NOVA SCOTIA COURT OF APPEAL
Citation: Union of Icelandic Fish Producers Ltd. v. Smith, 2005 NSCA 145
Date: 20051115
Docket: CA 237340
Registry: Halifax
Between:
The Union of Icelandic Fish Producers
Ltd. (S.I.F.) and S.I.F. Canada Limited, a body corporate
Appellants
v.
Roger H. Smith
Respondent
Judges: MacDonald, C.J.N.S.; Freeman and Cromwell, JJ.A.
Appeal Heard: September 20, 2005, in Halifax, Nova Scotia
Held: Appeal allowed in part per reasons for judgment of Cromwell, J.A.; MacDonald, C.J.N.S. and Freeman, J.A. concurring.
Counsel: Alexander Beveridge, Q.C. and Andrew Fraser, for the appellants
Andrew Nickerson, Q.C., for the respondent
Reasons for judgment:
I. INTRODUCTION:
[1] Mr. and Mrs. Smith sold their businesses and property to the Union of Icelandic Fish Producers Ltd. (“SIF”). As part of the transaction, Mr. Smith agreed not to compete with SIF for five years. He did this because SIF assured him that there was a place for him with the company which would provide him with a substantial wage. After the sale was completed, it became clear that there was not and never had been any place for Mr. Smith with SIF.
[2] Mr. Smith sued SIF for negligently misrepresenting that there was a place for him with the company. (He also claimed there had been an oral contract of employment, but that claim was dismissed at trial and there is no appeal with respect to it.) SIF defended and counterclaimed. It said that Mr. Smith had breached the non-competition agreement and failed to prepare a report for which SIF had paid him $25,000.
[3] The issue of liability only was tried by Hall, J. The judge found SIF liable to Mr. Smith in negligent misrepresentation and set aside the non-competition agreement. With respect to SIF’s counterclaim, the judge found in SIF’s favour and directed that the $25,000 paid by SIF to Mr. Smith should be set off against any damages to him by SIF. SIF appeals from the judge’s findings relating to negligent misstatement. There is no appeal by Mr. Smith with respect to the counterclaim.
II. ISSUES AND SUMMARY OF CONCLUSIONS:
[4] The appellants say that the judge erred in three respects:
1. in his finding concerning the nature of SIF’s representations;
2. in finding the representations to be actionable; and
3. in linking the representation to the non-competition agreement and setting that agreement aside.
[5] For the reasons which follow, I would reject the first two of these points, but accept the third. On the first point, the judge was not always as consistent as he might have been in describing the representations which he found. However, the essence of his conclusion is sound: SIF assured Mr. Smith that there was a place for him with SIF when SIF knew this was not the case. On the second point, the judge did not err, in my opinion, in finding these representations to be actionable. However, he did err, in my respectful view, by linking the representations solely to the non-competition agreement and in setting that agreement aside. The non-competition agreement was just one aspect of the overall agreement of purchase and sale. On the evidence at trial, the judge was wrong to treat it as something that could be divorced from that overall transaction and set aside.
III. FACTS AND DECISION AT TRIAL:
1. Summary of the evidence:
[6] The appellants take issue with a number of the trial judge’s factual findings and so I must provide a more thorough review of the evidence than would otherwise be required.
[7] Mr. and Mrs. Smith established Sans Souci Seafoods Limited, a salt fish processing and marketing company. Mrs. Smith was the sole shareholder but Mr. Smith was the driving force in the business and had a beneficial interest in the shares.
[8] SIF is an established Icelandic fish processing company. It was one of Sans Souci’s principal suppliers of raw fish and the two companies had been doing business since 1989 or 1990. Mr. Smith testified that a high level of trust had always existed between the two companies.
[9] In response to an inquiry from Mr. Smith, SIF expressed interest in buying Sans Souci. A $6.5 million transaction resulted. It was completed swiftly — from letter of intent to closing in just over a month — and with relative informality. There were three important meetings: the first, in late August of 1997, resulted in a letter of intent, the second, in early September, led to the agreement of purchase and sale and at the third on September 30 and October 1, the parties closed the transaction. Here is what happened.
[10] Representatives of the two companies met in Tusket in late August of 1997. Present for SIF were Gunnar Orn Kristjansson, its president and chief executive officer (Mr. Kristjansson’s name appears in the transcript as “Kristjasson”, but I will use “Kristjansson”, the form which appears in the documents and in the appellants’ factum), and Sighvatur Bvjarnason, the chair of its board of directors. The parties signed a letter of intent. It provided that SIF would buy all the issued shares of Sans Souci, as well as the Smiths’ residential property adjacent to the Sans Souci land and the land, buildings, equipment and vehicles of Tara Nova Seafoods Inc., another fish processing company owned by the Smiths. The letter noted, as everyone clearly understood, that the SIF board had to approve the deal before it could proceed.
[11] The letter of intent does not mention a non-competition agreement or Mr. Smith’s employment with SIF. As to whether these matters were discussed in the negotiations leading up to the signing of the letter of intent, there was conflicting evidence at trial.
[12] Mr. Smith’s evidence was that he had been assured by SIF throughout that there was a role for him with the company, the precise details of which would be worked out after closing. His evidence was clear that the question was not whether there was a role for him, but what the precise details of that role would be.
[13] Specifically, Mr. Smith testified that there was discussion that SIF would require a non-competition agreement and that he had indicated his willingness to sign such an agreement in exchange for a position with SIF. His evidence was that, in response, Mr. Kristjansson said “that can be arranged” and that the details could be worked out at a later date. Mr. Smith also said that he told Mr. Kristjansson that he would not want to work more than 100 days per year and that he expected to receive $1,000 per day. According to Mr. Smith, Mr. Kristjansson said “.. that can be worked out ...”. Mr. Kristjansson, however, testified that there had been no such discussion of either the non-competition agreement or Mr. Smith’s employment with SIF at that time. The judge accepted Mr. Smith’s evidence and the appellants do not challenge that credibility finding on appeal.
[14] Within a week of signing the letter of intent, the SIF board approved the transaction. The parties then met for the second time and successfully negotiated an agreement of purchase and sale which they signed on September 10, 1997. Among other things, the agreement provided that Mr. Smith would enter into a non-competition agreement restricting his involvement in the salt fish business for five years. There was no mention in the agreement of Mr. Smith’s future employment with SIF.
[15] At trial, there was once again conflicting evidence about whether the parties discussed Mr. Smith’s employment with SIF at this point in the negotiations. Mr. Smith testified that they had and that he had been assured by Mr. Kristjansson that his future employment would be looked after, with words to the effect, “don’t worry about it, we’ll work out the details after the deal is completed.” As Mr. Smith put it, the issue of whether he had a role was settled; what was left to be worked out after closing were the details of what that role would be. It was on the basis of Mr. Kristjansson’s assurances that Mr. Smith said he signed the agreement of purchase and sale. Mr. Kristjansson, however, testified that there had been no such discussions. He said that it was during these negotiations that SIF asked Mr. Smith to prepare a report for which he would be paid $25,000. According to Mr. Kristjansson, that was the extent of discussion about any role for Mr. Smith with SIF after the sale. In fact, Mr. Kristjansson’s evidence was to the effect that SIF never, at any point, had an interest in employing Mr. Smith.
[16] The closing was set for October 1, 1997. On September 26, SIF’s solicitor sent a draft non-competition agreement to the Smiths’ solicitor. The Smiths’ solicitor replied the next day. He said the draft agreement was significantly broader than the one referred to in the agreement of purchase and sale. He went on:
... In discussing the Non-Competition agreement during negotiations [Mr. Smith] understood that there was a place for him in providing consulting services to your client over the period of the Non-Competition agreement. He understood that this would be discussed and worked out as part of the Non-Competition agreement. Exact terms were not discussed at the time only the concept. ...
He does not insist that such consulting arrangement be concluded in full detail prior to closing but wishes to ensure that his concept and that of your client are not inconsistent. ... He is flexible and open to discussion and do not hesitate to have your clients contact him directly to ensure I have not misconveyed some thing.
I am asking that you obtain the response of your client to this and to provide Roger with some comfort in this regard. He is prepared to negotiate details now, if desired by your client, and obviously that would provide him the greatest comfort, however as all parties have acted in good faith and with good will he has asked me to obtain confirmation that the parties have the same general intention.
(Emphasis added)
[17] SIF did not respond to this letter directly. However, on September 30, the Smiths’ solicitor wrote to SIF’s solicitor:
I have spoken to Roger [Smith] who instructs me to advise that he has agreed with Gunnar [Kristjansson] that the non-competition will not extend in any way beyond that which was explicitly stated and agreed to in Clause 10 of the original agreement.
[18] The parties met the third time in order to close the transaction. They signed an amended agreement of purchase and sale on October 1. It referred to the non-competition agreement, but not to any employment of Mr. Smith by SIF. The transaction closed the same day. The non-competition agreement appeared as an item on the closing agenda. Mr. Smith and Sans Souci signed a form of non-competition agreement on that date. It reflected the clause contemplated by the original agreement of purchase and sale. There was no reference to employment by Mr. Smith with SIF in the non-competition agreement or the other closing documentation.
[19] Once again, there was conflicting evidence at trial about whether the parties discussed Mr. Smith’s employment at the time of closing. Mr. Smith testified that he had sought and received some assurance in this regard and that a meeting was set up in Newport News, Virginia, to discuss this further. There is in evidence a fax from SIF dated October 1, 1997 to Mr. Smith confirming a meeting for October 19. Mr. Smith’s evidence was that this confirmed there was agreement to meet to “settle the matter as to what [his] future role would be.”
[20] Mr. Kristjansson was not present at the closing. There was evidence, however, that he did receive a telephone call from his colleague, Peter Gudmundarson, who attended the closing on behalf of SIF. Mr. Kristjansson said that one of the subjects discussed concerned Mr. Smith having a role with SIF. Mr. Kristjansson’s testimony was that he advised his colleague that there would be no consultant’s agreement and that if Mr. Smith would not sign the non-competition agreement, there would be no sale. Mr. Gudmundarson’s evidence was that there was no discussion at the closing of Mr. Smith receiving any separate compensation above and beyond the purchase price of the shares in exchange for his execution of the non-competition agreement. He denied that he had given Mr. Smith any assurances that he would receive a consulting contract with SIF.
[21] After the closing, Mr. Smith went to considerable lengths to try to tie down his place with SIF. He travelled to Newport News to meet with Mr. Kristjansson. He received no further commitment and was told that Mr. Kristjansson had not had a chance to discuss the matter with the Board. Mr. Kristjansson testified that he did not know the purpose of that meeting and that nothing was brought up about employment or a consultancy agreement with Mr. Smith.
[22] Later in October 1997, Mr. Smith met with Mr. Kristjansson in Halifax. Mr. Smith said the issue of his future employment was raised again while Mr. Kristjansson testified that Mr. Smith did not bring up the subject of employment or a consultancy agreement.
[23] Later in 1997, Mr. Smith tried to reach Mr. Kristjansson several times by telephone and eventually did reach him in Puerto Rico. Mr. Smith testified that Mr. Kristjansson told him that the future employment issue was “still not resolved”. Mr. Kristjansson offered evidence to the contrary, and indicated that Mr. Smith had wanted to meet with him for an unstated reason in Puerto Rico but that Mr. Kristjansson had indicated that there was no reason to meet.
[24] Finally, in January, 1998, Mr. Smith travelled to Iceland, went to the appellants’ office and met with Mr. Kristjansson. Mr. Smith testified that Mr. Kristjansson told him that there would be a meeting of the Board the next morning and that he would take the matter up with the Board so that he and Mr. Smith should meet later in the afternoon. The following day, according to Mr. Smith’s evidence, Mr. Kristjansson indicated that the Board’s decision was that they had no place for Mr. Smith in their organization.
[25] According to Mr. Kristjansson, there was some discussion about Mr. Smith’s future employment with SIF while he was in Iceland. Mr. Kristjansson suggested that they meet after the Board meeting. Mr. Kristjansson testified that he did not take the question to the Board and that he did not indicate to Mr. Smith that he would. He did, however, indicate to Mr. Smith the next day that SIF was not interested in being involved with him.
[26] On January 27, 1998, Mr. Smith’s counsel wrote to SIF’s counsel. The letter noted that Mr. Smith knew “he had no firm arrangement” as to his future involvement or employment with SIF after the sale, and stated the purpose of the letter was:
.. to inquire whether there is any realistic possibility of coming to an arrangement between [Smith] and SIF before he and [Mrs. Smith] have to make decisions and investments that cannot be reversed.
[27] In the spring of 1998, Mr. and Mrs. Smith invested $5 million in a lobster holding pond, but that venture was unsuccessful and their new company went bankrupt. In 2000, the Smiths again became involved in marketing salt fish which, Mr. Smith acknowledged, was in contravention of the terms of the Non-Competition Agreement with SIF. Mr. Smith started the action giving rise to this appeal in January, 2000.
2. The trial judge’s findings:
[28] As noted, the issues of liability were tried before Hall, J. Given the sharply diverging evidence about Mr. Smith’s employment prospects with SIF, credibility was a significant trial issue.
[29] The judge made clear findings in this regard and they are not challenged on appeal. He concluded that Mr. Smith’s evidence was straight forward, accurate and reliable. In contrast, he found Mr. Kristjansson’s evidence with respect to the discussions of Mr. Smith’s employment not to be reliable or believable. Concerning the discussions between him and Mr. Smith after closing, the judge commented that Mr. Kristjansson “... was making up positions as he went along during his cross-examination.”
[30] Before turning to a thorough review of the judge’s decision, it will be helpful to summarize his conclusions. He found:
(a) There was no contract of employment between Mr. Smith and SIF;
(b) SIF negligently made a misrepresentation with respect to employment for Mr. Smith;
(c) Mr. Smith signed the non-competition agreement as a result of that misrepresentation and was, therefore, not bound by that agreement;
(d) Mr. Smith was entitled to damages flowing from the misrepresentation; and
(e) SIF was entitled to set-off against any damages proven by Mr. Smith of $25,000 which it paid to Mr. Smith to produce a report which he failed to produce.
[31] The judge found that Mr. Smith informed SIF that he would be willing to sign a non-competition agreement in exchange for a position with the defendant on the “conditions stated” and that Mr. Kristjansson assured Mr. Smith that it could be arranged or words to that effect. Some of these assurances, the judge found, were given before the agreement of purchase and sale was signed in August of 1997.
[32] The judge also found that everyone clearly understood that the SIF board had to give its approval before there could be any binding agreement. In light of Mr. Smith’s knowledge that there could be no binding agreement without the consent of the SIF board and the fact that no such approval was given, the judge dismissed Mr. Smith’s claim in contract.
[33] Turning to Mr. Smith’s claim in negligent misstatement, the judge made findings in relation to each of the five elements of that cause of action as set out in Queen v. Cognos Inc., [1993] 1 S.C.R. 87 at 110. These five elements are: (1) there must be a duty of care based on a “special relationship” between the representor and the representee; (2) the representation in question must be untrue, inaccurate, or misleading; (3) the representor must have acted negligently in making the misrepresentation; (4) the representee must have relied, in a reasonable manner, on the negligent misrepresentation; and (5) the reliance must have been detrimental to the representee in the sense that damages resulted. I will briefly review the trial judge’s findings in relation to each of these elements.
[34] The judge found that the relationship between the parties gave rise to a duty of care on SIF not to mislead the plaintiff as to his future employment with SIF. He also found that Mr. Kristjansson had breached that duty by being reckless in making the representations that he had. Thus, according to the judge, Mr. Smith established the first and third elements. SIF does not challenge these findings on appeal.
[35] To establish the second element, Mr. Smith had to show that SIF made a representation that was untrue, inaccurate or misleading. The judge found that there were such misrepresentations, but he described them in different ways at different points in his judgment. He said at para. 43 that Mr. Kristjansson told Mr. Smith that employment for him with SIF on the conditions stated “... could be arranged or words to that effect.” At para. 53, in the context of his analysis of Mr. Smith’s contractual claim, the judge said that Mr. Smith had offered to work for SIF for five years on the terms he proposed and that all he received from Mr. Kristjanssson was “... assurance or representation that it would not be a problem.” (Para. 54). Later, the judge refers to the representation as being that there was no problem in obtaining the agreement of the SIF board to employ Mr. Smith (para. 55). In his express findings in relation to the second element, the judge described the representation as being “... that there would be no problem in obtaining [the SIF board’s] approval [of Mr. Smith’s] employment” and that “the essential aspect of what was said .. was ... that the approval of the [SIF] board was available and would be exercised when required or at the appropriate time.” (Para. 60, point 2) Finally, in Para. 62, the judge referred to the representation as an “ assurance” and as a “guarantee” of future employment.
[36] The fourth element required Mr. Smith to show that he relied on the representation and acted reasonably in doing so. The judge found that this requirement was satisfied, stating that “Mr. Kristjansson was the president and chief executive officer of the defendant and the person known to [Mr. Smith] to be in charge of [SIF’s] operations. It was reasonable to expect a person in Mr. Kristjansson’s position to be fully knowledgeable as to how the [SIF board] would re-act to such a proposal of employment.”
[37] The fifth and final element required Mr. Smith to show that his reliance had been detrimental to him. The judge found Mr. Smith had relied to his detriment by entering into the non-competition agreement. That, in the judge’s view, “... had the effect of excluding [Mr. Smith] from the area of business that had provided him with substantial income and financial benefits over the course of the preceding seventeen years.”
[38] The judge, therefore, concluded that Mr. Smith had proved all of the elements of his claim in negligent misstatement and that he was entitled to damages.
[39] In addition, the judge set aside the non-competition agreement. He found that Mr. Smith had entered into the non-competition agreement because of the representation and that “[t]he guarantee of future employment was a condition precedent to the execution of the non-competition agreement.” That condition not having been met, Mr. Smith “should not be bound by the non-competition agreement.” However, any revenue earned by Mr. Smith would have to be taken into account in mitigation of any damages due to him.
[40] With respect to the counterclaim, the judge found that Mr. Smith owed SIF the $25,000 which it had paid to him for the report he had not completed. That amount was to be set-off against any damages recovered by Mr. Smith.
IV. ANALYSIS:
[41] The appellants say the judge erred in his findings about SIF’s representations, in his conclusion that they were actionable and in setting aside the non-competition agreement. After saying a brief word about the standard of appellate review, I will address each of these three main points.
1. Standard of Review:
[42] The applicable standards of review were described in detail by Oland, J.A., for the Court, in Fralick v. Dauphinee (2003), 219 N.S.R. (2d) 238; N.S.J. No. 434 (Q.L.)(C.A.) at paras. 19 - 21. I will summarize.
[43] A court of appeal is not to interfere with the trial judge’s findings of fact unless there is a palpable and overriding error. An error is palpable if it is one that is plainly seen or clear. An overriding error is one that is determinative in the assessment of the balance of probabilities with respect to that factual issue. See Housen v. Nikolaisen et al., [2002] 2 S.C.R. 235; 286 N.R. 1; 219 Sask. R.; 272 W.A.C. 1; 211 D.L.R. (4th) 577, at ¶ 1 to 5 and Delgamuukw v. British Columbia, [1997] 3 S.C.R. 1010; 220 N.R. 161; 99 B.C.A.C. 161; 162 W.A.C. 161, at ¶ 78 and 80. This highly deferential standard applies not only to the trial judge’s findings of credibility, but to inferences drawn from the evidence: Housen at paras. 18 - 25. If it is alleged that the trial judge failed to consider relevant evidence, the appellate court will be justified in reconsidering the evidence if the omission is material in the sense it gives rise to a reasoned belief that it is one which affected the judge's conclusions. See Delgamuukw, supra at ¶ 90 and K.V.P. v. T.E., [2001] 2 S.C.R. 1014; 275 N.R. 52; 156 B.C.A.C. 161; 255 W.A.C. 161, at ¶ 15.
[44] The appellate court is to review questions of law for correctness. Where the alleged error is one of mixed law and fact, such as in the application of a legal standard to the evidence, the standard of review depends on the circumstances. If it is shown that the judge reached his or her conclusion on the basis of the application of an incorrect legal principle or through the mis-characterization of a legal standard, then the standard of review is correctness. See Housen, supra, at paras. 26, 27 and 33. Otherwise, the palpable and overriding error standard applies.
2. The nature of the representation:
[45] The appellants say that the judge erred by holding there was a specific and identifiable representation that Board approval for a position for Mr. Smith’s employment with SIF was available and would be exercised when required or was guaranteed. This, say the appellants, is fundamentally at odds with the evidence which was to the effect that SIF would continue discussions about Mr. Smith’s possible role after closing.
[46] To succeed on this submission, the appellants must show that the judge made a clear and determinative error in his assessment of the evidence. The appellants do not challenge the judge’s credibility findings. The question, therefore, is whether the judge’s reasons as a whole, read in light of the trial record, reveal a clear and determinative error of fact. Inexact or inconsistent expressions by the judge in his reasons do not on their own meet this test.
[47] In my view the appellants have not shown reversible error. It is true that the trial judge described in different and not always consistent ways the representation that he found to have been made. However, reading his reasons as a whole in light of the trial record, I would conclude that the essence of the judge’s finding was this: SIF represented to Mr. Smith that there was employment available for him – that there was a place for him with SIF – but that the precise arrangements would have to be worked out after closing. As Mr. Smith put it in his evidence, what was left to be settled in the future was exactly what his role would be, not whether there was a role for him.
[48] This is what Mr. Smith’s solicitor said in his letter of September 27, 1997, a few days before the closing: Mr. Smith had been made to understand that “..there was a place for him in providing consulting services to [SIF] over the period of the Non-Competition agreement .” In other words, the representation was that there was something real – “a place for him” – to discuss. The theme through much of the evidence which the judge accepted was that the concept – that there was a place for Mr. Smith with SIF – was certain. What remained was to settle the particulars.
[49] The judge saw a parallel between this case and Cognos. He recognized that, as is true in almost any discussion of new employment, many aspects relate to the future. But he also recognized that, as in Cognos, representations about future employment may either implicitly or explicitly include a representation that there is, in fact, a job to discuss. The trial judge quoted a passage from the judgment of Iacobucci, J. in which he drew this distinction between future terms of employment and the present existence of a job. The passage, in part, is this:
... the representations most relevant to the appellant’s action are not those relating to his future involvement and responsibilities with Cognos, but those relating to the very existence of the job for which [Queen] had applied. That is a matter of existing fact. It was implicitly represented that the job applied for did in fact, at the time of the interview, exist ...
(Emphasis added)
[50] In my view, Mr. Smith’s trial evidence, which the trial judge accepted, amply supports the conclusion that Mr. Smith was assured that there was “.. a place for him ...”, the precise nature of which would be worked out by good faith negotiations after closing. He knew that Board approval was required for any such arrangements, but had been assured that this was not a problem. In other words, Mr. Smith was led to believe that there was something real and in the present to discuss although the details would have to be agreed upon in the future.
[51] This is what I understand the judge to mean when he says that “... the approval of the [SIF] Board was available ...” and when he speaks in terms of an “assurance” or a “guarantee” of employment (emphasis added). In other words, there was a present willingness of SIF to employ Mr. Smith in some capacity – that there was in fact a place for him with SIF. I do not accept the appellants’ contention that the judge’s findings in this regard are not reasonably supported by the evidence or are inconsistent with Mr. Smith’s trial evidence.
[52] The appellants make three other points: that the judge ignored or misapprehended the evidence of Messrs. King and Gudmundarson, that he failed to understand the importance of two letters written by Mr. Smith’s solicitor and that his findings are inconsistent with his dismissal of Mr. Smith’s claim in contract. I will address each of these points in turn.
[53] The appellants submit that the judge erred in ignoring or misapprehending the evidence of two witnesses, Messrs. King and Gudmundarson. With respect to Mr. King, the judge said:
[34] ... The evidence of Barry King as to discussions about the non-competition agreement and the plaintiff’s future employment being discussed at the August, 1997 meetings was at least not inconsistent with that of the Smiths. Indeed, he testified that although he did not hear any discussion about these issues while he was present at the meeting he was told, after the acceptance, by the plaintiff or Mrs. Smith that there had been discussions about the plaintiff’s future involvement in the industry. Mr. King testified as well that he was not present throughout the meeting as he was in and out “preparing the letter of intent” which took him at least an hour.
The appellants contend that Mr. King’s evidence did not support Mr. Smith’s evidence and the judge was wrong to find that it did. I do not agree.
[54] Mr. Smith’s wish to have employment with SIF after closing was known to Mr. King in very general terms. While he was apparently not privy to any discussions between Mr. Smith and SIF representatives, Mr. King saw the September 27 letter and advised Mr. Kristjansson that the issue of the consulting arrangement for Mr. Smith was a potential deal breaker. He also testified that he became aware of Mr. Smith’s interest in a consulting or other role after the initial August meetings which, of course, was before the agreement of purchase and sale had been signed.
[55] While Mr. King testified that he was at the September 9 and 10 meetings (leading to the signing of the agreement of purchase and sale) “in their entirety”, it was clear from his testimony, as well as Mr. Smith’s, that he had not been present with all of the other participants at all times. The judge mentioned this. Mr. King also made it clear that he viewed his role as being to protect the interests of Sans Souci. The arrangements between Mr. Smith and SIF concerning a consulting role were not his concern. In fact, he said that, “... when discussions occurred that [he] didn’t feel comfortable being in, [he] didn’t want to be there. [He] just removed [himself] from any of those type of conversations.” He understood the consulting or other future arrangement was a matter to be sorted out between Mr. Smith and Mr. Kristjansson. It was obvious to him that there had been discussions on this topic to which he had not been privy.
[56] I see no clear and determinative error in the judge’s findings with respect to Mr. King’s evidence.
[57] Mr. Gudmundarson is an Icelandic lawyer who acted as Icelandic counsel for SIF in the negotiations and sale. He and Mr. King prepared the draft purchase and sale agreement. He was present at the September 9 - 10 meetings leading to its execution as well as at the closing at the end of that month.
[58] There were some conflicts in the evidence of Mr. Gudmundarson and Mr. King. One concerned a notation made by Mr. King in a draft version of the agreement of purchase and sale, referring to an appointment to the board of directors. The judge dealt with this conflict as follows:
[47] Another point of departure in the evidence of the plaintiff and the defendant was with respect to a notation on the original draft purchase and sale agreement which was prepared by Barry King. The notation stated "APPOINTMENT TO BOARD OF DIRECTORS??" Mr. King testified that it was he who made the notation as a memo to himself as an issue that had to be discussed and referred to the possible appointment of the plaintiff or Mrs. Smith to the defendant's Board of Directors. He stated "Obviously it was something that had come up, probably out of what Roger or Gaile had told me about a position for Roger."
[48] Mr. Gudmundarson, however, said it referred to whether the defendant would form a separate Canadian company and who would be on the Board, but that it did not refer to the plaintiff. According to Mr. Gudmundarson the reference to appointment to the Board of Directors was entirely an internal matter for the defendant and had nothing to do with the plaintiff. If that were the case I fail to see why it would have been referred to in an agreement involving the plaintiff.
[59] The appellants say that the judge erred in accepting Mr. King’s evidence “despite the fact that Gudmundarson’s recollection was more exact and definitive.” With respect, a trial judge is permitted to take many considerations into account in arriving at conclusions concerning which evidence to accept. It is not a reviewable error to reject evidence which one party believes to have been “more exact and definitive”.
[60] The appellants also contend that the judge ignored or misconstrued Mr. Gudmundarson’s evidence about what happened at the closing on October 1. He testified that there were no discussions at the closing with Mr. Smith concerning any possible employment with SIF as part of the transaction and that he gave no assurances to Mr. Smith. Mr. Gudmundarson’s reporting letter prepared after the closing is consistent with his testimony on this point. The appellants say that this was critical evidence supporting SIF’s position and the judge erred by ignoring it.
[61] This evidence, however, was undermined to some extent by the testimony of Mr. Kristjansson. He testified that he had a call from Mr. Gudmundarson on October 1 in which the issue of Mr. Smith’s employment with SIF was discussed between them. While Mr. Gudmundarson agreed that they had spoken by telephone that day, his testimony was that the call related to completely different matters. There was also the evidence from Mr. King about the circumstances leading to the receipt of the fax, on the day of closing, from Mr. Kristjansson setting up a meeting between him and Mr. Smith in Newport News. The judge also had, of course, the evidence of Mr. Smith which he accepted.
[62] In my view, the appellants have not shown that the judge’s omission of reference to Mr. Gudmundarson’s evidence on this point was an error requiring appellate intervention.
[63] The appellants next submit that the judge erred in failing to recognize that two letters written by Mr. Smith’s solicitor were inconsistent with Mr. Smith’s version of events. These are the letter of September 27, 1997, to which I have referred earlier, and that of January 27, 1998.
[64] The appellants submit that the September 27, 1997 letter, written 17 days after the Agreement of Purchase and Sale had been signed, shows that there was no agreement or actionable representation that Mr. Smith would be employed in the future. However, I do not agree that this is a fair reading of the letter.
[65] The letter certainly makes it clear that terms of employment were not settled. However, the letter also says, as noted earlier, that Mr. Smith “... understood that there was a place for him in providing consulting services to [SIF]...” and that “... [e]xact terms were not discussed at the time only the concept.”
[66] This should also be placed in the context of Mr. Kristjansson’s evidence. He saw the text of the September 27 letter before closing (although apparently in a different format). He understood that in the letter, Mr. Smith said he had been assured that there was a place for him with SIF. Although stating that his clear instructions to SIF’s solicitors were that there would be “... no way that we will accept any part of this.” Mr. Kristjansson’s evidence was that, even in the face of this letter, he made no effort to communicate that to Mr. Smith.
[67] The judge could, therefore, infer from the letter and Mr. Kristjansson’s evidence: first, that Mr. Kristjansson knew that Mr. Smith thought as a result of their discussions that “... there was a place for him ...” in SIF; second, that Mr. Kristjansson’s position in fact was that there was no interest in having Mr. Smith play any such role; and third, that Mr. Kristjansson, even though he understood that Mr. Smith felt he had received these assurances, did nothing to communicate his contrary position to Mr. Smith.
[68] The judge was well aware of the September 27 letter. He quoted from it at length in his reasons. In my view, the letter is not at all inconsistent with the judge’s fundamental conclusion that Mr. Smith had been assured that there was a “... place for him ...” with SIF.
[69] Then there is the January 27, 1998 letter. This letter, written by Mr. Smith’s solicitor nearly 4 months after the closing, reiterates Mr. Smith’s position that he had been told repeatedly before signing the agreement of purchase and sale, during the closing period and after closing that it was not a problem to provide him with some sort of involvement with SIF. The letter clearly recognizes that there had been no firm arrangement, as the judge found. The appellants submit that this is powerful, important evidence which was inconsistent with Mr. Smith’s evidence that representations had been made upon which he relied prior to entering the Agreement of Purchase and Sale and/or the Non-Competition Agreement.
[70] I do not agree. The position set out in the letter is perfectly consistent with the judge’s fundamental finding. Mr. Smith received assurances that there was a place for him with SIF.
[71] The appellants also submit that there is an “inherent inconsistency” in the judge’s findings. It is suggested that this inconsistency lies in the judge’s finding, on the one hand, that there was no contract for future employment but, on the other, that there was an actionable representation in the same terms.
[72] No authority is cited for this proposition and I am aware of none that would support it. As the judge found, Mr. Smith knew that any contract required SIF board approval and that there had been no such approval. There was thus no contract. However, the essence of negligent misstatement is detrimental reliance on an inaccurate statement, negligently made by someone having a duty to be more careful. I can see no inconsistency between the judge’s findings on the contract and negligent misstatement aspects of the case.
3. Was the representation actionable?
[73] The appellants say that if there were representations, they were not actionable for three reasons: (i) they related to future events, not present facts; (ii) Mr. Smith did not reasonably rely on them; and (iii) Mr. Smith failed to prove that his reliance was detrimental. This last point is related to the appellants’ next main argument, that is, that the judge was wrong to set aside the non-competition agreement. I will therefore address those two issues together in the next section of my reasons. I now address the first two points, namely whether the representations related to future events and whether Mr. Smith reasonably relied on the representations.
(i) Representations as to future events:
[74] The appellants submit that the representations which the judge found were in relation to a future event or promise to do something in the future. Such statements, say the appellants, cannot be the basis of an action in negligent misstatement and the judge erred in law in holding otherwise.
[75] There is certainly authority for the view that to be actionable, a representation must relate to some existing fact or past event: Arrow Construction Products Ltd. v. Nova Scotia (Attorney General), (1996), 150 N.S.R. (2d) 241 (N.S.C.A.) at para. 62. However, the point was specifically left open by the Supreme Court of Canada in Queen v. Cognos Inc., supra at pp. 129 - 30. Mr. Smith has approached the appeal assuming that Arrow correctly sets out the law. I will do the same.
[76] That said, the distinction between representations as to future events and those relating to present facts can be elusive. As Halsbury’s Laws of England points out, a statement of intention is not a representation of the thing which is intended. The thing intended is for the future and not a matter of present or past fact. However, a statement of intention is a representation that such intention actually exists in the present: Halsbury’s Laws of England, 4th ed., vol. 31 (London: Butterworths, 1998) Misrepresentation and Fraud, paras. 705 - 6. As the authors wisely observe, “... if a person makes a statement relating to his own or some other person’s intention, or containing a promise or a forecast as to the future, ... or relating to his own or some other person’s opinion, belief or other condition of mind ... questions may arise whether, and in what sense, and to what extent a representation is contained in or to be implied from the statement.”: Ibid at para. 703.
[77] The trial judge was alive to this issue. He quoted from Cognos extensively. He found that while some aspects of the representations made to Mr. Smith were about future events, “... the essential aspect of what was said existed at the time the representation was made, that is, that the approval of the defendant’s Board was available and would be exercised when required or at the appropriate time.”
[78] The appellants contend that the representation as to the availability of Board approval was not of existing fact, but rather a representation that the Board would approve a role for Mr. Smith at some future time. This interpretation is bolstered, the appellants say, by the uncertainty of the outcome of future discussions with SIF as to what role Mr. Smith might play. The appellants submit, in the alternative, that if Mr. Smith’s evidence about the representation is considered instead of the judge’s characterization of it, the representation nonetheless relates to a future occurrence, not an existing fact: the gist of Mr. Smith’s evidence was that Mr. Kristjansson would discuss the details of a position for him after the closing and the details could be worked out. That, the appellants submit, is a representation as to what could or would happen in the future and is, therefore, not actionable.
[79] In my view, these submissions are answered by the correct characterization of the judge’s holding about the nature of the representation. While admittedly there is some inconsistency of expression in the judge’s reasons, I have concluded earlier that a fair reading in the context of the whole record makes clear what he intended. In essence, he found that SIF represented to Mr. Smith that there was a place for him in SIF. A representation of that nature falls squarely within the principles enunciated by the Supreme Court of Canada in Cognos, as the judge found.
[80] In Cognos, Mr. Queen, an accountant with a well paid and secure management position, applied for a job with Cognos in connection with the development of a line of accounting software. Iacobucci, J. set out the findings of the trial judge in that case as to what representations had been made to Mr. Queen: at pp. 128 - 29. They included statements that he would have a position, that it would a be significant one and involve his expertise as an accountant; that he would perform the responsible role of seeing to proper accounting standards being implemented; that beyond the three modules immediately in contemplation were a minimum of four other modules; and that the project for which he was being hired would last a minimum of two years. The trial judge also found that Cognos implicitly represented that management had made a firm budgetary commitment to the development of four other modules in addition to those presently under development. (pp. 128 - 129)
[81] Iacobucci, J. flatly rejected the contention that these representations related solely to future events or expectations (p. 128). He acknowledged that statements about Mr. Queen’s involvement and his responsibilities should he be offered the position related to future conduct and events. He concluded, however, that the representations most relevant to Mr. Queen’s action were those relating to the very existence of the job for which he had applied. The trial judge had found that Cognos “... had a duty not to hold out to applicants that the project was secure when it knew that funding was not approved and knew or should have known that the final approval was not a rubber stamp process and the secure funding was not a foregone conclusion ...” (p. 145). Iacobucci, J. concluded that there had been an implicit representation that the job existed when, in truth, it did not: p. 129.
[82] The appellants say that the analogy with Cognos is inapt, and cite three cases to support their position.
[83] The first is Williams v. Saanich School District No. 63 (1986), 37 C.C.L.T. 203; B.C.J. No. 2303 (Q.L.) (B.C.S.C.), aff’d (1987), 17 C.C.E.L. 257; B.C.J. No. 1236 (Q.L.) (C.A.). That case, as I read it, does not turn on the proposition that representations as to future events are not actionable, but on the questions of whether, in the circumstances, the plaintiff’s reliance on the representation had been reasonable. The court was of the view that the nature of the representation affected the analysis of both questions. There was a clear finding at trial that the defendant had not been negligent in making the representation and that the plaintiff’s reliance on it was not reasonable. The trial judge said in Williams:
.... I am satisfied the defendant met the required standard of care. It had no special knowledge as to the exact outcome of the grievance procedure when it told the plaintiff there was nothing to worry about. Mr. Schnieder expressed that opinion honestly believing it to be true because it was founded upon previous experiences of a similar nature. At the time he did not know the qualification list or criteria, that was used during the interview proceedings, would be called into question by the arbitrator.
Everyone knows or should know that it is almost impossible to accurately forecast the outcome of any kind of a litigious contest. The plaintiff should have anticipated this as well as the defendant. By placing so much reliance on the remark of the defendant as to the probable result of the grievance procedure, the plaintiff was not taking reasonable care for his own particular interests. ...
(Emphasis added)
[84] When the case reached the Court of Appeal, the plaintiff’s claim was described as being in tort for the employer’s breach of a duty to warn the plaintiff that the position might be terminated by union action. The Court of Appeal upheld the judge’s decision, citing with approval the passage I have quoted in the previous paragraph. The holding was, as noted, that the board had not been negligent.
[85] Williams, in my view, does not support the contention of the appellants at all.
[86] Next is cited Reid v. Marr’s Leisure Holdings Inc., [1994] 7 W.W.R. 542 (Man. C.A.). That was an appeal resulting from a Master’s decision to strike out the plaintiff’s statement of claim and dismiss his action because it disclosed no reasonable cause of action. Specifically, the Master found that while the plaintiff was attempting to plead a cause of action in negligent misstatement, he had not alleged facts to show that the required “special relationship” existed between him and the defendants.
[87] The Court of Appeal held that the action ought not to have been struck, because the determination of whether a special relationship exists requires a detailed examination of the context within which the discussions between the parties took place: para. 13. Although the plaintiff relied on a representation that his employment would be secure, the Court refused to strike the claim on the basis that the representation was as to a future event and therefore not actionable.
[88] Scott, C.J.M commented that it was not plain and obvious as to how much of the representation related to anticipated future events as opposed to the state of affairs that existed at the time of the representation: paras. 14 - 15. Kroft, J.A. in a concurring judgment, noted that the only representation alleged in the statement of claim was that the plaintiff’s position with the corporation would be secure. He found that while representations as to future events are not actionable, it was not plain and obvious that the representation alleged was of that nature: paras. 24 - 25.
[89] Reid, in my view, is not helpful to the appellants. The core of the representation found by the judge in this case is that there was a place for Mr. Smith with SIF and that SIF knew that this was not so when the representation was made.
[90] The final case cited on this subject is Budd v. Bath Creations Inc., [1998] O.J. No. 5468 (Q.L.) (Ont. Ct. Gen. Div.). There were discussions that the plaintiff would be “kept on board” after the sale of the company to new owners. He was, in fact, employed by the new owner during a transition period following the sale, but was terminated. He successfully sued for wrongful dismissal but his action framed in negligent misstatement failed. With respect to the negligent misstatement claim, the trial judge held that the discussions between the parties of the prospect of a position in the future had not been representations of fact and that the defendants had not made any factual representations that were untrue, inaccurate or misleading: para. 23.
[91] This case stands for the propositions that neither representations about future events nor ones that are true and accurate are actionable. For the reasons I have set out earlier, I do not think the essence of the representation found by the trial judge here related to a future event, but rather to a statement of the present fact that there was a place for Mr. Smith with SIF. In the present case, unlike Budd, there is no doubt that SIF’s representation was untrue, inaccurate or misleading. According to the evidence at trial, SIF never had any interest in any sort of employment relationship for Mr. Smith. There never was a place for him as far as SIF was concerned.
[92] In my view, the trial judge in the present case did not err in finding that the principles from Cognos applied to the matter before him. While, as in Cognos, there were representations about future terms and conditions of employment, they were anchored, as they were in Cognos, in representations about the present existence in fact of “... a place ...” for Mr. Smith with SIF. According to the evidence called on behalf of SIF at trial, this representation was not simply made carelessly but with knowledge it was false. Mr. Kristjansson’s evidence couldn’t have been clearer that there was never any interest in giving Mr. Smith a role in the company. There never was, to Mr. Kristjansson’s sure knowledge, “... a place ...” for Mr. Smith with SIF.
[93] I conclude that the judge did not err in finding that the core of the representation in this case was that there was a place for Mr. Smith with SIF and in finding that representation to be one of an existing fact.
(ii) Reasonable Reliance
[94] Mr. Smith had to show that he relied on the representation and acted reasonably in doing so. The judge was satisfied on this point, holding as follows:
The plaintiff did rely on the representation of Mr. Kristjansson and it was reasonable for him to do so. Mr. Kristjansson was the president and chief executive officer of the defendant and the person known to the plaintiff to be in charge of the defendant's operations. It was reasonable to expect a person in Mr. Kristjansson's position to be fully knowledgeable as to how the defendant's Board would re-act to such a proposal of employment. In making the representation Mr. Kristjansson was acting in the course of his employment and the defendant is liable for any damages resulting from the misrepresentation, as was the defendant in Cognos liable for the damages flowing from its manager's misrepresentation.
[95] The appellants submit that the judge erred in finding that Mr. Smith relied on the representation and that such reliance was reasonable in all of the circumstances.
[96] With respect to Mr. Smith’s reliance, the appellants say that the judge erred in finding such reliance in the face of Mr. Smith’s attempts before and after closing to tie SIF down, or as his solicitor put it, to get “some comfort” about the particulars of his place with SIF. The appellants submit that Mr. Smith had such serious doubts about Mr. Kristjansson’s comments to him that prior to closing he instructed his lawyer to write a letter asking for clarifications and offering to sign a broader Non-Competition Agreement if SIF would agree to engage him as a consultant. Mr. Smith’s lack of reliance is further demonstrated, the appellants say, by his attempts to meet with Mr. Kristjansson after the closing to confirm the apparent commitment.
[97] In making these submissions, the appellants are attempting to overturn the trial judge’s finding of fact that Mr. Smith relied on the representation. They must confront the applicable standard of review. Appellate deference is owed not only to the judge’s determination of whom to believe, but also to the inferences which he drew from the evidence: Housen v. Nikolaisen, supra at paras. 18 - 25. Mr. Smith’s evidence, which the trial judge accepted, was to the effect that he relied on the assurances he received in agreeing to proceed with the transaction. The fact that he and his solicitor sought to put more meat on the bones of “... the place ...” which SIF assured him existed does not undermine the judge’s acceptance of this testimony.
[98] In connection with this submission, the appellants once again refer to cases dealing with representations about future events, submitting that there can be no reliance on a conditional promise. In addition to Budd and Reid which I have mentioned earlier, the appellants cite Manders v. Petro-Canada, [2000] O.J. No. 2423 (Q.L.)(Sup. Ct.). I have already explained that in my view these conditional and future event cases are not pertinent. In this case, the representation was not conditional or about the future. SIF represented that there was a place for Mr. Smith with SIF, not that there was the possibility of a place in the future.
[99] I would not disturb the judge’s finding that Mr. Smith, in fact, relied on SIF’s representations.
[100] As to whether Mr. Smith’s reliance was reasonable, the appellants advance two lines of argument. One is that Mr. Smith, acting reasonably, ought to have dismissed the statements made to him as “.. a mere ‘ puff’ which [said] nothing ...”: Murray v. Tilley (2005), 244 Nfld. & P.E.I.R. 1 (N.L.S.C.T.D.). The second is that a reasonable person in Mr. Smith’s circumstances would not have relied on the representation without a firm and detailed commitment from Mr. Kristjansson and/or the Board that he would be employed on particular terms.
[101] I cannot accept these submissions. On the findings made by the trial judge, Mr. Smith was assured repeatedly that, in effect, there was a place for him with SIF. That he ought to have treated such repeated assurances as mere puff is an unsustainable suggestion on this record.
[102] The appellants’ second line of argument amounts to saying that Mr. Smith should have known better than to take Mr. Kristjansson at his word. In connection with this unpalatable submission, the appellants place much reliance on the September 27 letter. No reasonable person, say the appellants, would have relied on earlier oral assurances when SIF failed to respond to that letter.
[103] The judge’s finding that Mr. Smith’s reliance was reasonable is at most a finding of mixed law and fact. Absent some error in legal principle, such findings are to be reviewed on the palpable and overriding error standard. In my view, the appellants cannot meet that standard here.
[104] By the time Mr. Smith sent the September 27 letter, there was a signed agreement of purchase and sale which obligated him to sign a non-competition agreement. There had been, on the judge’s findings, representations leading up to the signing of that agreement: para. 45. Thus, on the judge’s findings, there had already been representations and reliance on them before the September 27 letter was sent.
[105] Moreover, the evidence which the judge accepted indicated that the dealings between the parties had been characterized by a high degree of trust and relative informality. This is confirmed by the way in which the deal unfolded and by Mr. King’s, as well as Mr. Smith’s, evidence. Having given the assurances that were given in that atmosphere, the appellants cannot now complain that Mr. Smith took them at face value. In such circumstances, it is no answer to a claim in negligent misstatement for the defendant to say to the plaintiff that “you should have got it writing.”
[106] I would not disturb the judge’s findings that Mr. Smith in fact relied on the representations and that his reliance was reasonable in the circumstances.
4. Proof of detriment and setting aside the non-competition agreement:
[107] The judge found that Mr. Smith had relied on SIF’s representations to his detriment by signing the non-competition agreement. This led the judge to set that agreement aside:
Clearly the plaintiff's reliance on the representation was detrimental to him in that as a result of his reliance on the representation he entered into the non-competition agreement which had the effect of excluding him from the area of business that had provided him with substantial income and financial benefits over the course of the preceding seventeen years. ... [S]ince [Mr Smith] agreed to enter into the non-competition agreement based on the misrepresented assurance of future employment ... the non-competition agreement ought to be set aside ...
[108] The appellants make two related points. The first is that the judge erred in finding that Mr. Smith had proved detriment given that he did not prove he had suffered any damages, in the sense of financial loss, as a result of his reliance on the representations. The second is that the judge was wrong to set aside the non-competition agreement because it was part of the overall transaction of purchase and sale and ought not to have been treated separately from the rest of the transaction.
[109] I agree with the second of these points, but disagree with the first. I will explain.
[110] The non-competition agreement was part of the package of terms which together made up the agreement of purchase and sale. It was one element, but only one element, of the broader purchase and sale transaction. The non-competition agreement was a term of the original agreement of purchase and sale signed on September 10, 1997. Although the non-competition agreement was ultimately a separate document, it was always part of the larger purchase and sale transaction. It was, from everyone’s perspective, an element which was at the heart of the whole transaction.
[111] There was no conflict in the evidence on this point. Mr. Smith’s evidence was that he knew from the first meetings that SIF “required” a non-competition agreement. He understood this to be “standard procedure” . He knew that the deal would not proceed unless he signed a non-competition agreement. As he said in his evidence, “There was never a time when [he] disagreed that the non-competition clause had to be signed prior to the transfer of assets.” Similarly, Mr. Kristjansson said that the non-competition agreement was one of SIF’s “main requirements” and that it was “obvious” that SIF had to have a non-competition agreement. His position was that if there was no non-competition clause, there was no deal.
[112] On the record before him, the judge, respectfully, erred in setting aside this single aspect of the larger transaction when there was no evidence that it was viewed by anyone as a severable aspect of that larger transaction.
[113] I turn to the question of whether Mr. Smith proved detriment resulting from his reliance on SIF’s representations. The appellants say that he did not and that his action should have been dismissed.
[114] It is true, of course, that to establish a cause of action in negligent misstatement (or any other form of negligence), the plaintiff must prove actual damage in the sense of injury or detriment: see, for example, Allen M. Linden, Canadian Tort Law, 7th ed. (Markham: Butterworths, 2001) at 104-5; Linda D. Rainaldi, Remedies in Tort Law, vol. 2, , looseleaf current to 2005, release 3 (Thomson Canada Ltd., 1987) at Ch. 16, Part IV, para. 26, G.H. L. Fridman, The Law of Torts in Canada , 2nd ed. (Toronto: Carswell, 2002), at 417. There is no dispute about the principle. The question is what it means in this case.
[115] The only issue submitted to the judge was liability. Damages were to be assessed in a separate proceeding if Mr. Smith proved that SIF was liable to him. However, in a case like this one, it is difficult to separate the question of whether Mr. Smith suffered detriment – one of the essential elements of his cause of action – from the question of what damages he ought to recover.
[116] The general rule is that victims of negligent misrepresentation should be restored to the position they would have been in had the misrepresentation not been made: see, e.g. Rainbow Industrial Caterers Ltd. v. Canadian National Railway Co., [1991] 3 S.C.R. 3 at pp. 14 - 15. In this case, Mr. Smith says (and the judge accepted) that he would not have signed the non-competition agreement absent SIF’s assurance that there was a place for him with the company. However, as I said earlier, it is clear from the record that the non-competition agreement was an essential element of the deal: no non-competition agreement, no deal. And of course, Mr. and Mrs. Smith received the $6.5 million purchase price and transferred the shares and real property. It is thus a complicated question as to where Mr. Smith would be had the misrepresentations not been made.
[117] The appellants say that to establish their liability, Mr. Smith had to prove actual financial loss flowing from his reliance on the misrepresentations. To do so in the circumstances of this case, Mr. Smith would have had to prove his damages in order to succeed on the trial of the liability issue. But if this had been required, there would have been no point in separating the trials of liability and damages. The procedure adopted by the parties and the particular circumstances of this case make it unfair to accede to the appellants’ submission. In the context of this case and particularly the decision to try liability and damages separately, the claim should proceed to an assessment of damages once Mr. Smith established that he relied on a negligently made misrepresentation by altering his position in a way he would not have done if the misrepresentation had not been made.
[118] Generally speaking, it is not necessary to draw the rather fine distinction between detriment and an actual financial loss flowing from a misrepresentation. This is because generally the issues of liability and damages are tried together. If the plaintiff fails to prove damages, the action is dismissed. If the plaintiff proves damages flowing from the misrepresentation, the cause of action is complete and the action succeeds. But in this case, it is necessary to distinguish between detriment and damages because the issues of liability and damages have been severed for separate trials. So the question is what is required to show detriment when issues of liability and damages have been separated?
[119] There is a distinction, long recognized, although sometimes overlooked, between damage and damages. As A.I. Ogus put it in his treatise The Law of Damages (London, Butterworths, 1973) at p. 2:
The terms “damage” and”damages” have suffered from loose usage. Some writers and judges have used them as if they were synonymous. But “damages” should connote the sum of money payable by way of compensation ... , while the use of “damage” is best confined to instances where it refers to the injury inflicted by the tort or breach of contract ... .
[120] Following this description, damage, or detriment, as an element of the cause of action in negligent misrepresentation may be understood to mean an injury rather than a sum money to compensate for its infliction. Consistent with this view, the House of Lords approved the following description of what actual damage means in Nykredit Mortgage Bank Plc. v. Edward Erdman Group Ltd. (No. 2) , [1997] H.L.J. No 52:
... any detriment, liability or loss capable of assessment in money terms and it includes liabilities which may arise on a contingency, particularly a contingency over which the plaintiff has no control; things like loss of earning capacity, loss of a chance or bargain, loss of profit, losses incurred from onerous provisions or covenants in leases. They are all illustrations of a kind of loss which is meant by ‘actual’ damage. ...
[121] The House thus recognized that losing the chance to bargain for different terms or being subject to onerous provisions in covenants may constitute damage or detriment for the purpose of determining when a cause of action in negligence is complete. Similarly, in Manuge v. Prudential Assurance Co. Ltd. (1977), 27 N.S.R. (2d) 183; N.S.J. No. 667 (Q.L.) (S.C.T.D.), Hart, J. (as he then was) recognized that the loss of the opportunity to bargain for different terms was detriment for the purpose deciding whether a cause of action in negligence had been established. In my view, this approach makes eminent sense particularly in a case such as this one in which the issues of liability and damages have been severed for separate trials.
[122] In this case, Mr. Smith’s reliance on SIF’s representations at the very least deprived him of the opportunity to negotiate (or to try to negotiate) more acceptable terms or seek out another buyer. They also induced him, as the judge found, to subject himself to the provisions of the non-competition agreement without the corresponding benefit of the place with SIF that he had been assured was there for him. These are the sorts of detriment or damage recognized by the House of Lords in Nykredit and by Hart, J. in Manuge. In my opinion, in the context of the separate trials of liability and damages in this case, that is sufficient to permit Mr. Smith to have the opportunity to prove his damages at an assessment if he can.
[123] However, I wish to be clear that nothing I have said here precludes the parties at the assessment from attempting to prove what they claim to be the position Mr. Smith would have been in had the misrepresentations not been made. Of course, they may not advocate for a result inconsistent with any of the trial judge’s findings which have been confirmed on appeal. None of the issues raised by SIF’s amended counterclaim for damages for breach of the non-competition agreement have been resolved and remain open.
V. DISPOSITION:
[124] I would allow the appeal in part. I would set aside that part of the judge’s order which declared the non-competition agreement to be of no force and effect. I would otherwise dismiss the appeal.
[125] As success is divided and the ultimate outcome of the assessment of damages and SIF’s counterclaim relating to the non-competition agreement is unknown, I would order that the costs of the appeal, fixed at $4000 plus disbursements, be left to the discretion of the judge deciding the assessment of damages and the counterclaim.
Cromwell, J.A.
Concurred in:
MacDonald, C.J.N.S.
Freeman, J.A.