COURT OF APPEAL FOR ONTARIO

CITATION: TMS Lighting Ltd. v. KJS Transport Inc., 2014 ONCA 1

DATE: 20140102

DOCKET: C56285

Cronk, Blair and Strathy JJ.A.

BETWEEN

TMS Lighting Ltd. and Bahra Holdings Inc.

Plaintiffs

(Respondents in Appeal)

and

KJS Transport Inc., Kulwant Singh and 1707416 Ontario Inc.

Defendants

(Appellants)

Thomas Slade and Jonathan Melo, for the appellants

Salvatore Mannella, for the respondents

Heard: September 3, 2013

On appeal from the judgment of Justice David Price of the Superior Court of Justice, dated October 17, 2012, with reasons reported at 2012 ONSC 5907.

Cronk J.A.:

I. Introduction

[1] This action arose from a dispute between neighbouring commercial businesses located in an industrial area of Brampton, Ontario. For approximately five years, airborne dust generated by the appellants’ trucking operations persistently disrupted the respondents’ conduct of their lighting manufacturing business. As a result, the respondents sued the appellants in nuisance and trespass, seeking compensation for various losses, including for an alleged loss of productivity in their business occasioned by the dust.

[2] The trial judge held the corporate appellants liable to the respondents in both nuisance and trespass. He awarded damages to the respondents for loss of productivity and the costs of refinishing various lighting fixtures to repair damage caused by the dust, among other matters. He held the individual appellant liable for the awarded trespass damages.

[3] There are two main issues on appeal: (1) whether the trial judge erred in his nuisance analysis by finding that the appellants’ interference with the respondents’ use and enjoyment of their lands was unreasonable in the circumstances; and (2) whether the trial judge further erred by awarding the respondents damages for lost productivity in their manufacturing operations, occasioned by the appellants’ unreasonable interference with and trespass on the respondents’ lands.

II. Background Facts

[4] The appellant, KJS Transport Inc. (“KJS”), operates a long-haul transport trucking business. It maintains its own fleet of transport trucks and trailers. The individual appellant, Kulwant Singh, is a director and shareholder of KJS and the appellant, 1707416 Ontario Inc. (“170 Inc.”). He manages KJS’s transport trucking business.

[5] The respondent, TMS Lighting Ltd. (“TMS”), is a manufacturer of high-end commercial and retail lighting fixtures. It operates its business on lands owned by the respondent, Bahra Holdings Inc. (“Bahra”), an affiliated corporation, in an industrial park in Brampton.

[6] In late August 2006, 170 Inc. purchased the lands immediately adjacent to those occupied by TMS. The lands included an unpaved parking lot, with a sand and gravel surface. Shortly after the purchase, KJS began to operate its trucking business on the property.

[7] In the spring of 2007, airborne dust generated by the movement of KJS trucks on 170 Inc.’s unpaved parking lot began to interfere with TMS’s manufacturing operations. TMS maintained that the interference was substantial. It also complained that KJS trucks encroached on its premises when entering KJS’s driveway or turning to back into KJS’s loading bays. In so doing, the trucks struck and displaced a series of concrete barrier stones that TMS had erected to prevent trespass to its premises.

[8] When the appellants failed to remedy the dust problems, TMS sued KJS and Singh in trespass and nuisance, claiming special damages in the amount of $50,000 and aggravated damages in a like amount. It later twice amended its statement of claim: (1) to add 170 Inc. as a defendant and Bahra as a plaintiff; (2) to claim injunctive relief; and (3) to increase the quantum of the damages claimed for trespass and nuisance to the amount of $650,000, plus aggravated damages in the sum of $50,000.

[9] The action was tried in January 2012. The trial judge held that the appellants’ interference with the respondents’ use and enjoyment of their lands was substantial and unreasonable. He ruled that the corporate appellants were liable to the respondents for damages in the amount of $281,112.50 for nuisance ($278,687.50 for loss of productivity and $2,425 for the costs of refinishing various lighting fixtures), plus the sum of $29,310 for trespass on the respondents’ property ($23,400 for loss of productivity and $5,910 for the costs of replacing barrier stones). The trial judge also held Mr. Singh personally liable for the awarded trespass damages. In addition, he granted a permanent injunction to enjoin the appellants from further trespassing on 170 Inc.’s property.

[10] The appellants appeal from the trial judge’s finding that their interference with the respondents’ lands was unreasonable and, consequently, from his holding that they are liable to the respondents for nuisance. They also appeal from his awards of damages for loss of productivity, in both nuisance and trespass, and refinishing costs. They do not challenge his liability holding in trespass, the other components of his damages awards, or the injunctive relief granted by him.

III. Issues

[11] I would frame the issues on appeal as follows:

(1) Did the trial judge err in his nuisance analysis by finding that the appellants’ interference with the respondents’ use and enjoyment of their lands was unreasonable?

(2) Did the trial judge err in his damages assessment:

(a) by failing to consider whether the respondents established lost productivity damages at trial, as distinct from proving how such damages could be quantified;

(b) by adopting a method for quantifying lost productivity damages that was neither supported by the evidence nor advanced by the parties;

(c) by failing to discount TMS’s lost productivity damages to take account of the seasonal and intermittent nature of the dust problems caused by the appellants;

(d) by impermissibly relieving the respondents of their burden to prove lost productivity damages, as pleaded; and

(e) by failing to award only nominal damages, if any, for the loss of productivity in TMS’s manufacturing operations caused by the appellants’ nuisance and trespass?

IV. Analysis

(1) Liability in Nuisance

[12] The appellants argue that the trial judge erred in his nuisance analysis by failing to assign appropriate “weight, impact and effect” to the alleged abnormal sensitivity of TMS’s manufacturing operations to damage from dust. The appellants say, in effect, that this error fatally taints the trial judge’s finding that the appellants’ interference with the respondents’ use and enjoyment of their lands was unreasonable in the circumstances. I disagree.

[13] To begin, the trial judge recognized the two-part test for establishing private nuisance and the factors relevant to the assessment of the reasonableness of an unauthorized interference with private property rights, as set out in Antrim Truck Centre Ltd. v. Ontario (Transportation), 2011 ONCA 419, aff’d 2013 SCC 13. See also, Mandrake Management Consultants Ltd. v. Toronto Transit Commission, 1993 CanLII 9417 (ON CA), [1993] O.J. No. 995, 102 D.L.R. (4th) 12 (Ont. C.A.).

[14] Antrim confirms, at para. 18, that private nuisance consists of an interference with a plaintiff’s use or enjoyment of land that is both substantial and unreasonable. The Supreme Court explained, at para. 19:

A substantial interference with property is one that is non-trivial. Where this threshold is met, the inquiry proceeds to the reasonableness analysis, which is concerned with whether the non-trivial interference was also unreasonable in all of the circumstances.

[15] With respect to the reasonableness component of the test for private nuisance, the Antrim court emphasized, at para. 25, that the reasonableness of the interference must be assessed in light of all the relevant circumstances. Further, under the reasonableness inquiry, the court assesses, “in broad terms, whether the interference is unreasonable by balancing the gravity of the harm against the utility of the defendant’s conduct in all of the circumstances”: Antrim at para. 26. While the courts are not limited by any specific list of factors in assessing the gravity of the harm occasioned by the defendant, such factors as the severity of the interference, the character of the neighbourhood, the sensitivity of the plaintiff to the harm caused, and the frequency and duration of the interference may be relevant under the reasonableness inquiry: Antrim at paras. 26 and 53-54.

[16] Before this court, the appellants accept the trial judge’s finding that their interference with the respondents’ use and enjoyment of their lands was substantial. This was a prudent concession. The evidentiary record overwhelmingly establishes that dust arising from the activities of the KJS trucks on 170 Inc.’s unpaved parking lot interfered with TMS’s manufacturing operations for approximately five years. As the trial judge explained, the frequency, duration, degree and impact of the dust generated by the KJS trucks, among other factors, caused a continuing and substantial interference with TMS’s manufacturing operations.

[17] The trial judge also found that from mid-April 2007, when he concluded that the dust problems began, until mid-June 2011, the appellants failed to pave 170 Inc.’s parking lot to eliminate the dust problems. When the parking lot was finally paved in mid-June 2011, the dust problems were effectively resolved. The trial judge concluded, in these circumstances, that the appellants’ interference with the respondents’ use and enjoyment of their lands was unreasonable.

[18] I see no reversible error in the trial judge’s appreciation and application of the Antrim private nuisance test, or in his analysis of the factors pertinent to that test, as identified in Antrim. In particular, in my opinion, his finding of unreasonable interference was open to him on the evidence adduced at trial.

[19] The trial judge’s finding of unreasonable interference was based on his consideration of three factors: (1) the incompatibility of the dust generated on the appellants’ property with the character of the neighbourhood in which the parties’ businesses are located; (2) the nature and utility of the appellants’ conduct; and (3) the alleged sensitivity of TMS’s manufacturing operations to damage from dust. As Antrim confirms, these are proper considerations on an assessment of the reasonableness of an unauthorized interference with private property rights.

[20] I did not understand the appellants to challenge the trial judge’s findings regarding the first two factors. As to the third, the appellants submit that the trial judge erred by ignoring relevant evidence about the nature of TMS’s manufacturing operations and products that rendered them especially susceptible to damage from airborne dust. Again, I disagree.

[21] The trial judge’s reasons confirm that he was alive to the significance of the alleged sensitivity of TMS’s manufacturing operations and products to damage from the effects of dust. His appreciation of the relevance of this issue and the evidence bearing upon it is also reflected in the transcript of his lengthy exchanges on the issue with the respondents’ counsel during the course of final submissions at trial.

[22] The trial judge was not obliged to refer in his reasons to all the evidence regarding the specific nature of TMS’s manufacturing operations and products. In his reasons, he referred to some of the pertinent evidence adduced at trial concerning TMS’s business, including the evidence of the suggested peculiarities of its manufacturing operations and the specialized nature of the lighting fixtures produced by it. The transcript also reveals that he explored the question of the alleged sensitivity of TMS’s manufacturing operations and products to damage from dust, in detail, with counsel during final argument.

[23] In this context, the trial judge found as follows, at para. 144:

[W]hile TMS’s manufacturing process was sensitive to dust, its sensitivity was not unique in the area. Its use of its property was consistent with the use that its neighbours made of their properties, including retail warehouses, small manufacturing concerns, and professional offices. TMS’s sensitivity to dust is not what made KJS’s failure to pave its [parking] lot for four years unreasonable, although it contributed to the extent of damages TMS suffered because of it.

[24] These findings were open to the trial judge on the evidence. Where, as here, a trial judge’s factual findings are supported by evidence at trial, they attract deference from this court. Absent palpable and overriding error, there is no basis for appellate interference with these findings.

[25] Moreover, in his analysis of the reasonableness of the appellants’ interference with the respondents’ use and enjoyment of their lands, the trial judge considered the appropriate factors in light of the evidentiary record. His appreciation of and assignment of weight to be given to the evidence bearing on the reasonableness of the appellants’ activities are matters squarely within his domain. They, too, attract considerable deference from a reviewing court. See for example, Woelk v. Halvorson, 1980 CanLII 17 (SCC), [1980] 2 S.C.R. 430; Toneguzzo-Norvell (Guardian ad litem of) v. Burnaby Hospital, 1994 CanLII 106 (SCC), [1994] 1 S.C.R. 114, at para. 15.

[26] In my opinion, the trial judge’s finding of unreasonable interference with the respondents’ use and enjoyment of their lands is firmly grounded in the evidentiary record. The appellants have failed to demonstrate that this finding is tainted by palpable or overriding error.

[27] Accordingly, I would reject this ground of appeal.

(2) Lost Productivity Damages

[28] I reach a different conclusion, however, concerning the appellants’ challenges to the trial judge’s awards of lost productivity damages. In my view, on this record and in light of the manner in which the trial judge quantified lost productivity damages, these awards are unsustainable. I say this for the following reasons.

[29] The appellants submit that the trial judge erred: (1) by failing to consider whether the respondents established lost productivity damages at trial, either in nuisance or trespass, as distinct from proving how such damages could be quantified; and (2) by failing, in several respects, to properly assess lost productivity damages. The appellants contend that, in light of these errors, only nominal damages, if any, should be awarded for TMS’s lost productivity arising from their nuisance and trespass.

[30] The force of these submissions must be considered in the context of the respondents’ theory of lost productivity damages at trial, the trial judge’s findings concerning that theory, and his ultimate approach to the quantification of lost productivity damages.

(a) Respondents’ theory of lost productivity damages

[31] In the final version of their statement of claim, the respondents pleaded that:

(1) dust and sand generated by the movement of KJS trucks on 170 Inc.’s unpaved parking lot entered TMS’s business premises through doors and windows on the south face of the structure (para. 9);

(2) the resulting dust in the respondents’ building had to be cleaned from TMS’s manufacturing and product staging areas in order to avoid damaging manufactured product (para. 12);

(3) the respondents incurred damages “through the loss of productivity caused by the increased man hours required to continually clean [their building] of dust during the spring, summer and autumn months” (para. 12); and

(4) to mitigate the effects of the dust generated by KJS’s trucks, the respondents were required to keep the doors and windows of their facility closed during the spring, summer and fall months, leading to elevated internal temperatures. These elevated temperatures, in turn, allegedly occasioned “employee complaints, reduced morale and reduced productivity” (para. 13).

[32] The respondents’ pleading contains no further particulars of their claim for lost productivity damages or of their theory as to how such damages should be measured.

[33] However, in his opening and closing submissions at trial, the respondents’ counsel explained that the respondents’ theory of lost productivity damages in nuisance was based on proof of the penetration of dust into TMS’s premises, which required TMS employees to devote time and services that would otherwise have been spent on TMS’s manufacturing operations, to dust remediation and corrective measures. The respondents took the position that damages in nuisance for TMS’s resulting lost business productivity should be calculated on the basis of a percentage of its lost sales revenues during the period April 2007 to June 2011, when dust problems from KJS trucks were experienced.

[34] In his opening address at trial, the respondents’ counsel stated:

You will hear from the witnesses for the plaintiffs that the sand and dust disturbance … detrimentally affected the business operations of the plaintiff, TMS Lighting. The evidence will show that TMS had to incur time and effort to do a number of tasks and work as a result of the sand and dust disturbance caused by the defendants, including as follows: additional time by TMS Lighting’s employees in cleaning sand from materials used during the assembly and – and packing processes, the repainting and refinishing of fixtures, lighting fixtures and other equipment, other products damaged from scratches caused by the sand emissions. You will hear that there were excessive handling of parts, equipment, and product and resulting shipping delays caused by the infiltration of sand and dust into their building. And you will ultimately hear that there was a loss of labour productivity due to the increased plant temperature.

The plaintiffs will present evidence that as a result of these additional tasks and remedial actions, necessitated by the infiltration of the sand and dust, that TMS Lighting suffered a loss of productivity. These witnesses will testify that based on their everyday observations and knowledge of their business, that TMS lost revenues in a range of two percent to seven percent of its admitted revenues over the period of April, 2007 to June, 2011. You’ll note that the admitted revenue which we discussed earlier was $9,223,104.00.

Your Honour will hear that TMS Lighting would have had better productivity over that period had its employees not had to deal with the sand disturbance issues. The evidence of the plaintiffs will show that the time the employees spent cleaning and trying to remedy the dust disturbances and the lost hours due to heat-related reductions in productivity would have instead been used to do what TMS Lighting is in the business of doing, that is assembling, packing and shipping custom lighting fixtures and products. The witnesses of the plaintiffs will testify that TMS Lighting could have completed more sales during the subject period.

You’ll hear that TMS was losing productive labour time as a result of the sand and dust disturbance and that, if it had not lost that labour time, it would’ve been able to accept and complete more orders for its customers during the period in question. [Emphasis added.]

[35] To these damages, the respondents maintained, should be added TMS’s damages in trespass, consisting of: (1) the costs of replacing the concrete barrier stones damaged or dislocated by KJS’s trucks; and (2) compensation for the lost time spent by TMS employees in realigning or repositioning the displaced barrier stones.

[36] In support of their theory of nuisance-based damages, the respondents relied on the admitted fact that TMS realized $9,223,104.51 in total gross sales revenues for the period April 1, 2007 to June 30, 2011. On the respondents’ theory, the quantum of TMS’s lost productivity damages in nuisance could be measured by calculating two to seven percent of this admitted gross sales revenues figure, and treating the resulting range ($184,462 to $645,617) as the range of TMS’s diminished revenues and, hence, its damages due to lost productivity caused by the appellants’ nuisance.

[37] There were several evidentiary weaknesses in this theory. First, the respondents led no expert evidence at trial to establish the extent of TMS’s damages due to lost productivity, whether in nuisance or trespass, or the appropriate manner of calculating those damages.

[38] Second, the respondents failed to produce any business records or other evidence to establish with any degree of certainty or precision: (1) TMS’s net sales revenues for the period in question; (2) the increased “man hours” allegedly expended by TMS employees to clean the TMS facility of dust or to otherwise address or remedy dust-related problems in TMS’s plant; (3) the productivity levels achieved by TMS before the commencement of the dust-related problems; (4) the production hours lost due to elevated internal temperatures caused by the need to keep the TMS plant windows and doors closed in the relevant months; or (5) the identity and value of any lost, unfilled or delayed customer orders occasioned by the dust problems and the responsive efforts undertaken by TMS.

(b) Trial judge’s rejection of respondents’ theory of nuisance-based lost productivity damages

[39] The trial judge was satisfied that TMS suffered damages due to lost productivity occasioned by the dust generated by the KJS trucks. However, he concluded that, although it was within their power to do so, the respondents failed to lead available evidence to support their theory of lost productivity damages in nuisance, calculated as a percentage of TMS’s gross sales revenues. He set out his central findings on this issue in these terms:

[194] In the present case, TMS did not produce an expert whose opinion of TMS’ loss of productivity as a percentage of its gross revenues the court could accept and rely on. Additionally, I find that there were records that TMS could have tendered to prove its loss of productivity on a percentage basis. The Court invited TMS’ counsel to provide the records it had showing TMS’ increase in gross revenues from the summer quarter of 2010 to the summer quarter of 2011, both of which were affected by dust from KJS’ unpaved parking lot; and the increase in its gross revenues from the fall or winter quarters of 2010, which were affected by the dust, to the fall or winter quarters of 2011, which were not affected, so that the effect of the paved lot at the end of June 2011 could be measured with precision. David Bahra acknowledged that this information was available, but he did not tender it.

[195] It is up to a plaintiff to decide how it chooses to prove its case, but the Court in the present case must draw an adverse inference from TMS’ failure to tender evidence that was available to it to prove the percentage loss in its productivity. I find that such evidence, if called, would not have supported the full amount of damages it claims. …

[196] Having regard to TMS’ failure to produce evidence in support of the percentage loss of productivity that it argues should be applied, the court will not assess TMS’s damages on the basis of 2% to 7% of gross revenues. There is simply no evidence whose reliability and appropriateness both the defence and the court can assess to support those percentages.

[200] Additionally, TMS … did not name any specific job in which substantial delays occurred, or in which a contract was cancelled, or could not be accepted because of such delays. I therefore decline to base my assessment of TMS’ damages on a percentage of its gross revenues during the claim period.

[205] It is not the nature of TMS’ damages that makes them difficult to assess. Rather, it is TMS’s failure to call the evidence necessary to support its theory of damages based on lost productivity, calculated as a percentage of revenues.

[206] Because TMS asked the court to calculate the damages caused by the dust as a percentage of the revenues it earned during the five year period when the dust was a nuisance, it was incumbent on it to prove not only what its revenues and profit margins were during the period, but also the extent to which the dust negatively affected them. There was no evidence to support its theory that its damages amounted to 2% to 7% of gross revenues earned, or to establish where within the range of $184,000.00 to $645,000.00 that those percentages represented, its actual damages lay. [Emphasis added.]

(c) Trial judge’s response to respondents’ theory of trespass-based lost productivity damages

[40] As I will describe later in these reasons, the trial judge accepted, with some adjustments, the respondents’ theory of trespass-based damages. However, in doing so, he relied in part on the same approach that he employed in his nuisance-based damages analysis to calculate the value of time expended by TMS employees to address the dust problems.

(d) Trial judge’s approach to the quantification of lost productivity damages

[41] After holding that the respondents had failed to lead sufficient reliable evidence to establish their theory of lost productivity damages in nuisance, the trial judge turned to the question whether an alternative basis for the quantification of those damages was available on the evidence. He concluded that TMS’s lost productivity damages could be measured, both in nuisance and trespass, on the basis of the estimated value of production time lost to address the dust problems.

(i) Lost productivity damages in nuisance

[42] The trial judge’s awards of damages in nuisance had two components: (1) damages for lost productivity; and (2) damages for the costs of refinishing light fixtures affected by dust.

[43] With respect to these damages, TMS led evidence at trial, and the trial judge accepted, that dust generated by the KJS trucks was a daily problem at the TMS facility during the months of April or May to September or November in each relevant year, commencing in April 2007 and continuing until June 2011. TMS witnesses also testified that, in order to combat the dust in these months, its employees were required to handle lighting fixtures three or four times, rather than once, in preparing the fixtures. For example, one of TMS’s fixture assemblers, Mark Wilson, testified that he assembled 15 to 20 fixtures over a nine-hour shift and that he was typically required to spend an extra five to ten minutes, per fixture, handling the lighting fixtures affected by the dust.

[44] There was also evidence before the trial judge that: (1) in the spring months, three assemblers worked on TMS fixtures and, in the summer months, four TMS assemblers were involved in this task; (2) the “shop rate” billed by TMS to its customers was $90 per hour, based on its costs of running its plant; and (3) the TMS employees who were required to reposition TMS’s concrete barrier stones were paid $15 to $35 per hour, depending on their position.

[45] Based on this evidence, the trial judge held, at para. 210, that the production time lost by TMS due to the dust problems was as follows:

(a) April 15 to June 15:

Average of 150 minutes/day x 3 employees = 450 minutes/day

450 minutes/day x 5 days/week x 8 weeks = 300 hours

(b) June 15 to Sept. 15:

Average of 150 minutes/day x 4 employees = 600 minutes/day

600 minutes/day x 5 days/week x 13 weeks = Total of 650 hours

(c) Total time from April 15, 2007 to June 15, 2011:

(i) 5 years x 300 hours = 1500 hours

(ii) 4 years x 650 hours = 2600 hours

[46] The trial judge next considered the hourly value of the production time that he viewed as having been lost by TMS. He held, at para. 211:

A reasonable hourly rate to apply to TMS’[s] loss of productivity is the difference between the $90.00 per hour “shop rate” which it charged its customers, less the average of $15.00 to $35.00 per hour (average $25.00) actually paid to employees, for a net hourly rate of $65.00 per hour.

[47] The trial judge relied on his estimates of the total production time lost by TMS and the hourly value of this lost production time to conclude, at para. 212, that TMS’s lost productivity damages occasioned by the appellants’ nuisance equalled: “4100 hours x $65 per hour = $266,500.00”. However, at the end of his reasons, at para. 273, the trial judge indicated, without elaboration, that the respondents’ lost productivity damages in nuisance were $278,687.50. I will return to this discrepancy later in these reasons.

[48] To the figure of $266,500, the trial judge added the amount of $2,425 as additional damages for the costs incurred by TMS to refinish fixtures affected by the dust. He based this amount on the evidence of David Bahra, one of TMS’s principals, that dust-affected fixtures required repainting two or three times per week, at a cost of $10 per instance. In light of this evidence, the trial judge quantified TMS’s refinishing costs, at para. 214, as: “An average of 2.5 fixtures per week x the 97 weeks referred to above (9 weeks x 5 years) + (13 weeks x 4 years) x $10.00 per fixture produces a cost of $2,425.00”.

[49] As a result, in one part of his reasons, the trial judge calculated TMS’s lost productivity damages in nuisance in the amount of $268,925 ($266,500 plus $2,425). However, as I have said, he later stated in his reasons that these damages totalled $278,687.50, plus $2,425 on account of refinishing costs, for an aggregate amount of $281,112.50.

(ii) Lost productivity damages in trespass

[50] The trial judge then considered the respondents’ claim for trespass-based damages. This claim, and the damages awarded by the trial judge under this heading, also had two components: (1) damages for the costs of replacing TMS’s concrete barrier stones damaged or dislocated by KJS’s trucks; and (2) lost productivity damages for the time spent by TMS employees in repositioning or realigning the displaced barrier stones.

[51] During oral argument before this court, the appellants conceded the trial judge’s damages award for TMS’s costs of replacing 10 damaged concrete barrier stones ($5,910 plus GST). Thus, with respect to trespass-based damages, only the damages awarded at trial for TMS’s alleged lost productivity as a result of dealing with the damaged or dislocated barrier stones ($23,400) remains in issue.

[52] The respondents’ claim for lost productivity damages in trespass was based on time spent by TMS employees to prevent or mitigate continuing trespass by the KJS trucks. The respondents led evidence that, from September 2006 to January 2012, a period of 65 months, TMS employees were required to reposition TMS’s barrier stones approximately 65 times. In a “Repositioning Summary” filed at trial, TMS estimated that the labour time of these employees was “6.0 man hours/occurrence, plus forklift”, for a total of 390 hours (6 x 65). Further, based on its “hourly shop rate” of $90, TMS maintained that its labour costs for barrier repositioning work totalled $35,100 (390 hours x $90 per hour).

[53] With some adjustments, the trial judge accepted the respondents’ approach to the calculation of TMS’s increased labour costs in dealing with the damaged or dislocated barrier stones. He found that repositioning or realignment of the barrier stones was required on a regular basis from September 2006 to the end of August 2012, a period of 72 months. Further, based on the respondents’ evidence that this corrective work sometimes involved only one TMS employee to assist a forklift driver in realigning the concrete blocks, the trial judge reduced the respondents’ estimate of TMS’s expended labour hours to an average of five, rather than six, hours per occurrence. Finally, and importantly, the trial judge rejected the use of TMS’s $90 per hour shop rate as an appropriate estimate of TMS’s hourly incremental labour costs, instead applying an estimated hourly rate of $65, as he utilized in his analysis of nuisance-based lost productivity damages. The trial judge held, at para. 262:

I am therefore reducing the labour hours per occurrence [from that claimed by TMS] to an average of 5 (between four and six) and using the hourly rate of $65.00, being the difference between the “shop rate” of $90 per hour charged to customers, and the average of $25.00 paid to employees. On this basis, the loss incurred by TMS was $23,400.00 (72 months x 5 labour hours x $65.00).

(e) The appellants’ challenges to the lost productivity damages awards

(i) Lost productivity damages were established

[54] As indicated at paragraph 11 of these reasons, the appellants raise numerous grounds of appeal regarding the trial judge’s awards of lost productivity damages. First, they argue that the trial judge erred in his damages assessment by failing to consider whether the respondents established lost productivity damages at trial, as distinct from proving how such damages could reasonably and reliably be quantified.

[55] I would reject this ground of appeal.

[56] It is true that the trial judge did not clearly distinguish in his reasons between whether the respondents established a loss of productivity by TMS due to the dust problems, on the one hand, and whether they had demonstrated a reasonable and reliable method for quantifying lost productivity damages, on the other hand. However, the trial judge’s detailed reasons for rejecting the respondents’ theory of lost productivity damages in nuisance and his own calculations of those damages both in nuisance and trespass are premised on a demonstrated loss of productivity suffered by TMS in its business. It is therefore implicit throughout the trial judge’s damages analysis that he accepted the respondents’ proffered proof of loss through diminished business productivity due to the appellants’ nuisance and trespass.

[57] Moreover, the evidence at trial amply grounded the trial judge’s acceptance of the respondents’ claim that TMS experienced diminished business productivity as a result of the dust problems caused by the appellants. Several witnesses called by the respondents at trial testified that TMS employees were required to expend time that would otherwise have been devoted to TMS’s manufacturing operations to handle dust-affected fixtures, to clean the dust off parts and fixtures, to deal generally with dust issues during the course of a regular working day, and to reposition or realign the concrete barrier stones affected by the activities of KJS’s trucks. For example, there was evidence before the trial judge that:

(1) TMS productivity was lost because, as the trial judge put it at para. 159: “extra labour was required to clean dust from components or fixtures, which resulted in the company shipping fewer products over the period than they could otherwise have done”;

(2) hours and sometimes days of extra work were required to restore TMS products that had been scratched by dust or sand particles to their original condition;

(3) the closing of the doors to TMS’s premises in the summer and spring months, necessitated by the penetration of airborne dust, forced TMS to buy more water and provide longer breaks for its employees to stave off employee heat exhaustion;

(4) increased temperatures in the plant sometimes required TMS to close its facility or send its employees home early;

(5) TMS employees were required to expend extra time placing lighting fixtures in boxes, rather than on shelves, in TMS’s plant packaging area to protect the fixtures from dust; and

(6) at least one TMS assembler (Mark Wilson) was obliged during each shift to spend at least an extra five to ten minutes, per fixture, to control or respond to dust problems.

[58] In the end, the critical damages question that emerged at trial was not whether the existence of a loss due to reduced productivity had been shown. Rather, the key question was whether the evidence afforded a reasonable and reliable basis on which damages flowing from that loss might properly be quantified. It is in considering this latter question and attempting to quantify TMS’s lost productivity damages that, in my opinion, the trial judge fell into error.

(ii) Trial judge’s quantification of lost productivity damages

[59] The appellants maintain that, having rejected the respondents’ theory that TMS’s lost productivity damages in nuisance could be calculated as a percentage of gross sales revenues, the trial judge, on his own motion, devised a method for quantifying those damages that was neither supported by the evidence nor urged by the parties. They submit that the trial judge’s assessment of lost productivity damages was fundamentally flawed, that they had no opportunity to challenge or make submissions on the quantification approach used by the trial judge and that, as a result, trial fairness was compromised. I agree.

[60] At the outset, I acknowledge that a trial judge’s assessment of damages attracts considerable deference from a reviewing court. Appellate interference with a damages award at trial, particularly an award made by a trial judge sitting alone, is justified only where the trial judge made an error in principle, misapprehended the evidence, failed to consider relevant factors, considered irrelevant factors, made an award without any evidentiary foundation, or otherwise made a wholly erroneous assessment of damages: Kerr v. Baranow, 2011 SCC 10, [2011] 1 S.C.R. 269, at para. 158; Magnussen Furniture Inc. (c.o.b. Magnussen/Presidential Furniture) v. Mylex Ltd., 2008 ONCA 186, 89 O.R. (3d) 401, at para. 71; Naylor Group Inc. v. Ellis-Don Construction Ltd., 2001 SCC 58, [2001] 2 S.C.R. 943, at para. 80.

[61] It is also beyond controversy that a plaintiff bears the onus of proving his or her claimed loss and the quantum of associated damages on a reasonable preponderance of credible evidence. Further, as the trial judge recognized in this case, a trial judge is obliged to do his or her best to assess the damages suffered by a plaintiff on the available evidence even where difficulties in the quantification of damages render a precise mathematical calculation of a plaintiff’s loss uncertain or impossible. Mathematical exactitude in the calculation of damages is neither necessary nor realistic in many cases. The controlling principles were clearly expressed by Finlayson J.A. of this court in Martin v. Goldfarb, 1998 CanLII 4150 (ON CA), [1998] O.J. No. 3403, 112 O.A.C. 138, at para. 75, leave to appeal to S.C.C. refused, [1998] S.C.C.A. No. 516:

I have concluded that it is a well established principle that where damages in a particular case are by their inherent nature difficult to assess, the court must do the best it can in the circumstances. That is not to say, however, that a litigant is relieved of his or her duty to prove the facts upon which the damages are estimated. The distinction drawn in the various authorities, as I see it, is that where the assessment is difficult because of the nature of the damage proved, the difficulty of assessment is no ground for refusing substantial damages even to the point of resorting to guess work. However, where the absence of evidence makes it impossible to assess damages, the litigant is entitled to nominal damages at best.

See also Cadbury Schweppes Inc. v. FBI Foods Ltd., 1999 CanLII 705 (SCC), [1999] 1 S.C.R. 142, at para. 99; 100 Main Street East Ltd. v. W.B. Construction Ltd. (1978), 1978 CanLII 1630 (ON CA), 20 O.R. (2d) 401 (C.A.), 88 D.L.R. (3d) 1, at para. 80; Penvidic Contracting Co. v. International Nickel Co. of Canada, 1975 CanLII 6 (SCC), [1976] 1 S.C.R. 267, at pp. 278-79.

[62] Thus, the respondents bore the onus of establishing their lost productivity damages, which they characterized in their pleading as “special damages”. Whether damages of this type are properly to be termed “special damages” (a label that I regard as inappropriate), or simply as a type of general damages to be measured in accordance with the trial evidence, the plaintiff bears the onus of proof on a balance of probabilities.

[63] On this appeal hearing, the respondents do not fault the trial judge for rejecting their theory of the appropriate method for the calculation of lost productivity damages in nuisance. Rightly so. There was no evidence at trial to support the respondents’ proposed use of a range of two to seven percent of gross sales revenues to measure these damages. As a result, consistent with his obligations under Goldfarb and related cases, the trial judge was obliged to examine whether the evidentiary record afforded a reasonable and reliable alternative basis for the quantification of these damages.

[64] The quantification of damages occasioned by a proven loss is often a difficult task. In many cases, while loss is established, the evidence affords little support for a precise or reliable assessment of damages arising from the loss. For this reason, as Finlayson J.A. noted in Goldfarb, at para. 75, a trial judge confronted with a meagre evidentiary record on damages may be required to resort to educated “guess work”.

[65] That said, in my opinion, it is not open to a trial judge to postulate a method for the quantification of damages that is not supported by the evidence at trial. Nor is it open to a trial judge to employ an approach to the quantification of damages that the parties did not advance and had no opportunity to test or challenge at trial. See for example, Stemeroff v. Swartz, 2005 CanLII 18183 (ON CA), [2005] O.J. No. 2073, 198 O.A.C. 141 (C.A.); and, in the context of liability, Rodaro v. Royal Bank of Canada, 2002 CanLII 41834 (ON CA), [2002] O.J. No. 1365, 59 O.R. (3d) 74 (C.A.). To hold otherwise would sanction trial unfairness.

[66] In this case, in my respectful view, the trial judge erred in principle in his approach to the quantification of lost productivity damages and, in the process, trial fairness was compromised.

[67] Recall that the trial judge’s formula for the calculation of lost productivity damages, both in nuisance and trespass, was based on his estimates of the extra time spent by TMS employees to address the dust problems caused by the appellants during the relevant months, multiplied by his estimate of “a reasonable hourly rate to apply to TMS’[s] loss of productivity”. There are several critical difficulties with this quantification approach, as employed by the trial judge.

[68] First, the trial judge based his nuisance-related calculation of the hours spent on dust-related problems primarily on Mark Wilson’s testimony about the extra time he spent handling lighting fixtures affected by the dust. However, there appears to have been no evidence at trial that TMS’s productivity actually declined as a result of the expenditure of this additional time. Nor was there any evidence of TMS’s expected productivity during the relevant months in the relevant years or of its historical or baseline productivity in the same months in the years before the dust problems were encountered. The absence of this evidence precluded any comparison of the average time spent by TMS product assemblers on the handling of fixtures, before and after the dust problems, and the effect on productivity of the incremental handling time during the intervals when dust interference was an issue.

[69] Second, as the appellants stress, Mr. Wilson commenced employment with TMS in September 2010. His evidence of his experience with the dust problems related to a narrow time frame – April 15 to June 15, 2011 – a period of only two months before the appellants halted the dust problems by paving 170 Inc.’s driveway. The respondents have pointed to no basis in the evidence on which Mr. Wilson’s limited experience with the dust problems could reliably be extrapolated to all TMS product assemblers (including more experienced assemblers) over the entire five-year period of the appellants’ nuisance. Nor have the respondents pointed to any evidence that the number of fixtures produced by TMS from April 15 to June 15, 2011 was representative of the number of fixtures manufactured by it during the prior five years or before the commencement of the dust problems in 2007.

[70] Third, the trial judge used a net hourly rate of $65 for the estimated hourly cost to TMS of the extra time spent by its employees on dust-related issues. This rate was based on the difference between what David Bahra testified was the $90 per hour shop rate that TMS billed to customers, less the average of $15.00 to $35.00 per hour ($25.00) that Mr. Bahra said TMS paid those employees who were involved in repositioning or realigning the barrier stones damaged or dislodged by KJS’s trucks.

[71] However, there appears to be no evidentiary support for the application of an estimated net hourly rate of $65 as a reasonable estimate of the hourly cost to TMS of extra time spent by TMS employees on the dust problems. As I have indicated, the net hourly rate of $65 derived from the $90 per hour shop rate charged by TMS to its customers and the average hourly wage rate paid to those TMS employees who dealt with the concrete barrier stones. But the use of the $65 net hourly rate ignores any profit margins employed by TMS in setting its hourly billing rate to customers, as well as its actual costs of increased labour in the relevant years for plant assemblers who were required to address the dust problems in TMS’s facility, neither of which was established by the evidence at trial.

[72] The trial judge’s reasons do not provide an evidentiary justification for the use of $65 as an estimate of the hourly cost to TMS of increased labour by its plant assemblers. Nor, as the respondents’ counsel candidly acknowledged in oral submissions, were the respondents able to do so.

[73] Fourth, the respondents concede that the trial judge’s approach to the calculation of lost productivity damages emerged, for the first time, in his reasons. The trial judge’s formula for the calculation of the costs to TMS of lost production time formed no part of the parties’ cases at trial. Consequently, the appellants had no opportunity to challenge this approach on cross-examination of the respondents’ witnesses or by leading evidence of their own.

[74] In my view, it is no answer to these flaws in the trial judge’s method of quantifying lost productivity damages to say that it was open to the respondents to seek leave to re-open their case on damages at trial once they were alerted, as occurred here, to the trial judge’s concerns regarding their own theory on damages.

[75] In his exchanges with counsel during final submissions at trial, the trial judge referred at one point to “bits of evidence as to how long it takes to, to remedy dust or scratches [on lighting fixtures] depending on whether the job is a big one or a small one”. However, he then immediately noted that there was no evidence of “specifics” regarding this remedial time expended by TMS employees. This was an accurate, indeed an understated, characterization of the state of the record.

[76] The important point is that, fairly read, nothing in this exchange between the trial judge and counsel or in those that followed it during closing submissions revealed any intention by the trial judge to employ the formula for quantifying lost productivity damages that he ultimately utilized. Nor do I think that the parties were obliged to anticipate an approach to the quantification of damages that was not fully grounded in the evidence, nor developed during the course of trial.

[77] In fairness to the trial judge, the transcript of closing submissions confirms his appreciation of the difficulties regarding the quantification of the respondents’ lost productivity damages. The trial judge identified, and explicitly put to the respondents’ counsel, the implications of the thin evidentiary record on the means by which those damages might be measured. In so doing, the trial judge actively sought the assistance of counsel on how his obligation to assess lost productivity damages might be satisfied in the face of this record. In this context, the trial judge’s approach to the quantification of lost productivity damages represents his best attempt to meet that obligation.

[78] Nonetheless, at the end of the day, there was an evidentiary foundation for only parts of the trial judge’s calculations of lost productivity damages, as I have described above. There was no evidentiary support for key components of his calculations, in the manner employed by him, either in nuisance or trespass. Nor were the parties, especially the appellants, afforded an opportunity to test the reliability of or otherwise counter the quantification approach eventually adopted by the trial judge. The resulting trial fairness implications are self-evident.

[79] There is a final, albeit more minor, difficulty with the trial judge’s assessment of lost productivity damages, to which I have already alluded. In his original calculations of the respondents’ nuisance-based lost productivity damages, the trial judge indicated that TMS’s lost productivity damages were $266,500, plus the further sum of $2,425 for fixture refinishing costs. In contrast, when setting out his final orders at the conclusion of his reasons, the trial judge stated that the same damages totalled $278,687.50, plus fixture refinishing costs. The latter figures for lost productivity damages in nuisance appear in the trial judgment. The reasons afford no explanation for this discrepancy. Nor were the parties able to furnish one.

(iii) Other grounds of appeal

[80] In light of the errors that I have described, it is unnecessary to consider the appellants’ other grounds of appeal from the trial judge’s lost productivity damages awards. In the circumstances, the trial judge’s quantification of TMS’s lost productivity damages, both in nuisance and trespass, cannot stand. I turn now to the question of an appropriate remedy.

(f) The question of remedy

[81] The appellants argue that any award of damages for TMS’s lost productivity should be nominal, at best. They submit that because the respondents’ nuisance-based damages theory was justifiably rejected at trial, and the trial judge’s substituted approach for the quantification of lost productivity damages is fatally flawed, the respondents must bear the consequences for their failure to lead the necessary evidence to establish the quantum of their damages. They rely, in this regard, on the trial judge’s findings that the respondents failed to adduce available evidence at trial that bore on their theory of lost productivity damages and that, as a result, an adverse inference should be drawn against the respondents regarding the utility of any such evidence. As a result of these factors, the appellants say, an award of only nominal damages is mandated.

[82] In the particular circumstances of this case, I would not accede to this argument.

[83] It is well-established that where the absence of evidence renders it impossible to assess damages, a plaintiff may be entitled to only nominal damages. Goldfarb, for example, says so. But this is not invariably the case. Where a plaintiff proves a substantial loss and the trial judge errs in the assessment of damages arising from that loss, the interests of justice may necessitate a new trial on damages. Although the quantification of damages flowing from the established loss may prove difficult, nonetheless the injured plaintiff is entitled to compensation.

[84] Goldfarb itself is a case in point. Goldfarb involved a claim for damages for breach of fiduciary duty advanced by the client of a law firm against the firm and the involved firm lawyer. This court held that there was inadequate cogent evidence to support the substantial award of damages made by the trial judge. Justice Finlayson explained, at para. 67:

[The plaintiff/client] failed to prove the losses through appropriate evidence. The trial judge’s award of damage is speculative at best, and does not reflect with much precision real losses flowing from the breach, notwithstanding that the plaintiff bore the burden of proving the losses in the normal course.

[85] Notwithstanding that the proffer of relevant evidence was “fully within the control of [the plaintiff]”, the Goldfarb court rejected the remedy of nominal damages and concluded that a new assessment of damages was necessary because the plaintiff had demonstrated a substantial personal loss although evidence proving the quantum of that loss was lacking: Goldfarb at paras. 80, 83 and 84. See also Rosenhek v. Windsor Regional Hospital, 2010 ONCA 13, 257 O.A.C. 283, at paras. 37-38, leave to appeal to S.C.C. refused, [2010] S.C.C.A. No. 89.

[86] This reasoning is apposite here. On the trial judge’s findings, the respondents suffered a substantial and unreasonable interference with the use and enjoyment of their lands, as well as trespass to those lands. The appellants’ nuisance and trespass were neither trivial nor transitory. To the contrary, they occurred over a sustained period and interfered, to a significant extent, with the respondents’ use and enjoyment of their lands for the purpose of TMS’s manufacturing operations. For approximately five years, disruption of TMS’s manufacturing operations led to reduced business productivity. This is a real wrong, which caused real loss.

[87] Damages, including damages for loss of revenues or profits, may be measured in various ways including, where appropriate, based on expert opinion evidence. That the manner of proof of lost productivity damages posited by the respondents at trial failed, does not mean that no proof is available. In all the circumstances, in my view, a new assessment of TMS’s lost productivity damages arising from the appellants’ proven nuisance and trespass is required in the interests of justice.

V. Disposition

[88] Accordingly, for the reasons given, I would allow the appeal in part, set aside the judgment below relating to lost productivity damages, and order a new trial limited to the assessment of those damages both in nuisance and trespass, save only for the admitted trial award of $5,910 for the respondents’ costs of replacing damaged barrier stones.

[89] The appellants are entitled to their costs of the appeal, fixed, as agreed by the parties, in the aggregate sum of $12,500, inclusive of disbursements and all applicable taxes. This court was informed that the costs of the trial are under reserve. In light of my proposed disposition of this appeal, I would order that the respondents should be entitled to costs at trial relating to liability, in an amount to be determined by the trial judge. The costs of the new trial on damages should be in the discretion of the judge presiding at that trial.

Released:

“JAN -2 2014” “E.A. Cronk J.A.”

“RAB” “I agree R.A. Blair J.A.”

“I agree G.R. Strathy J.A.”