The judgment of La Forest, L'Heureux-Dubé, Sopinka, Gonthier, Stevenson and Iacobucci JJ. was delivered by
The Canadian National Railway Company ("CN") called for tenders for the catering of meals nationwide for its track crews, from March 15, 1985 to March 14, 1986. It was estimated that 1,092,500 meals would be required.
The respondents are industrial caterers which operate as a single entity. I will refer to them together as "Rainbow". They bid $4.94 per meal. Then CN stated that the number of meals required would be only 85% of the previous estimate. Rainbow submitted a new bid of $5.02 per meal, and this was successful. It turned out that far fewer meals were required; there was something like a 30% reduction. The contract was not a financial success for Rainbow. They suffered a loss of over $1,000,000 by the time they terminated the contract on September 21, 1985, on thirty days' notice as permitted by its terms.
(a) British Columbia Supreme Court (Gibbs J.)
Rainbow sued in the British Columbia Supreme Court for fraud, breach of contract, negligent misrepresentation and interference with contract. This decision is unreported but is digested at [1987] B.C.W.L.D. 2838. Gibbs J., as he then was, found that Rainbow had been induced to enter into the contract by representations made on behalf of CN by its employee Michael Doroshenko, as to the number of meals required; and, that Doroshenko ought to have known that the representations were substantially wrong, and took no steps to inform Rainbow. This led to a finding of negligence and fraudulent misrepresentation against both Doroshenko and CN. The judge dismissed the claim for interference with contract, and found it unnecessary to address the breach of contract claim.
Gibbs J. awarded damages of $1,194,525 (plus interest and costs) for the loss suffered by Rainbow. This was the whole loss that Rainbow made on the contract. A claim for loss of profits on other potential contracts was denied as too speculative. The judge noted that certain of Rainbow's invoices had been approved but not paid, and left the matter for counsel to resolve by agreement.
(b) British Columbia Court of Appeal (Craig, Esson and Wallace JJ.A.)
CN and Doroshenko appealed, and Rainbow cross-appealed the disallowance of its claim on the invoices. The decision is reported at (1988), 30 B.C.L.R. (2d) 273. The Court of Appeal allowed Doroshenko's and CN's appeals in respect of the finding of fraud, and allowed Doroshenko's appeal in respect of the finding of negligence against him. It dismissed the cross-appeal. The Court remitted the matter to the trial judge for the determination of the breach of contract claim and for the reassessment of damages for the misrepresentation claim.
Esson J.A. found that Doroshenko's failure to provide accurate information was due to poor information flow within CN. This supported liability for negligent misrepresentation on the part of CN, but Doroshenko could not be held personally negligent for this poor information flow. Moreover, the fraud claim could not be supported against either defendant. CN's slow response to the emerging problems could not be characterized as its remaining silent when it knew that false information had been given earlier. There was no deliberate misleading of Rainbow, only poor communications.
With respect to damages, Esson J.A. stated that accepting the applicability of the tort measure, there would still have to be a finding that but for the misrepresentation, Rainbow would not have entered into any contract with CN. There was no such finding. Esson J.A. said at p. 308:
The evidence does not, in my view, provide any reasonable support for the view that [Rainbow], had it been presented with an accurate estimate, would have followed any different course except to bid a higher price per meal as, it is reasonable to assume, would all other bidders. What the plaintiff was "tricked out of" was not its whole investment in the contract but the additional remuneration per meal for which it would have stipulated had the estimate been given with reasonable care.
He therefore remitted the matter to the trial judge for the determination of damages. It is not clear whether the reassessment of damages by the trial judge was to be on the basis that Rainbow would have rebid or whether this was a matter left to the trial judge. Also, other allegations of breach of contract which had not been dealt with at trial were required to be considered at the new hearing. As to Rainbow's cross-appeal on the invoices, Esson J.A. said that damages were now at large on the rehearing and the matter could be addressed there.
Wallace J.A. agreed with Esson J.A. but wrote his own judgement as to the liability issues. On damages, he expressed a concurrence with Esson J.A.
Craig J.A. dissented. He thought that all findings of the trial judge were supportable, and he would have dismissed CN's appeal. He would have allowed the cross-appeal on the invoices.
(c) British Columbia Supreme Court (Gibbs J.)
This decision is reported at [1989] 1 W.W.R. 714. Gibbs J. first considered the reasons of Esson J.A. to decide whether the Court of Appeal had made a finding that Rainbow would have entered into the contract even had the misrepresentation not been made, in which case the assessment of damages would merely reflect how much more the contract price would have been under an accurate estimate; or, whether Esson J.A. merely identified this as an issue which had to be resolved before the correct measure of damages could be determined. He concluded that the latter was correct.
After reviewing the authorities, he said that there was no rule that the plaintiff has to make a statement in evidence to the effect that he would not have entered the contract had he known the true facts. The plaintiff must prove negligent misstatement, reliance upon it, inducement and detriment; and then he is entitled to all damage suffered. He said at pp. 721-22:
Accordingly . . . it is not necessary to assume a willingness to contract at a higher price or to speculate upon what that higher price might have been.
. . .
The plaintiff sought damages in tort and, secondarily, for breach of contract. It proved the dollar amounts for the two different measures in evidence. It did not attempt to calculate what the per meal tender might have been, taking into account all of the different variables, as if it had been asked to bid upon what ultimately turned out to be the actual number of gangs, and sizes and locations, and assuming it would have been prepared to accept the risk associated with smaller meal volumes. The court is in no position to do so. And it seems to me that if I awarded the breach of contract dollar figure on the assumption that it represented the difference between actual contract price and the "would have been demanded" contract price I would be compensating on the breach of contract measure whereas, on the authority of Doyle [v. Olby (Ironmongers) Ltd., [1969] 2 Q.B. 158 (C.A.)] and [Esso Petroleum v.] Mardon [[1976] Q.B. 801 (C.A.)], the plaintiff is entitled to the tort measure for negligent misstatement.
In the result, he made the same award, but added thereto those of the invoices which remained unpaid. The new award was $1,232,141 plus interest and the costs of both trial level decisions.
(d) British Columbia Court of Appeal (Hinkson, Lambert, Toy, Southin and Cumming JJ.A.)
CN appealed again, but the appeal was dismissed. The decision is reported at (1990), 43 B.C.L.R. (2d) 1. Lambert J.A. wrote for himself and Hinkson, Toy and Cumming JJ.A. Lambert J.A. held that Gibbs J. was correct that Esson J.A. had not made a positive finding with respect to whether Rainbow would have rebid had it known the true facts.
The second issue was whether Gibbs J. should have proceeded to determine that had Rainbow known the facts, it would have entered into the contract at some higher price. Lambert J.A. said at p. 12 that it may be possible in some cases for a defendant to show that the victim of the misrepresentation would have entered the contract even had the facts been known; and it may even be possible for the defendant to show what the terms of that contract would have been. In such a case:
. . . the measure of the loss flowing from the negligent misstatement, on the usual tort standard of placing the plaintiff in the position he would have been in if the tort had not occurred, would be the difference between the generally foreseeable financial consequences of the contract that was made and the generally foreseeable financial consequences of the contract that would have been made if the true facts had been known to the plaintiff.
It is not clear from Mr. Justice Gibbs' reasons, following the second trial, that he accepted that proposition of law from the reasons of Mr. Justice Esson. But what is clear is that even if he had accepted it he would not have found in this case that [Rainbow] would have entered into the contract at a different price if it had known the true facts about the number of meals. [Emphasis added.]
Accordingly, the Court of Appeal did not interfere with the decision of Gibbs J. that it was not necessary to make a finding that the plaintiff would have contracted at some higher price. Submissions were made by CN that the trial judge had not applied the correct measure of damages but these were dismissed.
Southin J.A. dissented. While she accepted the majority view that Gibbs J. was not bound by the previous decision on the question of Rainbow's rebid, she would have assessed the damages on the basis of breach of contract, by looking at what position the plaintiff would have been in had CN bought as many meals as it said it would. She did not consider that the measure of damages in this case would be different whether one applied the tort or contract measure. She would have allowed the appeal and remitted the case for a new trial to determine the damages for negligent misrepresentation and to adjudicate upon the breach of contract claims.
The appellant CN raised two main issues. The first is whether Gibbs J. was bound on the rehearing by a finding in the first judgment of the Court of Appeal. CN said that the Court of Appeal in the first appeal found as a fact that but for the misrepresentation, Rainbow would still have bid, but at a higher price. It was argued that damages had to be assessed on that basis, and not by simply awarding all of the loss that Rainbow made. The binding effect of the judgment of the Court of Appeal was supported both on the basis that it was the decision of a higher court in the same case and that the matter was res judicata.
The second issue, in the alternative, is whether the courts below have erred in the way that damages have been calculated.
I accept the decision made by Gibbs J. on the rehearing and by the Court of Appeal on the second appeal, which was unanimous on this point, that the decision of the Court of Appeal on the first appeal was not intended to be binding on Gibbs J. in respect of the factual question of what Rainbow would have done had it not been misled. As Lambert J.A. said at p. 11:
If a finding of fact becomes relevant, if it is closely disputed between the parties, if it turns on an assessment of the evidence, and if no finding has been made on that question of fact by the trial judge, then we almost invariably refer the matter back to the trial judge for a decision on the disputed question of fact.
In view of this finding, the issue of res judicata does not arise.