What is the test for punitive damages in a breach of contract case?

The following general principles are set out by Binnie, J.A.: • Punitive damages are not limited to a particular type of legal wrong. They are limited only by the requirement that they be rationally connected with the goal of adding punishment to compensation in a civil action. (¶ 67) • The objectives of punitive damages are to punish, deter and denounce. (¶ 68) • Punitive damages should be awarded only in exceptional cases, and then with restraint. (¶ 69) • There must be a rational basis for punitive damages. To that end a court should relate the facts of the particular case to the underlying purposes of punitive damages and determine if an award would further the objectives of the law. In doing so the court should also decide what the lowest award is that would serve the purpose. This rationality test applies both to whether an award should be made, as well as to the quantum of the award. (¶ 71) • It is rational to use punitive damages to detract from a defendant’s profit, where compensatory damages would amount to a license to earn greater profits through egregious conduct and disregard for another’s legal or equitable rights. (¶ 72) • The governing rule should be proportionality. (¶ 74) In considering whether an award is proportionate, the court should consider: o the blameworthiness of the defendant’s conduct; o the degree of vulnerability of the plaintiff, and the consequent abuse of power by the defendant; o the harm or potential harm directed at the plaintiff; o the need for deterrence; o other penalties, civil or criminal, that are likely to be inflicted on the defendant for the same conduct; and o the advantage wrongfully gained by the defendant from the misconduct. (paragraph 94) • Punitive damages are recoverable in breach of contract cases provided that the defendant’s conduct giving rise to the claim is an actionable wrong. (¶ 78, referring to Vorvis v. Insurance Corporation of British Columbia, 1989 CanLII 93 (SCC), [1989] 1 S.C.R. 1085 at p. 1106)