Findlay v. Howard

In an action for damages for loss of future profits arising out of a wrongful breach of partnership contract, events which happened between the date of the commission of the wrong and the time of the trial must be taken into account in estimating the loss for which the plaintiff is entitled to compensation and in determining what actually was the value of the contract to him at the date of the breach.

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APPEAL from a judgment of the Court of King's Bench, appeal side (1), Province of Quebec, varying a judgment of the Superior Court, sitting in review, at Montreal (2), and maintaining the plaintiff's action. The plaintiff sued to recover damages from the defendant for a breach of a five year partnership contract in a real estate business in Montreal, about twenty-one months before it would have terminated by effluxion of time.

The plaintiff's claim was for $350,000.

The trial judge assessed his damages at $80,000; the Court of Review reduced them to $22,000 and the Court of King's Bench gave judgment for $40,000.

The appellant seeks the restoration of the judgment of the Court of Review; and the respondent, by way of cross-appeal, demands the restoration of the judgment of the trial judge.

*PRESENT:-Sir Louis Davies C.J. and Idington, Anglin, Brodeur and Mignault JJ.

Q.R. S.C. An important quest-on of law was in issue: Is the court, in assessing damages for wrongful termination by a partner of a partnership, entitled to consider facts subsequent to the action, or must it ignore them and assess the damages according to conditions existing at the date of the action?

agree with the principles stated by Mr. Justice Lamothe (now Chief Justice of the Court of Appeal of Quebec) in delivering his reasons for judgment in this case in the Court of Review (1), as to the proper method of estimating and assessing damages in such a case as the present. would myself, however, in applying those principles have increased the amount of the damages somewhat, but I will not dissent on that ground alone and I concur n a lowing the appeal with costs and restoring the judgment of the Court of Review.

J.-The appellant had established a real estate business in Montreal.

On the 26th May, 1910, there was incorporated a company to carry on said business under the name of "Findlay & Howard." On the 22nd of August, 1910, an agreement was entered into between the parties hereto who were in fact the substantial members of the aid incorporation, wherein it was stated

This agreement was to have continued in force for five years.

They carried on business under said name accordingly until the 11th of September, 1913, when appellant requested a termination of same.

There ensued a correspondence between them which. terminated on the 12th December, 1913, by the forcible ejection of respondent by appellant from the premises wherein the business was carried on.

Immediately thereupon the respondent instituted this action for damages for breach of the said agreement.

Meantime, on the 7th October, 1913, a company was incorporated under the name of "John Findlay, Limited," to carry on the business of dealing in real estate and under cover of that name appellant took possession gradually of the entire business which the parties hereto had carried on as aforesaid and continued thereafter to exclude the respondent from any interference therewith, save and except such rights as conceded to him by a partial settlement of their difficulties.

All the pretensions of appellant in way of justification for his conduct have been decisively rejected and are not now in question.

All that is in question herein is the amount of damages which respondent is entitled to.

The last clause of the respondent's declaration which, I think, for reasons I am about to state, seems to have been overlooked, reads as follows:- Inasmuch as the business carried on by the parties hereto was carried on in the name of "Findlay & Howard, Limited," and the fruits thereof passed to it, though the subsidiary agreement, on which in a technical sense their action rests, provided for the term of five years' control, and distribution of profits of said corporate business, we should not have to concern ourselves with anything but such loss of profits as the respondent suffered by his exclusion. Yet I suspect there has, by a confusion of thought, entered into the estimate thereof much that should not have done so.

All the profits made by the carrying on of the business of "Findlay & Howard, Limited," became part of the assets thereof and should not enter into consideration in determining the problem of how much the respondent's share of its profits has been impaired, by the wrongful conduct of the appellant.

It is that problem and nothing else that we have to solve.

The remarkable diversity of judicial opinion which this litigation has developed impresses me with the need of emphasizing this proposition which I have laid down for my guide.

It sometimes happens that when partners disagree and one excludes the other, the community in which they live take sides and thus the business is seriously impaired.

The respondent seems to have possessed so much strong common sense that he did not lend himself to anything necessarily productive of such results. He relied upon this action properly taken, if he could not have obtained an injunction, to preserve his rights and recover his share of whatever loss of profits the business sustained by his exclusion.

The learned trial judge finds the business though carried on, after the exclusion, under the name of "John Findlay, Limited," was the same business, only the name being changed.

If the trial had been postponed for nine months and appellant then had been forced to produce his books a nearly absolutely correct assessment of damages could have been arrived at.

The misfortune is that the trial was too early for that and hence necessarily the result had to be determined by evidence which, in any such like case, must be more or less of a speculative character.

Added to this was the view of the law taken by the learned trial judge which has not been shared in by any of the other judges who have had to consider the case.

Hence his judgment for $80,000 has been set aside

The Court of Review reduced that to $22,000 upon an entirely different view of the law which has been given expression to by Mr. Justice Lamothe, with whose main point of view I agree.

In the details thereof I cannot say that I entirely agree.

There was before the court an account of the business of "John Findlay, Limited," for the year from the 4th November, 1913, to 30th October, 1914, which was audited by same accountant as had been employed in former years by the parties hereto. The net profits were shewn thereby to have been $13,353.86 which, if presumed to have continued for the balance of the five years' partnership now in question, would have produced to respondent a great deal less than the Court of Review awarded him. That court, however, eliminated certain items of expense from that amount and seems to have assumed that the war conditions pending would have resulted in no profit. I am not quite satisfied with the details by which the award thus reached was fixed at $22,000. I think they are open to some criticism yet the substantial result reached is one I should not if in the place of the Court of Appeal have disturbed.

The basis taken was a much more satisfactory one than that taken by the Court of Appeal which took the year ending 30th November, 1913.

And apart from other considerations it included many questionable items which should not have entered into a basic computation of the probable profits from current earnings in the following period. Indeed, it seems to me far from furnishing a safe basis for computation. Had its record been sifted in such a way as to eliminate items in respect of which there could be nothing analogous in the later period now in question and the case threshed out at the trial on some such basis, it might have been made useful, but I hardly think would have justified the result reached by the Court of Appeal.

Again, the Court of Appeal took into consideration the goodwill of the business and in a way that I can find nothing in law or fact to uphold.

Goodwill is sometimes a valuable asset of an old partnership.

That, however, was the asset of the corporate company and hence excluded by the pleading. If you choose to imagine a valuable asset in a five year term I much doubt its existence.

I quite agree that the possibility of a more satisfactory result in an amicable dissolution might have been reached, -but I cannot say that respondent would have reaped much from that factor in this instance even if the partnership had run its full term.

A man might, by misconduct, so wreck a firm as to give rise to such a claim, but here it is something intangible.

As an outside man, as it were, he never had the same chance of securing a share of the clientele in the end as the inside man who had founded the business as appellant had.

As to the respondent not seeking some other occupation or business this was not a case in which any such rule or principle as relied upon can be properly applied. If nothing else, his position as outside man had become such that when the stage of decline in business had been reached he would have been, if staying on in that event, almost in the condition of a gentleman of leisure, as his active occupation would have been gone, and he was entitled to reap that reward with other earnings which his energetic efforts in the outside field had helped to make so successful.

I would allow the appeal and restore the judgment of the Court of Review, but I should hesitate to give costs.

The cross-appeal should be dismissed.

J.-The plaintiff Howard sues to recover damages from the defendant Findlay for what the latter now admits to have been an unwarranted breach by him of a five year partnership contract on the 30th November, 1913, about twenty-one months before it would have terminated by effluxion of time. The plaintiff's claim was for $350,000, and he expressly excepted from this action, and reserved his right to recover, his share and proportion of the assets of the partnership, and to take such other proceedings as might be necessary or advisable for the protection of his interests.

The trial judge assessed his damages at $80,000; the Court of Review, on an appeal by the defendant, at $22,000; and the Court of Appeal, on appeal by the plaintiff, at $40,000.

From the latter assessment the defendant appeals to this court seeking a restoration of the judgment of the Court of Review, from which he had not appealed.

By a cross-appeal the plaintiff demands the restoration of the judgment of the trial judge.

Although "Findlay & Howard, Limited," was an incorporated company, by an agreement between the plaintiff and the defendant it was arranged that they should

This action has, therefore, been treated as a claim made by one partner against his co-partner; and I shall so deal with it. Although the defendant's notice of termination of partnership was given on the 11th of September, 1913, to take immediate effect, for convenience the date of breach has been treated as the 30th of November, 1913-the actual date of the closing of the books of the partnership.

While it does not formulate a definite basis for the assessment of the damages, the Court of Appeal appears to have proceeded on the principle laid down by the Court of Review and to have differed merely in its application to the facts in. evidence.

On the other hand, the difference in principle between the Court of Review and the learned trial judge is fundamental.

A considirant in the judgment of the trial judge reads in part as follows:- Consid6rant que le juge doit, quand il rend sa sentence, se rapporter A l'6tat de chose existant, au moment de la demande, et placer les parties, dang la situation oi elles se seraient trouv6es respectivement, s'il avait pu statuer imm6diatement, les plaideurs ne devant pas souffrir des lenteurs de la justice, qui ne leur sont pas imputables, et que de mime que des dommages r6clam6s par suite d'une rupture ill6gale de contrat, ne sauraient recevoir d'augmentation, par suite de circonstances subsquentes, comme une 16gislation nouvell6, ou de r6centes d6couvertes de la science apportant de nouveaux moyens d'exploitation, de m6me qu'ils ne sauraient recevoir de diminution, par suite de circonstances subs6quentes et d'une nature temporaire, comme le relachement des affaires ou une guerre soudaine, et que si la rupture du contrat que le d6fendeur a voulu dissoudre, malgr6 les protestations de son associ6, n'a pas 6t6 aussi fructueuse qu'il se -l'6tait imagin6, par suite d'6vbnements qu'il n'a pas su ou n'a pas pu pr6voir, il ne saurait en avoir le b6ndfice, et que le demandeur a droit aux dommages causds par le d6fendeur et existant, autant qu'il est possible de les constater, 6, la date du 11 septembre 1913, jour de la rupture violente par le d6fendeur du contrat de soci6t6.

Very early in the course of the trial the learned judge said:- We have to decide the right of the parties at the date of the pleadings, so that what happens subsequently to that we have nothing to do with.

The following passages from the formal judgment of the Court of Review, on the other hand, indicate the basis on which it proceeded:- Considrant que dans l'estimation des dommages-intdrAts r6clam6s par le demandeur, la cour doit tenir compte du pass6 de la dite socit6, des profits qu'elle avait faits jusqu'dN la dissolution et des profits qu'elle devait i'apporter aux associ6s, et cela en prenant en consideration non seulement les faits qui existaient lors de la dissolution, mais encore les faits survenus depuis la dite dissolution, qu'il 6tait possible d'6tablir au moment oi s'est faite l'enqufte;

Consid6rant qu'il est 6tabli par la preuve que depuis 1911 jusque vers le printemps de 1913, le commerce d'immeubles que faisait la socist6 a t trbs prospbre, mais que depuis cette 6poque le commerce a subi une d6pression graduelle jusqu'd la d6claration de guerre qui a eu lieu au commencement d'aofit 1914;

Consid6rant que les tribunaux sont cens6s connattre 'existence de l'6tat de guerre et sa continuation;

Mr. Justice (now Chief Justice) Lamothe, in his opinion, thus states the view of the court:- L'action a t intent6e en d6cembre 1913; et la Cour Sup6rieure a pos6 en principe qu'elle ne devait pas prendre connaissance des faits postdrieurs A cette date. Ce principe existe; il doit recevoir son application dans toutes les causes ot la r6clamation est basde purement sur des faits arriv6s ayant fix6 d'une maniere d6finite la responsabilit4 des parties.

Mais dans les cas la r4clamation est faite pour des dommages futurs, dommages bass sur des faits futurs et probables (savoir sur la continuation pr~sum6e d'une certaine srie de faits et de circonstances), la cour doit s'6clairer A la lumiire des faits survenus subs6quement, et, alors, au lieu de simples probabilitis, la cour a devant elle des faits certains.

He also points out certain misleading elements included in the statement of earnings for the twelve months' period before the breach relied on by the learned trial judge.

The formal judgment discloses the method of calculation by which the court reached its assessment of $22,000.

Of this I shall have something further to say when discussing the quantum of the damages.

The Court of King's Bench, without disapproving of the basis of assessment in the Court of Review, finds: Que le cour de premire instance lui a accord6 un montant trop 6lev6 et que la cour de r6vision a accord6 un montant insuffisant; and after alluding to certain alleged oversights in the estimate made by the Court of Review continues:- Considdrant que le montant le plus probable et le plus 6quitable, devrait 6tre un juste milieu entre montant accord6 par la Cour Supdrieure et celui allou6 par la cour de r6vision, ce qui ferait une somme d'A peu-pris $50,000; mais que, A tout 6v6nement, il est certain, vu la preuve, que le demandeur appelant droit A un chiffre minimum de $40,000;

While claiming by his cross-appeal the restoration of the judgment of the trial court, counsel for the respondent in his factum appears partially to admit the soundness of the basis of assessment adopted by the Court of Review in this passage:- It is not pretended that the past profits must be taken as a fixed and settled basis for settling the amount of future profits, for naturally all business is subject alike to periods of prosperity and depression and revenue from business in hand must necessarily be considered as subject to the ordinary trade contingencies, but the earnings of the firm in the past, especially if such earnings cover a period of years, are a good criterion of probable earnings in the future and deserve most serious consideration.

Citing the case of Wakeman v. Wheeler & Wilson Manufacturing Co. (1), he quotes these two sentences from the judgment:- When the contract is repudiated the compensation of the party complaining of its repudiation should be the value of the contract.

* * * His damages are what he lost by being deprived of his chance of profits.

The same principle is enunciated by the Judicial Committee in Wertheim v. Chicoutimi Pulp Co. (2):- The general intention of the law in giving damages for breach of contract is that the plaintiff should be placed in the same position he would have been in if the contract had been performed.

An apt illustration of the application of these principles is afforded by the House of Lords in British Westinghouse Electric & Manufacturing Co. v. Underground Electric Railways Co. of London (3), the head note of which is as follows:- (1) N.Y. 205.

A.C. at 307. (3) [1912] A.C. 673.

Held, that the pecuniary advantage which the railway company derived from the superiority of the substituted turbines (i.e., substituted for turbines supplied by the defendant which were deficient in value), was relevant matter for the consideration of the arbitrator in assessing damages.

In Mayne on Damages, 8th ed., at p. 141, the author says:- Where the action is to recover damages for some loss arising from the defendant's acts, evidence is admissible to shew that the injury is not so great as would at first appear.

In Arnold on Damages, at p. 23, after referring to the authorities, the learned author says:- The conclusion to be arrived at is that where a contract is broken the cause of action at once accrues. The plaintiff may immediately sue for damages, and the measure of damages must be assessed as being the loss or injury sustained at the date of the breach of contract. But for the purpose of estimating the present loss, probable future events must be considered, and if the bringing of the action be delayed, evidence as to actual subsequent consequential damage or subsequent relevant facts in mitigation of damage may be given.

In Batten v. Wedgwood Coal & Iron Co. (1) where a solicitor acting for a receiver failed to fulfil a duty to have money invested in consols he was held liable for loss of interest which would have been earned by the investment, but he was allowed to set off a gain to the client resulting from a fall in the price of consols between the date that the investment should have been made and the date of hearing. The receiver is only entitled to be recouped what he has actually lost.

In Laishley v. Goold Bicyle Co. (2), in allowing an appeal from Ferguson J., Garrow J.A., speaking for the Ontario Court of Appeal, thus discusses, at p. 324, the proper basis for the computation of damages analogous to those here claimed:- The breach is clear and admitted, and the only reason, apparently, for not permitting the ordinary consequences of adequate damages being adjudged to the plaintiff, is because such damages are, it is said, too vague and conjectural, which is the question to be determined on (2) 6 Ont. L.R. 319.

this appeal.

Damages are very seldom capable of exact calculation, and yet I think many cases can be found in which damages have been awarded where the basis for a calculation was less certain than in this case.

To begin with, there is the undisputed fact of the plaintiff's past earnings from commissions in 1898 and 1899; certainly some evidence of what he would probably have earned in 1900 and, indeed, in my opinion, strong evidence, unless affected by counter evidence on the part of the defendants to shew that these past earnings were abnormal, or that the business had depreciated or come to an end. But we have here not merely the past earnings but the fact that the bicycle business was continued under the new company after the plaintiff's dismissal, during the year 1900, but with, it is said, a diminished market. The manager for the new company puts this depreciation at about 40% of the previous year's demand; and another witness called by the defendants at about 50%. Giving credit to these witnesses, it appears to me that there is proper and even sufficient material for a reasonably correct calculation of the amount of the damages in question to which the plaintiff is entitled, having regard, of course, to what the situation and outlook were at the time of the breach in November, 1899.

The decision of this court in Cockburn v. Trusts & Guarantee Co (1), proceeds on the same view of the aw as does also our decision in Wood v. Grand Valley Railway Co. (2).

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Art. 1073.-The damages due to the creditor are in general the amount of the loss which he has sustained and of the profit of which he has been deprived

Art. 1074.-The debtor is liable for the damages which have been foreseen, or might have been foreseen, at the time of contracting the obligation, when his breach of it is not accompanied by fraud.

264; 37

D.L.R. 614.

Art. 1075.-In the case even in which the inexecution of the obligation results from the fraud of the debtor, the damages comprise only that which is an immediate and direct consequence of its inexecution.

Before proceeding to consider the quantum of damages justified by an application of these principles to the facts in evidence, I shall say a word on the merits, merely to indicate how far they influence me in the assessment.

The trial judge found that la socidt6 qui a 6t6 en existence entre les parties pendant environ trois ans et demi, avec un succhs ph6nominal, a 6t6 dissoute par le defendeur, ill6galement, sans raison ni cause, d'une facon brutale, injuste, diloyale et malhonnite, que le d6fendeur, volontairement et d6lib6r6ment, a renvers6 le superbe 6difice 61ev6 par I'activit4, le I'industrie et 1'habilit6 des associds, afin d'en faire sortir le demandeur, qui en 6tait le propridtaire conjoint, et en devenir le seul mattre et propri6taire, etc.

The Court of Review held que le demandeur a prouv6 l'all6gation essentielle de sa demande, A savoir; que le ddfendeur a mis fin, sans cause 16gitime, au dit contrat de soci6td, et que le d~fendeur n'a pas 6tabli ses alldgations sur ce point.

The Court of Appeal expressed its view in these terms:- Consid6rant que I'intim6 a mis fin au contrat de socidt6 existant entre Iui et I'appelant et cela mois avant l'expiration du terme convenu;

Considdrant que la conduite de l'intim6 sous cc rapport 6tait arbitraire, injustifiable et inexplicable.

Consid6rant qu'aucune raison n'a td donnde par l'intim6 pour justifier sa conduite, lorsqu'il a pr6tendu mettre fin A la dite soci6td. Having declined to hear argument by his counsel on the question how far the defendant's conduct should be deemed morally reprehensible, we should not, in my opinion, treat him as deseiving of censure more severe than that pronounced by the judgment of the Court of Review in which he acquiesced.

But however gross the violation of the plaintiff's right, however discreditable the defendant's motives, the damages cannot be other than compensation for pecuniary loss naturally flowing from the breach. No punitive or vind'cetive consideration may enter into the assessment.

Art. 1075 C.C. must be obeyed. In the case of fraudulent breach of contract actual damages sustained, though unforeseen at the date of the contract, must be made good.

Where the breach is not accompanied by fraud damage which could not have been foreseen cannot be recovered.

Whatever may have been the motive that induced the defendant to break the partnership contract, he took that step freely and deliberately and it must be ascribed to a determination to serve some purpose of his own. In the absence of proof of justification, such a breach should, I think, be regarded as falling within art. 1075 C.C. rather than within art. 1074.

Assuming the conduct of the defendant to merit no more emphatic denunciation than that pronounced by the Court of Review, in regard to such elements of damage as cannot be measured with mathematical exactitude but must be determined on such probabilities as a jury is justified in proceeding upon, he is not entitled to expect that the amount of the plaintiff's compensation shall be weighed in golden scales or to have the sum allowed interfered with on appeal merely because of some trifling error in its computation. On the other hand, he would be entitled to complain of any palpable substantial excess in the award, even were his conduct properly characterized by the vigorous terms employed by the learned trial judge. Under art. 1075 C.C. the plaintiff would have been entitled to any unforeseen damages which were an immediate and direct consequence of the breach although they would not have arisen but for the happening of some events which could not have been anticipated when the contract was entered into. I have no doubt whatever that events which happened after the breach and would have adversely affected the profits that the plaintiff would have made had the contract been carried out until the end of the five year term must likewise be taken into account in estimating the loss for which the plaintiff is entitled to compensation and in determining what actually was the value of the contract to him at the date of the breach.

The purpose of awarding damages being to compensate for a loss sustained by the plaintiff, it seems to me, with great respect for those who take the contrary view, to be repugnant to common sense that he should be permitted to recover for loss which facts within the cognizance of the court at the time of the trial shew he did not suffer merely because upon the facts as they stood at the date of the commission the wrong which subjected the defendant to liability, or even at the time the action was begun, it seemed probable that such loss would be sustained.

If there had not been any clear error in the basis computation in the judgment of the Court of King's Bench, although it increased the amount of the damages allowed by the Court of Review by $18,000, I should have. been loath to disturb it on a mere question of quantum, in a case where it is so obviously impossible to ascertain with anything approaching exactitude the amount of the damage actually sustained. But unfortunately for the plaintiff that court, as appears from the opinion o' Mr. Justice Pelletier, made the mistake of taking the $104,000 of earnings (which represented $67,000 of profits proper to be taken into account in the opinion of that learned judge) for the year ending the 3rd of November, 1913, the period immediately preceding the breach, as having been received during the year which followed the breach, i.e., the year ending on November 30th, 1914. Proceeding on this erroneous footing the learned appellate judge estmated that the net profits for the latter period, -had the plaintiff Howard continued to act as a member of the partnership during it, would have been not the $67,000 actudally earned by the defendant, as he understood, but $33 000 more, i.e., $100,000. It was by adding one-hal of this additional amount, $16,500, to the estimated earnings for the twelve months following the breach (November 30, 1913, to November 30, 1914)

and a further sum of $9,000 ($750 per month), to cover what would have been Howard's probable share of the earnings for the last year of the partnership term (August, 1914, to August, 1915), for which the Court of Review had allowed nothing, to the $22,000 allowed by that court that Mr. Justice Pelletier reached a sum approximating $60,000 as the amount of the plaintiff's damages which, in order to be " bien st6r de ne pas commettre d'erreur," he fixed at $40,000.

The learned appellate judge apparently quite overlooked the fact that the allowance for profits in the $22,000 and $16,500 was based on figures carried down to the 30th of November,' 1914, and that the $750 a month, if a proper addition, should, therefore, have been for nine months and not for twelve months.

Of course a judgment based on such a manifest and fundamental error as that in regard to the year in which the $104,000 was earned cannot be sustained.

There is nothing to shew that had it not been for this mistake the Court of King's Bench would have disturbed the assessment of the damages made by the Court of Review.

But it does not follow that the amount allowed as damages by the Court of King's Bench was clearly wrong or that the assessment of the Court of Review ought to be restored.

The judgment of the latter court has been set aside and before we can restore it we must be sat sfied that the respondent is not entitled to a larger sum than it awards.

We are simply left without the assistance of the opinion either of the trial court or of the Court of King's Bench as to the quantum of the damages, the assessment of the former having been based on an erroneous conception of the law, and that of the latter on a mistaken view of the facts.

Under these circumstances we must determine for ourselves, proceeding largely as a jury, what is a fair amount to compensate the plaintiff for the loss of the profits that he would have received had the partnership business been continued until the 22nd of August, 1915, as the contract of the parties contemplated. Inasmuch as the judgment of the Court of Review is based on a correct appreciation of the law as to the measure of the damages recoverable and has not been appealed from by the defendant, it might at first blush seem to be not unreasonable to limit the inquiry to ascertaining by what sum, if any, the $22,000 which it awards should be increased.

On the whole, however, I think this would not be a satisfactory mode of dealing with the case.

The basis on which the Court of Review estimated the plaintiff's profits for the eight months from November 30th, 1913, to August 1st, 1914, at $17,800 seems to me, with respect, to be too fanciful.

Moreover, there is a patent mistake in its calculation.

Estimating the profits of the business from November 30th, 1913, to November 30th, 1914, at $25,663 (as hereinafter indicated), the court in making its calculation took one-half of this amount, $12,800, instead of $8,500 as the plaintiff's share of them for eight months.

I, therefore, incline to think it wil not be advisable to take as a starting point the $22,000 assessed by it as the plaintiff's damages. In arriving at what would probably have been the profits for the. year from November 30th, 1913, to November 30th, 1914, however, the Court of Review, VIA very properly in my opinion, added to the $13,353 profits made by the defendant during that period, as shewn by his statement, several amounts which should not have been deducted from the gross earnings as against the plaintiff, thus bringing the profits actually earned by Findlay in that year for the purpose of its calculation up to $25,633.

Having regard to the evidence of the witnesses DeCary, Beausoleil, Browne and Davis that the real estate market was, if anything, better between August, 1913, and August, 1914, than it had been during the preceding twelve months and giving due weight to the testimony of Messrs. Peloquin (50% decline in eight months before the war), Short (falling off began in the summer of 1913), Kirkpatrick, Casgrain, Ogilvy and Avard, in view of the enormous earning capacity of Findlay and Howard during the three years when both partners were co-operating, and especially to the profits of at least $67,000, or $33,500 for each partner, made during the twelve months ending November 30th, 1913, I think there should have been allowed for the diminution of earning capacity due to Howard's absence during the latter twelve months over and above the $4,800 salary paid by Findlay to Parker, vho replaced him, an additional sum of about $12,000, making the total probable profits for the year from November 30th, 1913, to November 30th, 1914, had Howard continued in the business, $37,633 instead of the $25,633 estimated by the Court of Review.

On that basis the plaintiff's share would have been $18,800.

No doubt the sales branch of the real estate business, formerly its most profitable part, amounted to little or nothing during the first year of the war.. But, according to the evidence, collections continued to be good.

I incline to think that had the partnership business of "Findlay & Howard"

been conducted during that year, having regard to the volume of its outstanding business, and its very extended connections, by cutting down expenses and "carrying on" on a conservative basis some substantial profits might have been realized.

Placing them at one-fifth of the earnings in the preceding period of one year (obviously the approximation of a juryman), the plaintiff's share for eight months would have been $2,500-about $300 a month in lieu of the $750 a month which Mr. Justice Pelletier was disposed to allow.

If the goodwill of the business. of "Findlay & Howard" should not be regarded as one of the partnership assets as to which the plaintiff expressly reserved his rights, I am unable to find any appreciable value in it having regard to the character of the business and the events which followed the improper breaking up of the partnership.

I am not disposed to make any deduction on account of the plaintiff's receipts from assets taken over by him-the effect of that has been already allowed for in the reduced profits-or because of his failure to take steps to earn money in some other capacity than as a real estate agent.

Fully realizing that my estimate of the damages is quite as likely to be inaccurate as that of the Court of Review or of the Court of King's Bench, but discharging the functions of a juryman as best I can, I would, therefore, estimate the plaintiff's damages at $18,800 plus $2,500, or, say, $21,300 in all.

It follows that the judgment of the Court of Review for $22,000 should be restored.

The appellant should have his costs here and in the Court of Appeal. (dissenting)-Il s'agit dans cette cause de dommages-int6rits r6clambs par le demandeurintim6, Howard, contre le d6fendeur appelant, Findlay, parce que ce dernier aurait ill6galement mis fin A la soci~t6 qui existait entr'eux.

Le 22 aotit 1910, par acte notari6, les parties se mettaient en soci6t6 pour tenir une agence d'immeubles A Montreal.

La durde de la soci~t6 6tait fixde A cinq ans.

Los trois premibres annies ont 6t6 des plus prospires et la soci6t6 a r6alis6 des profits au montant d'environ $450,000.

Le 11 septembre 1913, I'appelant Findlay mettait fin A la soci6t6 sans donner de raisons valables. Howard protesta naturellement contre cette dissolution pr6matur6e.

Des nigociations eurent lieu pour amener une dissolution A 1'amiable.

On s'entendit sur le partage de l'actif; mais on ne put rdussir A determiner la quotith des dommages que Howard r~clamait pour cette dissolution ill6gale.

De la pr~sente action. La Cour Sup6rieure a accord6 $80,000 A Howard. La Cour de Revision a r~duit les dommages A la somme de $22,000.

Howard a alors port6 sa cause en Cour d'Appel qui lui a accord6 $40,000.

Les deux parties appellent de ce dernier jugement.

Findlay accepterait cependant le jugement de la Cour de Revision et ne voudrait tre condamn6 qu'A

$22,000;

Howard voudrait avoir les $80,000 qui lui ont 6t6 accordies par la Cour Supirieure. Nous avons alors un appel de la part de Findlay et un contre-appel de la part de Howard.

La Cour Sup6rieure n'a pas voulu prendre en consid6ration les faits qui ont eu lieu post6rieurement A L'institution de Laction mais elle a d6clar6.

La Cour de Revision a, au contraire, d6cid6 de prendre en consid6ration les faits survenus depuis la dissolution de la soci6t6 et qui ont 6t6 6tablis au moment oii s'est faite 'enqu~te.

Voilh les deux points de vue diff6rents auxquels ces deux cours se sont plac6es.

Si nous avions A disposer de cette cause d'apris les principes du droit anglais, il y a de nombreuses d6cisions h l'effet que l'enquite peut porter sur les faits ant6rieurs aussi bien que post6rieurs A l'institution de laction et aux plaidoiries.

Sowdon v. Mills (1); British Westinghouse v. Underground Electric (2); Cockburn v. Trusts & Guarantee Co. (3); Halsbury, vol. 18, No. 522. Mais cette cause ayant origin6 dans la province de Qu6bec, elle doit 6tre d~cide suivant les principes du droit en force dans cette province; et, par cons6quent, A moins que les deux legislations ne soient semblables, je ne puis accepter les nombreuses autorit6s anglaises cit6es par l'appelant dans son factum.

Il est de principe 616mentaire en droit civil que les jugements ont un effet r6troactif et remontent, en g6n6ral, au jour de la demande et des plaidoiries. Si les parties veulent faire adjuger sur des faits post~rieurs A leurs plaidoiries respectives, ils doivent se pourvoir en consequence.

Ainsi le demandeur peut pendant l'instance former une demande incidente pour demander un droit 6chu depuis l'assignation (art. 215 C.P.C.).

Il en est de m6me pour le d6fendeur qui peut faire une demande reconventionnelle pour une r6clamation de deniers qu'il peut avoir r6sultant d'autres causes (art. 217 C.P.C.).

Si certains faits sont survenus depuis la contestation, le juge peut permettre de faire valoir, par voie de plaidoyer ou de r6ponse puis darrein continuance ces faits nouveaux (art. 199 C.P.C.). Schiller v. Daoust (1); Duhaut v. Pacaud (2); Rapport des codificateurs sur art. 199 C.P.C.-La preuve doit ensuite se faire sur les faits mentionn6s dans la demande j. et la d6fense et dans les demandes, incidentes ou reconventionnelles ou d6fenses ou r6ponses puis darrein continuance. (Arts. 286, 334, 339 C.P.C.)

Le jugement qui est ensuite rendu a un caractare d6claratif et a pour objet de constater un droit pr6existant.

Il rdsulte de dit Dalloz, R6pertoire Pratique, No. 585, vo. Jugement,

Nous voyons le mime principe 6nonc6 dans Garsonnet, par. 1161; Garsonnet & Bru, No. 737; et dans les d6cisions suivantes; Dalloz, 1868-1-397; Dalloz, 1901-1-621.

Il r6sulte de cela que les droits des parties dans cette cause doivent 6tre d6termin6s de la date de l'institution de Faction et non pas suivant les faits et les circonstances qui sont post6rieurs.

Ainsi la Cour de Revision a r6duit les dommages parce que le commerce d'agence d'immeubles, dans lequel les parties 6taient engag6es, s'est trouv6 s6rieusement affect6 par la guerre.

La guerre a t6 d6clar6e en aodt 1914.

L'action avait 6t6 institu6e en d6cembre 1913; et, suivant moi, les droits des parties doivent 6tre d6termin6s et les dommages doivent tre 6valu6s de cette dernibre date, c'est-A-dire du mois de d6cembre

Si des 6v6nements post6rieurs ont influ6 sur la prosp6rit6 ou l'insucc~s du commerce des parties, nous n'avons pas A nous en prioccuper.

Le juge, en 6valuant les dommages r6sultant de l'inex6cution d'une obligation, doit prendre en consid6ration les evdnements pass6s et les perspectives de I'avenir. Par exemple, dans le cas actuel, il pouvait bien examiner les profits que les associ6s avaient faits dans le pass6, les tendances du commerce A augmenter et A diminuer, et les pr6visions ordinaires qui peuvent Atre faites dans ces circonstances pour l'avenir. Mais il doit se placer A l'6poque de l'institution de l'action et voir quels 6taient les dommages que les parties pouvaient s'attendre de payer et de recevoir A raison de l'inex6cution de l'obligation. Pouvait-on alors pr6voir qu'une guerre mondiale 6claterait d'ici A quelques mois?

Il n'y en avait aucun indice.

Vouloir, maintenant que la guerre a tb d6clar6e, prendre en consid6ration l'effet de la guerre sur les operations commerciales des parties, c'est violer, suivant moi, un des principes 616mentaires du droit civil.

Findlay a jug6 h propos, dans l'automne de 1913, de ne pas ex6cuter son obligation, qui 6tait de maintenir ce contrat de soci6t6 jusqu'au 22 aott 1915. Alors on doit le condamner aux dommages qui pouvaient 6tre pr6vus et d6terminds quand il a poursuivi. Dans le cas des expropriations la loi determine une date A laquelle la valeur d'une bitisse expropri6e devrait 6tre d6termin6e, si une guerre survient subs6quemment qui d~truit cette bitisse, on doit alors d6terminer la valeur de cette bAtisse non pas au jour de la sentence arbitrale mais au jour fix4 par le statut. McCarthy v. City of Regina (1); Crisp on Compensation, p. 70.

La Gazette des Tribunaux rapporte une d6cision de la Cour de Paris qui est A l'effet qu'il faut se placer pour calculer l'4tendue du prejudice & une 6poque voisine du terme fix6 pour 'ex6cution du march6. s'agissait dans cette cause de marchandises dont le prix avait 6 affect6 par la guerre.

(1917-2-119.) J'en suis done venu A la conclusion que la Cour de Revision a fait erreur en prenant en consid6ration l'effet de la guerre sur le commerce des parties. Maintenant quels sont les dommages auxquels le demandeur Howard a droit?

Par les articles 1073 et suivants du Code Civil, les dommages-int~rits sont le montant de la perte qu'il a faite et du gain dont il a 6t6 priv6; et si le d6biteur n'est pas coupable de dol, il n'est tenu que des dommages qu'on a pr6vus au moment du contrat; et, dans tous les cas, les dommages-int6rits ne comprennent que ce qui est une suite immediate et directe de cette inex6cution.

Findlay avait un contrat de soci6t6 qui le liait pour cinq ans. Apris un peu plus de trois ans il met fin A ce contrat; et, au lieu de poursuivre pour le faire r6silier s'il avait des raisons valables, il se fait justice h lui-meme en formant une nouvelle compagnie et en transportant ou faisant transporter A cette nouvelle compagnie toutes les affaires de l'ancienne compagnie Findlay & Howard.

Cette conduite de la part de Findlay le constitue de mauvaise foi; et alors on doit lui appliquer les r~gles 6dict6es par l'article 1075 C.C. qui punit le d6biteur qui se rend coupable de dol.

Le dol dont parle cet article ne consiste pas dans ces manceuvres frauduleuses qui ont pour but d'amener quelqu'un A contracter et dont il est question dans l'article 993 C.C., mais c'est le fait par lequel le d6biteur frustre le cr6ancier de ses droits. Baudry-Lacantinerie, vol. no. 483. Boileux sous art. 1151 C.N.

Les profits avaient It dans l'ann6e de la dissolution de $104,000.

Dans ce chiffre, se trouve le guide le plus que les tribunaux doivent suivre pour d6terminer la perte que Howard a subie par la dissolution de la soci6t6.

On a pritendu que dans l'automne de 1913, c'est-a-dire. lors de la dissolution, le commerce d'immeubles avait une tendance vers la baisse. Sur ce point la preuve est contradictoire.

Je vois, entre autres t6moins, M. D~cary qui jouit d'une trbs grande r6putation, qui affirme le contraire.

Mais si on prend les profits faits par les associ6s les anndes pric6dentes et ceux faits en 1913, il est 6vident que le commerce d'immeubles subissait une d6pression.

Et alors nous devons prendre ce fait en consideration.

Il convient de mentionner que de cette somme de $104,000 on doit d6duire certains profits que Howard devra recevoir sur la part de l'actif qui lui est bchu par le partage.

Ces profits ont 6t6 estimbs par le Cour de Revision A environ $37,000.

En d6duisant ces $37,000 des $104,000, nous arrivons a une somme de $67,000 pour l'ann&e, ou $5,500 par mois.

Du 30 novembre 1913, date A laquelle cet 6tat a t pr6par6, jusqu'au 22 aofit 1915, date la soci~t6 se terminait, il y avait encore plus de vingt mois.

En multipliant la somme de $5,500 par 20 j'arrive a un profit probable, que la soci6t6 aurait fait, de la somme de $110,000, soit pour Howard une somme de $55,000.

On devait pr6sumer, comme je l'ai dit plus haut, que les profits seraient un peu moindres que cela A cause de la tendance du march6 vers la baisse. Je crois done qu'en accordant $40,000, c'est-a-dire la m~me somme que celle qui a 6t6 accord6e par la Cour d'Appel, nous rendrions pleine et entibre justice aux parties.

Je serais done d'opinion de renvoyer l'appel et le contre-appel avec d6pens.

J.-This case raises some important questions on which notable differences of opinion have existed between the different courts that have dealt J. with it, although in each court the judgment was unanimous.

There is before this court an appeal and a cross-appeal shewing that neither party is satisfied with the judgment rendered by the Court of King's Bench.

The main respondent and cross-appellant, Howard, would, however, accept the latter judgment if he cannot get the judgment of the Superior Court restored.

On the other hand, the main appellant and cross-respondent, Findlay, is now satisfied to abcide by the judgment of the Court of Review, which, moreover, is conclusive against him inasmuch as Howard alone appealed from it. The only question at issue under these circumstances is the amount of damages, the liability of Findlay to pay to Howard at least $22,000, the amount granted by the Court of Review, being conclusively established.

Findlay and Howard had entered into a partnership to carry on a real estate business in Montreal for a term of five years from the 22nd August, 1910, which business they conducted by means of a joint stock company, "Findlay

& Howard, Limited." Their profits were phenomenal, especially at first, owing to the real estate boom then prevailing in Montreal and vicinity.

The partnership had nearly two years to run when, on the 11th September, 1913, Findlay put an end to it without cause or reason.

Howard now claims damages and these must run from a minimum of $22,000, allowed by the Court of Review, to a maxiumum of $80,000 granted by the Superior Court. The Court of King's Bench awarded $40,000.

There is, however, an important question of law on which the Superior Court and the Court of Review took opposite sides, but which was not expressly passed upon by the Court of King's Bench.

Is the court, in assessing damages for Findlay's wrongful termination of this partnership, entitled to consider facts subsequent to the action and shewing what profits the partnership would have earned had there been no dissolution?

Or must it ignore all such facts, the most important of which is the Europeai war which paralyzed the real estate business in Montreal, and assess these damages on the basis of conditions as they existed on the 11th September, 1913, date of the breach of contract?

The Superior Court adopted the second alternative, the Court of Review the first. The learned trial judge lays down the rule that damages being, in general, according to art. 1073 C.C., the court must, in rendering its decision, go back to the conditions existing at the date of the action, and place the parties in the situation in which they would have been had the judgment been rendered immediately, and that the damages for breach of contract can neither be increased by reason of subsequent circumstances, such as new legislation or recent discoveries of science, nor diminished on account of subsequent facts of a temporary nature, such as a slackening of business or a sudden war.

I would not feel disposed to quarrel with this rule rightly applied to a proper case.

But, as I construe Howard's action, he is claiming, not the value of his share in the partnership as it stood at the date of the breach, for he expressly reserves his right to recover his share and proportion of the assets of Findlay & Howard, Limited, but the value of his share of the profits the partnership would have realized had not Findlay's wrongful act brought it to an end.

That is to say, Howard demands really future damages, and I cannot follow the learned trial judge when he estimates the FDLAY value of the future profits of the partnership by considering only its past profits, as. if they were sure Mignault J. to continue, and closes his eyes to events which had happened since the action, but before the trial, and which shewed that these future profits would in no wise have been comparable to those made before the date of the breach.

Where future damages are claimed, future conditions must necessarily be considered, and what better evidence of conditions, which were in the future at the date of the breach, can be made than by shewing, at the date of the trial, what has actually occurred since the breach of contract? I, therefore, think that in his estimation of the damages granted to Howard, the learned trial judge has adopted an erroneous principle, and consequently his judgment cannot be restored.

The Court of Review, on the contrary, lays down a rule which I fully accept as applied to this case, and which I quote:- Cbnsid6rant que dans 1'estimation des dommages-intir~ts rdclam6s par le demandeur, la cour doit tenir compte du pass6 de la dite soci6t6, des profits qu'elle avait faits jusqu'd la dissolution et des profits qu'elle devait rapporter aux associds, et cela en prenant en considdration non seulement les faits qui existafent lors de la dissolution, mais encore les faits survenus depuis la dite dissolution, qu'il 6tait possible d'6tablir au moment oil s'est faite l'enquite.

The judgment of the Court of King's Bench, I have said, does not expressly pass upon the question to which I have just referred, but holding that both the Superior Court and the Court of Review were in error, the former in granting too much, the latter in allowing too little, it comes to the conclusion that le montant le plus prqbable et le plus 6quitable devrait 6tre un juste milieu entre le montant accord4 par Ia cour supdrieure et celui allou6 par la cour de revision, ce qui ferait une somme d'A peu pris 850,000, mais que, A tout 6vdnement, il est certain, vu la preuve, que le demandeur appelant a droit A un chiffre minimum de 840,000.

If I may say so, with deference, this selection of a juste milieu between the amounts allowed by the Superior Court and the Court of Review, is rather a too rough and ready way of determining the amount which Howard ought to receive, and I cannot feel that I should adopt it. Moreover, Mr. Justice Pelletier, who alone gave reasons for judgment, seems to take it that the partnership realized $104,000 for the year which followed the breach, whereas these profits were for the year which preceded the breach and had only a couple of months to run when Findlay broke the partnership.

I would, therefore, apply the rule adopted by the Court of Review, and consider the profits made by the .partnership during the past up to the date of the breach, and those which it would have made had it continued for its full term, estimating the latter in the light of the circumstances disclosed by the evidence as having happened up to the date of the trial, some of which, like the gradual decline of the real estate boom in Montreal, could have been foreseen in September, 1913, and others, like the European war, were of such a nature that no man not versed in the secrets of diplomacy and of continental politics could.have ventured to predict them.

In my view, the question of good or bad faith or of fraud, or what the French text of the Civil Code calls "dol" in articles 1073, 1074 and 1075 C.C., has little application here, for I am willing to grant that Findlay acted in bad faith in breaking his contract, and he is liable for all damages foreseen or not which Howard suffered through the breach, provided that they directly resulted therefrom.

If he is liable for the unforeseen but direct consequences of his breach of contract, he should at least, in an action claiming future damages, have the benefit of unforeseen circumstances, ascertained at the trial, shewing that these future damages were not incurred, or were incurred in a less degree that seemed probable at the date of the breach.

This, moreover, is not a case where I would deem myself justified in granting punitive damages, although the conduct of Findlay was very reprehensible, or anything more than real damages, for Howard, who, I repeat, claims damages for the loss of future profits, should not be placed in a better position by reason of the breach of his contract than he would have found himself had the breach not occurred. Taking now the past profits of the partnership, they are as follows:- For the first 18 months.

... ....

$203,318.53 For the year ending on the 30th

November, 1912 .................

161,216.83 For the year ending on the 30th

November, 1913 .................

104,121.05 and from the latter sum certain amounts mentioned by the Court of Review should be deducted.

The evidence shews that the boom was at its height up to the close of 1912, that it then began to decline, and that the bubble-because, like so many other land booms, it was only a bubble-was rapidly nearing the bursting point when the war suddenly broke out to the astonishment of the whole world. The war killed it, and thenceforth, the witnesses say, the real estate business was dead.

The decline of the boom is shewn by the figures I have given as it affected Findlay & Howard, Limited. After the breach, Findlay continued the same business in the same premises, with the same subsidiary companies or syndicates formed by the parties, with.also the same employees, with the exception of Edward C. Parker whom he engaged to replace Howard, while the latter did not go in the real estate business fearing, he states, had he competed with Findlay, that he might endanger his security for his claim for damages against Findlay, and yet Findlay's profits, for the year ending on the 30th November, 1914, are shewn by his balance sheet to have been only $13,353.86.

But the Court of Review refused to take the latter figure as being a fair statement of the profits made by Findlay in the year ending on the 30th November, It deducted from the amounts indicated by Findlay's balance sheet as expenses the following items:- ..............

......

.......

high...............

..............................

Then the Court of Review compared the eight months of pre-war conditions in Findlay's first year, considering the business as having been dead during the four months of war, to the corresponding period in Findlay & Howard's last year, and found that Howard received for the latter period about.....................

$22,300.00 and that he would have been paid for the former period about...........

12,800.00 Making a total of ...............

$35,100.00 This would be, if Howard's share of profits were VIA averaged, as the Court of Review averaged them, an amount of $17,550 for each period, so the court fixed Howard's share of profits for the year ending on the 30th November, 1914, had the partnership continued, at $17,500.

To this figure it added the sum of $4,500, which is estimated as Howard's share of the additional profits which he would have brought to the partnership had he not been excluded therefrom, and thus arrived at the total figure of $22,000 which it considered as representing Howard's loss of future profits through the breach of the contract of partnership.

I must confess that, in my opinion, the Court of Review dealt liberally with Howard.

Its figures would shew that, the business having been at a standstill since the 1st of August, 1914, on account of the war, Howard would have received, for the year 1914, one-half of

$25,633.86, or $12,816.93, and not its average of $17,500, which would decrease the damages it allowed by nearly $5,000.

I fail to see the reason for averaging two years during which the land boom gradually and very rapidly declined, but Findlay is bound by the judgment of the Court of Review, and the amount this judgment granted to Howard cannot be decreased.

I have said that the judgment of the Superior Court cannot be restored, so the choice is between the judgment of the Court of Review and that of the Court of King's Bench.

I cannot, with deference, agree with the latter court when it endeavours to arrive at a juste milieu between the judgment of the Superior Court, which proceeded on an entirely wrong principle, and that of the Court of Review whose governing rule as to these future damages I fully accept.

And I fail upon due consideration to find any satisfactory reason for the figure of $40,000, allowed by the Court of King's Bench, which it merely says the evidence fully justifies. Had it referred more in detail to this evidence, which after all, is the evidence furnished by the balance sheets, I would have felt more hesitation in rejecting its estimate of Howard's loss, but, with all respect, I must say that Mr. Justice Pelletier seems to me to have been in obvious error when he stated that the Court of Review adopted as its basis $104,000 for the year following the breach of contract, and made thereto certain additions and therefrom certain subtractions, which reduced this figure of $104,000 to $67,000.

Then the learned judge adopts $67,000 as the basis of his own calculation of Howard's loss of profits.

The error here is that the Court of Review, with reference to the $104,000, reduced to $67,000, was dealing with the year preceding the breach for which Howard received his share of profits, and not with the year following it, and. that Mr. Justice Pelletier used the figure of $67,000 as the foundation for his calculation of the profits which would have accrued during the year following the breach.

The judgment of the Court of King's Bench also criticises the judgment of the Court of Review because the latter judgment allowed nothing for the goodwill of the partnership.

This is a matter of some difficulty, because by the supplementary agreement of the parties, dated the 9th January, 1913, the goodwill of "Findlay & Howard, Limited," was valued at $12,500 in the case of one of the partners dying during the partnership, and the survivor purchasing the concern.

But the goodwill of "Findlay & Howard" formed a part of its assets and Howard's right to claim his share of these assets was reserved by him, so I cannot look upon it as properly included in his action.

It is true that Howard alleges that he has been deprived of all his right and interest in the future profits and goodwill of the partnership, which goodwill, he says, has been utterly destroyed by Findlay's wrongful acts.

I am not satisfied, however, that after the beginning of the war this goodwill had any value.

Moreover, the goodwill mainly consists in the name and Findlay did not use the name of "Findlay & Howard, Limited," and he agreed to give Howard the first offer of the leases of the business premises.

Under these circumstances I do not feel justified in adding anything to the amount allowed by the Court of Review.

My opinion in this very difficult case is, therefore, that the appeal of Findlay should be allowed and the cross-appeal of Howard dismissed, with costs in favour of Findlay here and in the Court of King's Bench, and that the judgment of the Court of Review should be restored.

Appeal allowed with costs; Cross-appeal dismissed with costs.