Indexed as: Hamilton v$.$ Open Window Bakery Ltd$.$

Neutral citation: $2004$ SCC $9.$

File No$.$: $29225.$

Hearing and judgment: November $13,2003.$

Reasons delivered: February $19,2004.$

Present: McLachlin C$.$J$.$ and Major, Bastarache, Binnie, Arbour, LeBel and Deschamps JJ$.$

on appeal from the court of appeal for ontario

Contracts $$ Repudiation $$ Damages $$ Approach to assessing damages for breach of contract with alternative modes of performance.

Costs $$ Scale $$ Variation of scale by appellate court $$ Elements required for appellate court to set aside or vary award of costs.

The parties had entered into a $36$month contract which provided for termination by the respondent: $(1)$ for cause $$without notice or other act if $...$ the $[$appellant$]$ acts in a manner $...$ detrimental to $[$the respondent$$s$]$ reputation and well being$$; or $(2)$ by the exercise of an unconditional right to terminate the contract on three months$$ notice $$effective after the commencement of the $[$contract$$s$]19$th month$.$ The respondent repudiated the contract pursuant to the first clause and later pursuant to the second. The trial judge held that the respondent had wrongfully repudiated the contract and awarded damages reflecting the payments that would have been made under the full $36$month term of the contract, less an allowance of $25$ per cent to reflect the possibility that the respondent might have validly exercised its right to terminate the contract with notice at some later time. He ordered the respondent to pay the appellant$$s costs on a party$$and$$party scale to a certain date and on a solicitor$$and$$client scale from that date forward. A majority at the Court of Appeal held that the early termination clause with three months$$ notice constituted both the minimum guaranteed benefits under the contract and the respondent$$s maximum exposure for damages. The damages award was reduced accordingly and the costs order was varied by reducing the award of costs on a solicitor$$and$$client scale to costs on a party$$and$$party scale.

Held: The appeal should be dismissed on the issue of damages and allowed only on the issue of costs.

Where a contract might be performed in several ways, the mode which is the least profitable to the plaintiff, and the least burdensome to the defendant, is adopted. The test is not how the defendant would likely have performed his or her obligations under the contract but for his or her repudiation. The non$$breaching party need not be restored to the position it would likely have been in but for the repudiation but rather to the position it would have been in had the contract been performed. A factual inquiry to determine an estimated cost of the various means of performance may be required but was not necessary here.

A costs award should be set aside on appeal only if the trial judge made an error in principle or if the costs award was plainly wrong. The trial judge$$s costs order was restored as neither condition was met here.

Cases Cited

Referred to: Cockburn v$.$ Alexander $(1848),6$ C$.$B$.791$; Park v$.$ Parsons Brown & Co$.(1989),1989$ CanLII $2801($BC CA$),39$ B$.$C$.$L$.$R$.(2$d$)107$; Aldo Ippolito & Co$.$ v$.$ Canada Packers Inc. $(1986),1986$ CanLII $2478($ON CA$),57$ O$.$R$.(2$d$)65$; Lavarack v$.$ Woods of Colchester Ltd$.,[1967]1$ Q$.$B$.278$; The $$World Navigator$,[1991]2$ Lloyd$$s Rep. $23$; Western Oil & Fuel Co$.$ v$.$ Kemp, $245$ F$\mathrm{.}2$d $633(1957)$; Stewart v$.$ Cran$$Vela Rental Co$.,510$ F$\mathrm{.}2$d $982(1975)$; Withers v$.$ General Theatre Corp., $[1933]2$ K$.$B$.536$; Young v$.$ Young, $1993$ CanLII $34($SCC$),[1993]4$ S$.$C$.$R$.3$; Duong v$.$ NN Life Insurance Co$.$ of Canada $(2001),2001$ CanLII $24151($ON CA$),141$ O$.$A$.$C$.307.$

Authors Cited

American Jurisprudence, vol. $22,2$nd ed$.$ Rochester, N$.$Y$.$: Lawyers Co$$operative Publishing Co$.,1988.$

American Law Institute. Restatement $($Second$)$ of Contracts, vol. $3.$ St$.$ Paul, Minn.: American Law Institute Publishers, $1981.$

Fleming, John G$.$ The Law of Torts, $9$th ed$.$ Sydney: LBC Information Services, $1998.$

Fridman, Gerald Henry Louis. The Law of Torts in Canada, $2$nd ed$.$ Toronto: Carswell, $2002.$

Heuston, R$.$ F$.$ V$.,$ and R$.$ A$.$ Buckley. Salmond and Heuston on the Law of Torts, $21$st ed$.$ London: Sweet & Maxwell, $1996.$

Linden, Allen M$.$ Canadian Tort Law, $7$th ed$.$ Markham, Ont.: Butterworths, $2001.$

Orkin, Mark M$.$ The Law of Costs, $2$nd ed$.$ Aurora, Ont.: Canada Law Book, $1987($loose$$leaf updated December $2003).$

Waddams, S$.$ M$.$ The Law of Damages, loose$$leaf ed$.$ Toronto: Canada Law Book, $2003.$

Williston, Samuel. A Treatise on the Law of Contracts, vol. $11,3$rd ed$.$ by Walter H$.$ E$.$ Jaeger. Mount Kisco, N$.$Y$.$: Baker, Voorhis, $1968.$

APPEAL from a juIndexed as: Hamilton v$.$ Open Window Bakery Ltd$.$

Neutral citation: $2004$ SCC $9.$

Filedgment of the Ontario Court of Appeal $(2002),2002$ CanLII $41449($ON CA$),58$ O$.$R$.(3$d$)767,211$ D$.$L$.$R$.(4$th$)443,157$ O$.$A$.$C$.222,[2002]$ O$.$J$.$ No$.1228($QL$),$ reversing a judgment of the