proceedings which head of damages it intends to pursue.

In the present case, the court permitted the plaintiffs by counterclaim to wait until after judgment was rendered to elect which head of damages they wished to pursue. As the court said, the plaintiffs by counterclaim:

"[pointed] out that [the court’s] findings of fact on the trial may affect the quantum of any damages awarded under both claims. [The plaintiffs by counterclaim] believe they should be allowed to await [the court’s] decision and then choose the higher of damages awarded, assuming they are successful in their claim."

In the court's view, the plaintiffs' position was supported by a 1987 Ontario Court of Appeal decision, Emco Ltd v Union Insurance Society of Canton Ltd ((1987) 58 OR (2nd) 420 (CA)), where no prejudgment election was required. The Court of Appeal held as follows:

"Where there is a breach of a fiduciary duty and a plaintiff can show evidence of its own loss and also of a fiduciary gain or profit, the plaintiff is not required to elect one remedy or the other, but should be compensated based on the higher of the two."

In the present case, the court stated as follows:

"It appears that as a practical matter and as a matter of law, the plaintiffs by counterclaim are entitled to await my decision, which will include findings of fact which may affect any damages awarded or the quantum thereof prior to making their election. I recognize the issue of trial efficiency raised by the defendant, but ultimately the rights of the plaintiff must override that concern. I would also note that, in reality, we have already heard all of the evidence through many weeks of trial on both of these heads of damages. Accordingly, the only time saving would be in cutting down on submissions and the time spent making my decision. Accordingly, I find that the plaintiffs by counterclaim may await decision prior to the selection of which of the alternative heads of damages they will seek to recover from the defendant by counterclaim, if such are so awarded by my decision."

For the purposes of trademark cases, by the end of discovery, a plaintiff would normally know which head of damages it wants to pursue and elect it. However, there may be circumstances in which such reality does not exist. That being the case, the plaintiff now appears to have a new option.

Toni Polson Ashton, Sim & McBurney, Toronto

Plaintiffs allowed to defer decision on head of damages

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