Cap or no cap? Court of Appeal confirms damages are substantive law in interprovincial tort claims
In 2005, a bus accident occurred in Nova Scotia. The people injured in the accident were residents of Newfoundland and Labrador, which is where they sued the bus owner and driver for negligence. Nova Scotia has a legislated cap on damages for minor injuries arising from motor vehicle accidents, while Newfoundland and Labrador does not.
How does this “conflict of laws” get resolved?
That was the question before the Newfoundland and Labrador Court of Appeal (NLCA) in Hillyer v Tilley.[1] In a precedent-setting decision released last month, the NLCA determined that Nova Scotia’s legislated minor injury cap is a matter of substantive, and not procedural, law. As such, the Nova Scotia cap would apply to limit the non-pecuniary damages available to the plaintiffs in the Newfoundland and Labrador proceeding.
Nova Scotia’s minor injury cap
In 2003, Nova Scotia imposed a cap on general (non-pecuniary) damages for minor injuries. For accidents occurring before April 28, 2010 the cap is $2,500.[2] For accidents after April 28, 2010, the cap is $7,500, indexed to inflation.[3]
Because the accident in Hillyer occurred in 2005, the defendants argued that the $2,500 cap applied, to the extent any of the plaintiffs suffered “minor injuries” as defined by the Nova Scotia regime. (Liability was not actively contested.)[4]
Determining the applicable law in interprovincial tort claims
As Justice Hoegg explained in Hillyer, the case involved “a conflict of laws between two Canadian provinces, Newfoundland and Labrador and Nova Scotia.”[5] In particular, there was a conflict about whether the law of Newfoundland and Labrador, or the law of Nova Scotia, would apply to determine the amount of non-pecuniary damages available to the claimants. If Nova Scotia law applied, and the claimants were found to have suffered minor injuries, each claimant’s general damages would be capped at $2,500; if Newfoundland and Labrador law applied, there would be no such cap.
Tolofson v Jensen is the leading Supreme Court of Canada (SCC) case on determining what law applies where a wrong — like the tort of negligence — “occurs in one province but is litigated in a different province.”[6] The SCC in Tolofson distinguished between two options: the law of the place where the wrong occurred (the “lex loci delicti”), and the law of the forum where the proceeding is brought (the “lex fori”). The SCC ultimately confirmed that the substantive law governing the parties’ rights, and defining “the character and consequences of the wrong”,[7] will be the lex loci delicti, while the procedural law governing the mechanics of the litigation will be the lex fori.[8]
Minor injury cap: Substantive or procedural?
The particular issue in Hillyer was whether the calculation of non-pecuniary damages is a matter of substantive law (such that Nova Scotia law, including the cap, would apply), or procedural law (such that Newfoundland and Labrador’s law of damages would apply).
The application judge in Hillyer held that calculating non-pecuniary damages was a matter of procedural law, such that the NS damages cap did not apply to the Newfoundland and Labrador proceedings. The application judge relied on two main precedents:[9] the Ontario case of Somers v Fournier,[10] and Stevens v Head, an Australian case.[11]
The NLCA disagreed with the application judge’s analysis, finding flaws with both decisions cited. For one thing, the NLCA found that Somers did not observe the longstanding distinction between substantive and procedural law:[12]
Despite long-standing Supreme Court of Canada law and appellate jurisprudence clearly distinguishing between substantive and procedural law, the distinction has not always been observed. In particular, the Ontario Court of Appeal in Somers concluded that while the availability of non-pecuniary damages was a matter of substantive law, calculation of the amount of non-pecuniary damages was a matter of procedural law. The court justified this characterization as public policy to enable it to apply Ontario damages law so as to prevent the Ontario court from awarding substantial damages like those awarded in New York state, where the vehicle at fault was insured in the knowledge of potentially substantial damages awards. Somers is unclear as to how the calculation of injury damages pursuant to New York state law would affect policy informing Ontario or other Canadian damages law.
Moreover, the Australian case, Stevens, had actually been overruled:[13]
The Somers case also relied on the Stevens decision of the High Court of Australia. Stevens concerned a conflict of laws between two Australian states – akin in constitutional status to Canadian provinces. By a narrow margin, Stevens held that while the availability of non-pecuniary damages was substantive law, the calculation of such was a matter of procedural law. Stevens was unanimously overruled by the Australian High Court seven years later. In John Pfeiffer Property Limited v. Rogerson, [2000] HCA 36, the Court held that both the availability and calculation of the amount of damages were matters of substantive law. There is no indication that the Somers Court, or the Judge in the instant case, was aware of Pfeiffer.
Justice Hoegg also noted that Somers has been critiqued by leading conflict of laws experts.[14]
Unbound by the Somers approach, the NLCA conducted its own analysis of whether the calculation of non-pecuniary damages would be a matter of substantive or procedural law.
It was clear “that the availability of an award of damages is the manifestation of a successful plaintiff’s substantive right.”[15] The question then became “whether legislating a maximum on the extent of the substantive right to damages somehow turns determining the amount of a plaintiff’s award into a procedural exercise.”[16] The NLCA said no: procedural laws are generally geared towards “making the machinery of the forum court run smoothly,[17] and that was not an accurate description of the minor injury cap.[18]
Nova Scotia’s minor injury provisions require the court to determine causation, apply the definition of “minor injury” to the facts, and calculate the award within permissible legal limits — all substantive matters,[19] much like applying the common law limit on general damages established in Andrews v Grand & Toy Alberta Ltd.[20]
For added comfort, Justice Hoegg referenced the principle from Tolofson that, if “there is any doubt about whether a law categorized as substantive or procedural, the doubt ought to be resolved in favour of categorizing it as substantive.”[21]
Conclusion
In the result, the NLCA overturned the application judge’s decision, and held that the Nova Scotia cap would limit the damages of any plaintiffs who suffered minor injuries in the 2005 accident.
This decision breaks new ground in confirming that the calculation of damages is a matter of substantive law, including where there is a legislated cap or common law limit on non-pecuniary damages. This means that, where a tort occurs in one province and damages are at issue in a proceeding commenced in another province, the law of the province where the tort occurred should govern the damages calculation.
Stewart McKelvey is pleased to have successfully represented the appellants in this important case.
This client update is provided for general information only and does not constitute legal advice. If you have any questions about the above, please contact the authors, or a member of our Insurance Group.
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[1] Hillyer v Tilley, 2024 NLCA 35, reversing 2022 NLSC 53. This was a unanimous decision written by Justice Hoegg.
[2] Insurance Act, RSNS 1989, c 231, s 113B; Automobile Accident Minor Injury Regulations, NS Reg 94/2010, Part 1, s 5.
[3] Insurance Act, RSNS 1989, c 231, s 113E; Automobile Accident Minor Injury Regulations, NS Reg 94/2010, Part 2, s 13.
[4] Hillyer at para 4.
[5] Hillyer at para 1.
[6] Hillyer at para 18, citing Tolofson v Jensen; Lucas (Litigation Guardian of) v Gagnon, [1994] 3 SCR 1022.
[7] Hillyer at para 27.
[8] Tolofson at 1071-1073, cited in Hillyer at para 26.
[9] Hillyer at para 10.
[10] Somers v Fournier, 2002 CanLII 45001 (ONCA).
[11] Stevens v Head, [1993] HCA 19.
[12] Hillyer at para 41.
[13] Hillyer at para 42.
[14] Hillyer at para 43, citing Janet Walker, Castel and Walker: Canadian Conflict of Laws, 6th ed (2020) and Stephen G.A. Pitel & Nicholas Rafferty, Conflict of Laws, 2d ed (2016).
[15] Hillyer at para 45.
[16] Hillyer at para 45.
[17] Hillyer at para 44. See also paras 26, 40, 55 (and see Tolofson at 1071-1072).
[18] Hillyer at para 46.
[19] Hillyer at para 46.
[20] Hillyer at paras 49-50, citing e.g. Andrews v Grand & Toy Alberta Ltd., [1978] 2 SCR 229.
[21] Hillyer at para 53; see also para 27.