Jan 7, 2016

Gain-based Remedy in Breach of Contract - Nunavut Tunngavik Inc. v. Canada, 2014 NUCJ 31

Nunavut Tunngavik Inc. v. Canada, 2014 NUCJ 31 (CanLII)

In this 2014 case, the people of Nunavut sued due to an alleged breach of the collective agreement by a delay by the Federal government to implement an environmental monitoring program that they had contractually agreed to provide to the Inuit in exchange for the comprehensive land claim settlement that acted as the consideration for the binding agreement.

However, the main problem of valuation of the Inuit people’s collective loss arose - the more than a decade lost of potential environmental monitoring data was not readily quantifiable as an economic loss due to the nature of the environmental interest protected. The Court of Appeal had to resolve whether the plaintiff Inuit were entitled to “more than nominal damages” due to the delay of the Federal government’s monitoring program. The Court of Appeal noted at paragraph 86 that

… the covenant to establish a system of statistical monitoring is not truly commercial in nature, and there is no obvious way of measuring its value in economic terms. In the Land Claims Agreement the appellant covenants to provide a number of what might be described as “social” or “public” services, not because they have any commercial value, but because they are perceived to have inchoate social advantages. Exactly what benefit could be made of the statistical data that results from the monitoring program is difficult to predict or calculate. The benefits that accrue from the statistical data would be indirect, and would benefit the general Inuit population in ways that could not easily be measured.

The Nunavut Court of Appeal neatly summarized the major policy issues at stake in stating that

[88] The appellant received valuable consideration for the covenant to establish a system of statistical monitoring. If it could simply refuse to perform that covenant, and argue that it need not pay any damages because none could readily be established, it would potentially deprive the Inuit of many of the intended benefits of the Land Claims Agreement. In the context of a land claims treaty, insulating the contracting government from any consequences of a breach of a covenant like this is legally unacceptable. As a result, the case management judge was correct in concluding that the respondent is not limited to a claim for nominal damages. Some appropriate measure of damages must be found. The “savings” achieved by the appellant in not performing are different in character from the profits recovered in Blake, but roughly analogous to the saved expenses in Dolly Varden, and are a relevant consideration.

The majority decision of the Court of Appeal referred to Blake as an “unusual example” (89), and the dissenting judgment more thoroughly endorsed the Blake case as support for the possibility of a disgorgement remedy. The measure of damages was key here, in that the government had not made a “profit”, but had rather achieved a “savings” by not spending upon the environmental program in a situation that appears to lie between the “skimped performance” cases and the argument for disgorging the profit made by a rational economic actor simply maximizing their own value upon the resale of commercial goods.

The Court of Appeal thus ruled on the narrow issue that “the decision of the case management judge that restitutionary remedies were available for this breach of covenant discloses no reviewable error” (89). The case required a return to the trial level for a full hearing on the merits as to whether or not further damages should be awarded on this principle.