The Supreme Court of Canada released two judgments this week of interest to Canadian businesses and professions.

In the first, AIC Limited v. Fischer, 2013 SCC 69, the Court upheld the certification of a class action by investors against mutual fund managers, who alleged that they suffered losses when the defendants engaged in “market timing” activities.  The issue for the Court was whether a class action could be the preferable procedure, as required under s. 5(1)(d) of Ontario’s Class Proceedings Act, 1992, when the defendants had already entered into settlement agreements with the Ontario Securities Commission that paid large sums to the investors.  The Court concluded that a class action was the preferable procedure, because there was some basis in fact to believe that procedural and substantive access to justice concerns continued to remain after the settlements which a class action could address.  In doing so, the Court substantially reformulated the second branch of the preferable procedure test, which asks whether a class action would be preferable to any other reasonably available means of resolving the class members’ claims.  For a detailed review of AIC and the new preferability framework, please see this article by my colleagues Julie Parla and Timothy Chapman-Smith.

The second decision of interest this week is IBM Canada Limited v. Waterman, 2013 SCC 70.  In IBM, the Court held that pension benefits which are paid to a wrongfully dismissed employee during the legal notice period are not to be deducted from the employee’s wrongful dismissal damages.  The Court reasoned that pension benefits are a form of deferred compensation and retirement savings, and not an indemnity for wage loss due to unemployment.  As a result, the Court held they were analogous to private insurance benefits, which are also not deductible from damages awards.  While the majority’s judgment is largely focused on the “collateral benefits” principle, it also makes several important observations of interest to contract law more generally, including this statement regarding the role of reasonable expectations in measuring contractual damages:

This is not to say, however, that the approach to damages does or should ignore the underlying purposes of the substantive obligations the breach of which they seek to remedy.  If, for example, an important purpose of the law of contracts is to protect the reasonable expectations of the parties to a contract, it is appropriate to consider how well the award of damages furthers that purpose in a particular case: see, e.g., A. Swan and J. Adamski, Canadian Contract Law (3rd ed. 2012) at § 1.27. This consideration may be taken into account along with the other principles of damages law in order to ensure that there is a good “remedial fit” between the breach of obligation and the remedy. (para. 72)