Atlas Supply Co. of Canada Ltd. v. Yarmouth Equipment Ltd. and Murphy, (1991) 103 N.S.R.(2d) 1 (CA)

• Jurisdiction: Nova Scotia
• Court: Supreme Court of Nova Scotia (Canada)
• Judge: Hallett, Matthews and Freeman, JJ.A.
• Citation: (1991), 103 N.S.R.(2d) 1 (CA),1991 CanLII 2552 (NS CA),1995 CanLII 4261 (NS CA),[1991] CarswellNS 378,[1991] NSJ No 178 (QL),103 NSR (2d) 1
• Date: 23 April 1991

Atlas Supply v. Yarmouth Equip. (1991), 103 N.S.R.(2d) 1 (CA);

    282 A.P.R. 1

MLB headnote and full text

Atlas Supply Company of Canada Limited (appellant) v. Yarmouth Equipment Limited and John M. Murphy (respondents)

(S.C.A. No. 02318)

Indexed As: Atlas Supply Co. of Canada Ltd. v. Yarmouth Equipment Ltd. and Murphy

Nova Scotia Supreme Court

Appeal Division

Hallett, Matthews and Freeman, JJ.A.

April 23, 1991.

Summary:

Yarmouth Equipment purchased an automotive supply franchise from Atlas, a subsidiary of Esso. The franchise failed almost immediately. Atlas sued Yarmouth Equipment and Murphy (personal guarantor) to recover its losses.

The Nova Scotia Supreme Court, Trial Division, in a judgment not reported in this series of reports, dismissed the action. Atlas appealed.

The Nova Scotia Supreme Court, Appeal Division, Hallett, J.A., dissenting, allowed the appeal in part. The court held that Murphy's liability was limited to the value of inventory received from Atlas which was sold by a bank and applied to Murphy's own debts.

Contracts - Topic 2122

Terms - Express terms - Exclusionary clauses - Bars - Unconscionability - A franchiser induced a franchisee to contract by presenting favourable financial forecasts and deliberately withholding available information forecasting the nonviability of the franchise - An exclusionary clause provided that the franchiser did not warrant the sales volumes and profit projections provided - The inexperienced franchisee relied on the information and the franchise failed almost immediately - The trial judge found that had the franchisee had all the information he would not have contracted - The Nova Scotia Court of Appeal stated that the parties were in unequal bargaining positions; the exclusionary clause would not be enforced to protect the franchiser where to do so would be unconscionable.

Equity - Topic 1122

Equitable relief - Contracts - Unconscionable bargain defined - [See Contracts - Topic 2122].

Franchises - Topic 2065

Franchise agreement - Duties of franchiser - During negotiations for franchise - [See Contracts - Topic 2122].

Franchises - Topic 2065

Franchise agreement - Duties of franchiser - During negotiations for franchise - [See Contracts - Topic 2122].

Cases Noticed:

Stein Estate v. Ship "Kathy K", [1976] 2 S.C.R. 802; 6 N.R. 359, refd to. [para. 42].

Beaufort Realties (1964) Inc. v. Belcourt Construction (Ottawa) Ltd. and Chomeday Aluminum Co., [1980] 2 S.C.R. 718; 33 N.R. 460, refd to. [para. 52].

Heilbut, Symons & Co. v. Buckleton, [1913] A.C. 30, refd to. [para. 52].

Lister v. Dunlop (1978), 85 D.L.R.(3d) 321, refd to. [para. 52].

Midland Doherty Ltd. v. Rohrer and Central Trust Co. (1985), 68 N.S.R.(2d) 103; 159 A.P.R. 103, refd to. [para. 52].

Pao On et al. v. Yiu et al., [1979] 3 All E.R. 65, refd to. [para. 52].

Photo Production Ltd. v. Securicor Transport Ltd., [1980] 1 All E.R. 556, refd to. [para. 52].

Pepsi-Cola Canada Inc. and Pizza Hut Inc. v. P.M. Foods Ltd. et al. (1985), 61 A.R. 340, refd to. [para. 52].

Syncrude Canada Ltd. et al. v. Hunter Engineering Co. and Allis-Chalmers Canada Ltd. et al., [1989] 1 S.C.R. 426; 92 N.R. 1, refd to. [para. 57].

Lloyd's Bank v. Bundy, [1974] 3 All E.R. 757 (C.A.), refd to. [para. 69].

National Westminster Bank v. Morgan, [1985] 1 All E.R. 821, refd to. [para. 72].

DeWolfe v. Mansour et al. (1986), 73 N.S.R.(2d) 110; 176 A.P.R. 110 (T.D.), refd to. [para. 73].

Sodd Corporation Inc. v. Tessis (1977), 79 D.L.R.(3d) 632 (Ont. C.A.), refd to. [para. 75].

Harry v. Kreutziger (1978), 95 D.L.R.(3d) 231 (B.C.C.A.), refd to. [para. 77].

Morrison v. Coast Finance Ltd. et al. (1965), 55 D.L.R.(2d) 710, refd to. [para. 80].

Stephenson v. Hilti (Canada) Ltd. (1989), 93 N.S.R.(2d) 366; 242 A.P.R. 366 (T.D.), refd to. [para. 83].

Davidson v. Three Spruces Realty Ltd. (1977), 79 D.L.R.(3d) 481 (B.C.S.C.), refd to. [para. 86].

Jirna Limited v. Mister Donut of Canada Ltd., [1972] 1 O.R. 251, refd to. [para. 135].

Esso Petroleum Co. Ltd. v. Mardon, [1976] 2 All E.R. 5, refd to. [para. 136].

447927 Ontario Ltd. v. Pizza Pizza Ltd. (1987), 44 D.L.R.(4th) 366, refd to. [para. 165].

Morrison v. Coast Finance Ltd. et al. (1965), 55 D.L.R.(2d) 710, refd to. [para. 167].

Authors and Works Noticed:

Cross on Evidence (6th Ed. 1985), pp. 615-616 [para. 54].

Flannigan, Robert, Hunter Engineering: The Judicial Regulation of Exculpatory Clauses (1990), 69 Can. Bar Rev. 514, generally [para. 88].

Fridman, The Law of Contract in Canada (2nd Ed. 1986), p. 303 [para. 66].

Waddams, Law of Contracts (1984), pp. 348-349 [para. 55].

Counsel:

Charles Peter McLellan and Bernard Francis Miller, for the appellant;

D.A. Caldwell, Q.C., and Dennis James, for the respondents.

This appeal was heard on January 14, 1991, before Hallett, Matthews and Freeman, JJ.A., of the Nova Scotia Supreme Court, Appeal Division.

On April 23, 1991, the judgment of the Court of Appeal was delivered and the following opinions were filed:

Matthews, J.A. - see paragraphs 1 to 111;

Freeman, J.A. - see paragraphs 112 to 130.

Hallett, J.A., dissenting - see paragraphs 131 to 201.