The Optimum Solution: Justice Perell Urges Fairness And Restraint In Awarding Aggregate Damages

• Law Firm: McCarthy Tétrault LLP
• Subject Matter: Litigation, Mediation & Arbitration, Trials & Appeals & Compensation
• Author: Canadian Class Actions Monitor, Madeleine Brown and Alexa Jarvis
• Published date: 31 May 2023

Overview

After more than a decade of litigation, the litigants in Spina v. Shoppers Drug Mart Inc., 2023 ONSC 1086 finally have a decision on the merits. Success was divided. To the extent liability could be established, Justice Perell held that damages ought be proven by way of individual issues trials.

Spina confirms important legal principles governing aggregate damages claims. In particular, the decision is a reminder that the social utility of aggregate damages in a class proceeding does not excuse a plaintiff who seeks such an award from their obligation to demonstrate that aggregate damages are available and appropriate in the circumstances.

Before granting an award of aggregate damages, the Court must be satisfied that the defendants' monetary liability can be "fairly and reasonably" determined without proof by individual class members, and that there is a viable methodology. If the plaintiff cannot meet this burden, the appropriate means through which to quantify damages will be by individual issues trials.

Background

Spina arose from a franchise dispute between pharmacists who owned and operated Shoppers Drug Mart stores as franchisees (the "Associates") and Shoppers Drug Mart (and its parent company and affiliates, collectively "Shoppers").

The claims were based around two franchise contracts; referred to as the 2002 Associates Agreement and the 2010 Associates Agreement (collectively, the "Agreements"). Under the Agreements, Associates did not earn a salary for their work as pharmacists or managers. Rather, they shared in the profits, if any, of the store, with a guarantee of minimum earnings (even if the store was unprofitable). Shoppers incurred expenses for its role in the operation of the store's businesses and recovered some of these expenses through fees charged to the Associates. Shoppers provided equipment to the stores, which it leased to each business. The Associates were essentially managed by Shoppers, where Associates had to exclusive buy their store merchandize from Shoppers via Shoppers' centralized distribution centers.

The Associates alleged Shoppers perpetuated seven breaches of contract, breached its statutory and common law duties of good faith and fair dealing, and was unjustly enriched. The Associates sought aggregate damages for a number of their claims.

Both Shoppers and the Associates moved for summary judgment. In a 170-page decision, Justice Perell granted both motions in part, and dismissed both motions in part...