Fridays with Rogers Partners

January 07, 2022

At our weekly firm meeting, Annie Levanaj discussed the recent decision with respect to damages on the plaintiffs’ motion for default judgment in Zarei v. Iran, 2021 ONSC 8569.

Background

This decision dealt with compensatory and punitive damages sought by the plaintiffs for the shooting down of Ukraine International Airline Flight PS 752 by Iran’s Revolutionary Guards. In Justice Belobaba’s decision released May 20, 2021, he concluded that the defendant, the Islamic Republic of Iran, was civilly liable for shooting down the flight shortly after it departed from Tehran en route to Kiev carrying 9 crew and 167 passengers.

Five plaintiffs sued in their capacity as surviving family members and as estate representatives of six deceased killed in the shooting of Flight PS 752: Mehrzad Zarei lost his 18 year-old son, Shahin Moghaddam lost his wife and young son, Ali Gorji lost his niece and her husband, Jane Doe lost her husband, and John Doe lost his brother.  

The plaintiffs filed impact statements and provided photographs which helped demonstrate their relationships with the deceased and their ongoing grief. The court began its discussion by noting that “damage awards are a poor substitute for the lives that were lost but a monetary award is the only remedy that a civil court can provide”.

The Claims

The plaintiffs advanced damage claims in two different capacities. As surviving family members they claimed damages:

  1. Under section 61 of the Family Law Act[1] (“FLA”) for the loss of care, guidance and companionship;
  2. At common law for the intentional infliction of mental distress (or solatium) and;
  3. At common law for aggravated damages;

As estate representatives of the deceased, the plaintiffs sought damages under section 38 of the Trustee Act[2]:

  1. For the pain and suffering endured by the deceased as Flight PS 752 was shot down and plummeted to earth; and
  2. Significant punitive damages given the magnitude of the defendants’ wrong-doing

The Court’s Analysis

Solatium Damages v. FLA Damages

Counsel for the plaintiffs relied on American caselaw to advance their claims, since U.S. courts had experience with compensation claims for acts relating to international terrorism, particularly with the Islamic Republic of Iran.

The court differentiated Canadian law from American law by stating that only three damage claims were viable under Ontario law: the FLA claim of the surviving family members, the estate’s claim for pain and suffering, and the estate’s claim for punitive damages. Family members of the deceased in Ontario are unable to claim for “solatium” (damages for mental anguish, bereavement and grief) or aggravated damages.

Section 61(1) of the FLA outlines that if a person was killed by the fault or negligence of another and would have been entitled to recover damages if not killed, their spouse, children, grandchildren, parents, grandparents, brothers and sisters are entitled to recover pecuniary loss resulting from the death.  Section 61(2) of the FLA deals with fatal accidents and provides compensation for loss of guidance, care and companionship.  Four of the five plaintiffs fell within the provision. Mr. Gorji, as an uncle, was not eligible for FLA damages. 

Loss of Care Guidance and Companionship

Justice Belobaba indicated that there is no statutory cap on damages awarded for “loss of guidance, care or companionship”. The court distinguished s. 61(2)(e) FLA damages from non-pecuniary general damages that have a judicially-imposed cap. While no ceiling applies to FLA damages, caselaw has categorized a $100,000 award in 1992 as on the “high end” of damages.

Moore[3] was the most recent decision where $250,000 was awarded by the jury under this head of loss. In Moore, the Court of Appeal established its position in dealing with FLA awards by the jury by stating that unless the amount shocks the conscience of the court, they will not disturb a jury award.

Justice Belobaba believed a jury would have awarded the plaintiffs in this case the requested $250,000 amount. The case was originally to be tried by a jury, but the plaintiffs were forced to proceed without a jury due to COVID-19.

Accordingly, the court awarded $200,000 to each of the four eligible plaintiffs, and an additional $200,000 to Mr. Moghaddam who lost both his wife and son. Justice Belobaba highlighted that he was adjusting the “high end” award suggested for judge-alone trials. The court awarded a total of $1,000,000 for loss of care, guidance and companionship.

Pain and Suffering

Section 38 of the Trustee Act states that “the executor or administrator of any deceased person may maintain an action for all torts or injuries to the person or to the property of the deceased in the same manner and with the same rights and remedies as the deceased would, if living, have been entitled to do, and the damages when recovered shall form part of the personal estate of the deceased.”

Regarding the plaintiffs’ claims as estate representatives, the court had to deal with monetizing the terror experienced by the crew and passengers. Theplaintiffs submitted that the deceased had had to endure substantial pain and suffering as Flight PS 752 sustained two missile strikes and fell to the earth. The missile strikes were 30 seconds apart, and it took 4 minutes for the aircraft to crash.

U.S. courts had awarded damages for pain and suffering in the millions of dollars for terrorism claims against the Islamic Republic of Iran, factoring in the length of time the victim endured physical suffering, and the victim’s mental anguish stemming from imminent death. Taking these factors into account, the court awarded the deceased plaintiffs’ estates $1 million each for the pain and suffering endured, totalling $ 6 million.

Punitive Damages

This was the most challenging component of the court’s damages assessment, given that it was the first decision where a Canadian court decided on punitive damages awarded against a foreign state for lives lost from terrorism.

Justice Belobaba highlighted that punitive damages focus on a defendant’s misconduct, not the plaintiff’s loss, and that punitive damages are not compensatory and should only be awarded in exceptional circumstances. The court stated that the murdering of 176 innocent people fell within the category of “highly reprehensible misconduct that departs to a marked degree from ordinary standards of decent behaviour”. 

The plaintiffs asked for $500 million each, and relied on American caselaw. The court acknowledged the relevance of U.S. cases which awarded damages in the hundreds of millions. An expert witness, Dr. Patrick Clawson, a renowned specialist on the Islamic Republic of Iran and Iran-related terrorism, provided evidence on Iran’s increased use of terrorism despite the numerous U.S. decisions and awards against it. Dr. Clawson urged the court to impose “substantial punitive damages to demonstrate broad international support for firm opposition to Iranian support for terrorism”.

Dr. Clawson’s research concluded that Iran spends $ 800 million per annum funding and supporting non-state terrorist groups. In the U.S., a multiplier approach is used for calculating punitive damages. The U.S. courts have adopted Dr. Clawson’s recommendation to calculate punitive damages by multiplying the amount Iran spends each year on funding terrorism by a factor of 3-5. 

Justice Belobaba stated that if one accepts the more conservative $800 million estimate and the U.S.’s “multiplier method of calculation”, the punitive awards should fall between $2.4 billion to $4 billion. However, the court was concerned about the “multiplier” approach for calculating punitive damages because it had been recently discredited by the Chief Judge in the District Court in D.C. and was not available under Canadian law.

The court highlighted proportionality as the approach taken under Canadian law for evaluating punitive damages. A proportionate punitive damages award is only as large as rationally necessary to achieve the objectives of retribution, deterrence and denunciation.

In its proportionality assessment, the court considers i) the defendant’s blameworthiness ii) the plaintiff’s degree of vulnerability, iii) the level of harm, iv) the need for deterrence, v) any advantage wrongfully gained by the defendant, and vi) any other penalties or sanctions that have been or are likely to be imposed on the defendant for the misconduct.

Applying these considerations, the court found that the deceased and 170 victims were highly vulnerable, the level of harm could not have been higher, the shooting down was an intentional act of terrorism, there was a wrongfully gained advantage, and no other penalties or sanctions were imposed on the defendants for this misconduct.

The main question was whether a large punitive damages award against the Islamic Republic of Iran would achieve any level of deterrence. U.S. courts debate the futility of making any further damage awards against the Islamic Republic of Iran when billions of dollars in judgements against it remain outstanding. Plaintiffs’ counsel submitted that there are viable and accessible Iranian-owned assets and investments in Canada and worldwide. Justice Belobaba was satisfied that some level of enforcement and some level of deterrence could be achieved.

The court believed the award should be significant, but also recognized that other civil actions, including proposed class actions on behalf of the crew and other 170 passengers, would be proceeding and noted this should be taken into account to not “jeopardize the potential for achieving some level of fair-minded distribution.” The court concluded that punitive damages should be on the high end, and awarded $100 million.

The court cited three reasons for its decision: the enormity of the defendants’ misconduct, the Supreme Court’s comments on the need for “stronger resources” for breaches of customary international law, and the Supreme Court’s judgement in Whiten[4] where it stated that proportionality in punitive damage awards is achieved by asking what is the lowest amount that will serve the purposes of punishment, deterrence and denunciation.

Takeaways

This decision demonstrates that Canadian courts are prepared to add their voices in the international community in the fight against terrorism. Justice Belobaba provides guidance on the Canadian approach to different heads of damages as the court differentiated the Canadian approach from the American approach in awarding pecuniary damages and punitive damages. This decision demonstrates a high award for damages by a Canadian court therefore it will be interesting to see the decision’s impact on future damages assessments.

[1] R.S.O. 1990, c. F.3

[2] R.S.O. 1990, c. T.23

[3] Moore v. 7595611 Canada Corp., 2021 ONCA 459

[4] Whiten v. Pilot Insurance Co., 2002 SCC 18.