Sklar-Peppler Furniture Corp. v. George C. Sweet Agencies Ltd.

Sklar-Peppler Furniture Corp. v. George C. Sweet Agencies Ltd. Court Court of Appeal Date 1995-05-30 Citation 1995 NSCA 70 Docket CA 106484 Judge/Registrar/Adjudicator Chipman, David (Honourable Justice); Freeman, Gerald B. (Honourable Justice) (CA); Hallett, J. Doane (Honourable Justice) (CA) Document Type Decision Decision Content C.A. No. 106484 NOVA SCOTIA COURT OF APPEAL Cite as: Sklar-Peppler Furniture Corp. v. George C. Sweet Agencies Ltd., 1995 NSCA 70 Hallett, Chipman and Freeman, JJ.A. BETWEEN: SKLAR-PEPPLER FURNITURE ) Jonathan C.K. Stobie and CORPORATION, a body corporate ) Virve Sandstrom ) for the Appellant Appellant ) ) - and - ) ) Thomas P. Donovan and ) Marc J. Belliveau GEORGE C. SWEET AGENCIES LIMITED, ) for the Respondent a body corporate ) ) Respondent ) Appeal Heard: ) December 5, 1994 ) ) ) Supplementary Judgment Delivered: ) March 30th, 1995 ) THE COURT: Pre-judgment interest and costs varied per reasons for supplementary judgment of Hallett, J.A.; Chipman and Freeman, JJ.A. concurring. HALLETT, J.A.: Counsel for the parties were unable to agree on the issue of pre-judgment interest and costs. We have received their written submissions. The trial judge awarded interest on the sum of $216,000 at the rate of 5.9% per annum from the date the cause of action arose, July 20th, 1992 to the date of judgment, June 2nd, 1994. In his reasons he stated that there was no reason to depart from the approach he took in Connor v. Canada Life Assurance Co. (1992), 108 N.S.R. (2d) 361. In that case he decided that the award of interest in a wrongful dismissal suit should not be: " reduced to account for the notion that the plaintiff's wages would have been earned (and paid) over time. " He followed decisions of the Supreme Court in MacEachern v. Nova Scotia (Attorney General) (1988), 83 N.S.R. (2d) 57 and Goyer v. Castle Motors Inn Holdings Ltd. (1990), 96 N.S.R. (2d) 235, A.P.R. 29. Both of those cases involve wrongful dismissal suits in which pre-judgment interest was awarded on the total award from the date of dismissal to the date of judgment. No reasons are given for awarding interest for the whole period. In the appeal we have under consideration we concluded that the trial judge misinstructed the jury when he told them they could either assess the damages for the wrongful termination of a sales agency agreement on the basis of gross commissions or net commissions. Counsel had invited us to assess the damages rather than order a new trial if we allowed the appeal. In writing for the court I stated: " I would approach the task in this manner. As the jury decided that an 18 month notice period was required and apparently decided that average annual earnings for the five year period 1987 to 1991 inclusive was an appropriate period to determine what would be the respondent's annual loss in the period following the termination of the sales agent's relationship and as there was evidence to support these findings I would not disturb them and will apply the findings in assessing the damages. At trial the appellant called Karen Cramm, a chartered accountant and financial consultant, as its expert witness to give opinion evidence as to the respondent's loss arising out of the termination based on her review of the respondent financial statements for the five year period 1987 to 1991. She testified in direct that, in effect, the respondent suffered no loss based on certain assumptions she made with respect to the serious down turn in the Canadian furniture industry as a result of free trade with the United States which came into effect January 1st, 1990, the recession and the exchange rate on the Canadian dollar. In cross-examination she was questioned as to what Mr. George Sweet's annual benefit from the operations of the respondent agency had been over the five year period 1987 to 1991, that is, his personal benefit including both his salary and profits as opposed to the profit of the agency itself. She made the necessary calculations and concluded that his average personal benefit for that period was $63,000. Considering the long term (31 years) personal relationship between George Sweet and the appellant the proper approach to the calculation of the respondent's damages is to determine what was the personal benefit lost to George Sweet, arising out of the termination of the agency relationship by the appellant. To base the loss calculation as if it was merely a corporate loss would be to distort the reality of the relationship between George Sweet and the appellant. Therefore, applying the jury findings which I have referred to, I would calculate the loss to the respondent at $94,500 ($63,000 x 1.5 years). I would therefore vary the damage award from $216,000 to $94,500." The crux of the appellant's submission is that if the respondents are to be awarded pre-judgment interest on the $94,500 from the time the cause of action arose they would effectively be getting an amount greater than their loss. This would occur, they argue, because the jury had awarded the respondents an amount which was calculated on the basis of $12,000 gross commissions per month for an 18 month notice period. If they were awarded 5.9% interest on the total amount from July 20, 1992 the respondents would be getting interest on monies which they would not have had for the entire 18-month period had an 18-month notice of termination been given. The law is clear that the objective of pre-judgment interest is to place the respondents in the position they would have been had the breach not been committed. See this court's analysis in The Attorney General of Nova Scotia v. Cherubini Metal Works Limited, January 12, 1995 and Coughlan et al. v. Westminer Canada et al. (1994), 127 N.S.R. 2(d) 241 at p. 310. The statutory basis for awarding pre-judgement interest is found in Section 41 of the Judicature Act, R.S.N.S., 1989, c.240. It provides: " 41(i) In any proceeding for the recovery of any debt or damages, the Court shall include in the sum for which judgment is to be given interest thereon at such rate as it thinks fit for the period between the date when the cause of action arose and the date of judgment after trial or after any subsequent appeal; ... (k) the Court in its discretion may decline to award interest under clause (i) hereof or may reduce the rate of interest for the period for which it is awarded if (i) interest is payable as of right by virtue of an agreement or otherwise by law, (ii) the claimant has not during the whole of the pre-judgment period been deprived of the use of money now being awarded, or (iii) the claimant has been responsible for undue delay in the litigation." The appellant argues that pre-judgment interest should be calculated as if the damages were the same as a loss of wages in a personal injuries claim case. They cite the decision of Justice Gruchy in Skeffington v. McDonough and Vanamburg (1992), 114 N.S.R. (2d) 181 at p. 183 where he held that in such a case: " An award for loss of income as a figure which has accrued over a given period of time. The total loss obviously did not occur as at the date of accident. The loss may not have accrued evenly throughout the period due to changing rates of pay and perhaps other factors. Those other factors are reflected in the calculation of the amount of the reduction for contingencies. There are two methods readily available to reflect the accrual of the loss. The first is simply to assume the loss occurred at a point in time half way during any period under consideration and then calculate the loss at the appropriate rate from that point of time. The second, amounting to the same thing, is to calculate the interest for that period at one-half the rate." The appellant's argument is supported by the decision of Justice Richard in Hillis Oil and Sales Ltd. v. Wynn's Canada Ltd. (1982), 53 N.S.R. (2d) 421, a case in which an agency was wrongfully terminated where Justice Richard, in dealing with pre-judgment interest, stated: " I now turn to the question of pre-judgment interest. I fix the rate at 15% per annum which seems to be the most frequently used rate for the period with which this case is concerned. The cause of action arose on the date of the breach by Wynns - February 11, 1980. However, the assessed damages accrued during the subsequent 12 month period it would therefore be inequitable to allow interest on the entire amount from February 11, 1980. Assuming the profits would have accrued to Hillis at a consistent rate throughout the notice period then pre-judgment interest ought to be calculated on the median profit figure. In order to compensate for this I fix the starting date for pre-judgment interest at August 11, 1980." (emphasis added) Justice Richard's decision was appealed to this court and reversed and then appealed to the Supreme Court of Canada which restored the trial judge's decision. The pre-judgment interest issue was not specifically addressed on appeal. Like the Hillis Oil and Sales case, supra, the case we have under consideration is not a wrongful dismissal suit but a breach of contract. However, the measure of damages is tied into what would be a reasonable notice period for termination of the agency and, therefore, resembles a wrongful dismissal suit. It is clear that in this case the jury award was based on what advanced notice of termination the appellant should have given to Mr. Sweet if it intended to terminate the agency relationship. The income Mr. Sweet would have acquired had a proper notice of termination been given would have come into his hands over the 18-month period had he been given advance notice that the agency would be terminated in 18 months. There is some attraction to the argument that the pre-judgment interest reflect this fact. However, on analysis I reject it. A damage award for termination without notice is calculated on what would have been reasonable notice for termination. The appellant apparently decided to terminate the agency without any notice and without payment. In order to terminate without notice the appellant would have been required to pay an amount of money that was equivalent to the income respondents would have earned over the reasonable notice period. The appellant would have been required to pay this sum up front, that is, as of the date of termination of the agency. Therefore, the respondent would have had the money represented by the award as of the wrongful termination date; the date the cause of action arose. In my opinion the calculation of pre-judgment interest in this case should not be treated in the same manner as a loss of wage claim in a personal injuries case. The fact that there has been a termination of the business relationship without notice and without payment in lieu of notice distinguishes these cases from the calculation of pre-judgment interest in loss of wage claims that arise in personal injuries cases where the employment of the injured party would have continued but for the injuries suffered. In the latter the wages lost would not have come into the hands of the plaintiff other than over the period the plaintiff was unable to work whereas in a wrongful dismissal suit or a wrongful termination of agency suit without notice the money would have to have been paid at the time of termination. Furthermore, such a result is consistent with the language of s. 41(i) of the Judicature Act and does not really fit into the provisions of s. 41(k). Finally the result is consistent with the practice of the Supreme Court in awarding pre-judgment interest in cases of this nature. In this case the respondent was entitled to be paid up front where the agency was terminated without notice. Therefore, I would not interfere with the trial judge's exercise of discretion to award interest at 5.9% from July 20th, 1990, to the date of judgment. However the pre-judgment award of interest must be adjusted to take into account the reduction in the amount of damages. Rule 63.08 provides: " The costs of an appeal and of the proceeding in the court below shall be as directed by the judgment of the Appeal Division, or in default of direction shall be in accordance with the applicable provisions of Tariffs." I would vary the award of interest by awarding pre-judgment interest calculated as follows: (i) from July 20th, 1992 to March 21st, 1995 at 5.9% on the sum of $94,500; and (ii) the foregoing interest payment is to be adjusted to take into account amounts paid by the appellant on the judgment to date and the date of those payments. Costs The respondent succeeded at trial and was awarded costs of $10,855 based on Scale 3 with disbursements to be taxed and on an "amount involved" of $216,000. As the proper damage award at trial ought to have been $94,500 the award of costs must therefore be reduced to $7,100 plus disbursements to be taxed. The appellant was substantially successful on the appeal in that the award was reduced from $216,000 to $94,500. The appellant ought to have its costs on the appeal of 40% of $7,100 ($2,840) plus disbursements to be taxed. Hallett, J.A. Concurred in: Chipman, J.A. Freeman, J.A. C.A. No.106484 NOVA SCOTIA COURT OF APPEAL BETWEEN: SKLAR-PEPPLER FURNITURE ) CORPORATION, a body corporate ) ) Appellant ) - and - ) REASONS FOR ) SUPPLEMENTARY ) JUDGMENT BY: GEORGE C. SWEET AGENCIES ) LIMITED, a body corporate ) HALLETT, J.A. ) Respondent ) ) ) ) ) ) )