Brown & Root Services Corp. v. Aerotech Herman Nelson Inc. et al., 2004 MBCA 63

• Judge: Scott, C.J.M., Twaddle and Steel, JJ.A.
• Court: Court of Appeal (Manitoba)
• Case Date: May 04, 2004
• Jurisdiction: Manitoba
• Citations: 2004 MBCA 63;(2004), 184 Man.R.(2d) 188 (CA)

Brown & Root v. Aerotech (2004), 184 Man.R.(2d) 188 (CA);

    318 W.A.C. 188

MLB headnote and full text

Temp. Cite: [2004] Man.R.(2d) TBEd. MY.004

Kellogg Brown & Root Inc. (plaintiff/respondent) v. Aerotech Herman Nelson Inc. and Paul R. Sigurdson (defendants/appellants)

(AI 03-30-05461; 2004 MBCA 63)

Indexed As: Brown & Root Services Corp. v. Aerotech Herman Nelson Inc. et al.

Manitoba Court of Appeal

Scott, C.J.M., Twaddle and Steel, JJ.A.

May 4, 2004.

Summary:

A Texas engineering/construction management firm (Brown) purchased heaters and related goods and services from a Winnipeg company (Aerotech). Brown sued Aerotech and its principal for fundamental breach of the contract and fraudulent misrepresentation. Brown sought reimbursement of the cost of the heaters and other related equipment ($1,359,571.50 (U.S.)), the cost of shipment of the goods ($321,905.55 (U.S.) and punitive damages. Aerotech counterclaimed for losses it allegedly incurred.

The Manitoba Court of Queen's Bench allowed the action and dismissed the counterclaim. The court declined to award Brown solicitor and client costs. Aerotech appealed. Brown cross-appealed on the issue of costs.

The Manitoba Court of Appeal, Twaddle, J.A., dissenting in part, dismissed the appeal and cross-appeal.

Fraud and Misrepresentation - Topic 7

Fraudulent misrepresentation (deceit) - What constitutes fraud - On December 18, 1995, a Texas firm (Brown) purported to purchase, inter alia, new heaters from a Winnipeg company (Aerotech) to heat tents housing American troops in Bosnia - The heaters Aerotech delivered were used, military surplus which was disguised by altered hour meters, paint, cleaning, reserialed and changed manufacture plates - Brown and Aerotech technicians attempted to make the heaters functional but were largely unsuccessful - On March 6, 1996, Brown rejected the heaters due to their used condition and unsatisfactory performance - Brown alleged fraud - The trial judge held that the state of the heaters were clearly at odds with what was anticipated by and contracted for by Brown and that Brown was the victim of a massive fraud - The Manitoba Court of Appeal dismissed Aerotech's appeal - The elements of fraud were present - Aerotech's position that Brown's action could not succeed because Brown did not exercise due diligence on its own behalf was unsustainable as a matter of law - See paragraphs 19 to 33.

Fraud and Misrepresentation - Topic 407

Fraudulent misrepresentation (deceit) - Remedies - Rescission - [See Sale of Goods - Topic 6507 ].

Practice - Topic 5402

Judgments and orders - General - Currency of judgments (incl. conversion) - Section 12 of the Currency Act provided that "... any reference to money or monetary value in any indictment or other legal proceedings shall be stated in the currency of Canada." - The Manitoba Court of Appeal held that the phrase "other legal proceedings" in s. 12 was not intended to include statements of claim - Given the context of its enactment, it would appear that Parliament did not intend to limit or affect the rights of foreign litigants whose claims were properly stated in foreign currency, but rather to encourage the use of one domestic currency within Canada - Many cases appeared to proceed on the basis that s. 12 simply required that the final judgment be given in Canadian funds - See paragraphs 75 to 79.

Practice - Topic 5402

Judgments and orders - General - Currency of judgments (incl. conversion) - A trial judge granted a plaintiff two items of damage in American currency - Section 12 of the Currency Act required that the final judgment be given in Canadian currency - The trial judge held that the interests of justice required that the appropriate date for the conversion of the foreign currency into Canadian dollars was the date of judgment - The defendant appealed, arguing that the appropriate date was the date of the breach of the contract (breach date rule) - They argued that this was the traditional approach and courts were bound by precedent, including two Supreme Court of Canada cases from 1927 and 1945 - The Manitoba Court of Appeal agreed with the trial judge's decision - The court held that the breach date rule was not binding and unequivocal in all situations - In matters of breach of contract, Canadian courts had flexibility in their choice of conversion date, the underlying objective being to achieve equity in the particular circumstances of the case - Here, a date of breach would not have fully compensated the plaintiff at the point in time at which the trial judge was making her decision - The court's primary concern was that the innocent plaintiff should not bear the risk of the fluctuating exchange rate - See paragraphs 86 to 111.

Practice - Topic 7454

Costs - Solicitor and client costs - Entitlement to - Improper, irresponsible or unconscionable conduct - A Texas firm (Brown) purchased heaters and related goods and services from a Winnipeg company (Aerotech) - Brown sued Aerotech and its principal for fundamental breach of the contract and fraudulent misrepresentation - The trial judge allowed the action and awarded Brown punitive damages of $50,000 - Considering the overall criteria of reasonableness, the sparing use made of solicitor-client costs generally and the award of punitive damages, the trial judge declined to award Brown solicitor-client costs - The trial judge took no significant issue with the manner in which Aerotech and its principal conducted the litigation - The Manitoba Court of Appeal found no palpable error in the exercise of the trial judge's discretion to not award solicitor-client costs - See paragraphs 112 and 113.

Sale of Goods - Topic 6507

Breach - Remedies of buyer - Rescission - Fundamental breach - On December 18, 1995, a Texas firm (Brown) purported to purchase, inter alia, new heaters from a Winnipeg company (Aerotech) to heat tents housing American troops in Bosnia - The heaters Aerotech delivered were used, military surplus which was disguised by altered hour meters, paint, cleaning, reserialed and changed manufacture plates - Brown and Aerotech technicians attempted to make the heaters functional but were largely unsuccessful - On March 6, 1996, Brown rejected the heaters due to their used condition and unsatisfactory performance - The trial judge held that there was fundamental and total breach of the contract by Aerotech - The heaters were not in a deliverable state, not of merchantable quality and not suitable for their intended purpose - Brown's attempt to utilize and repair the heaters because of the urgent need of heat for the troops did not constitute acceptance of the goods nor prevent rescission of the contract - Brown repudiated the contract within a reasonable time - Alternatively, Brown was entitled to rescission based on misrepresentation and fraud - The Manitoba Court of Appeal dismissed Aerotech's appeal respecting the issues of rescission and fundamental breach - It was not the law that victims of fraud had, as soon as there was an inkling of a misrepresentation, to make up their mind then and there whether to rescind or not - See paragraphs 81 to 119.

Sale of Goods - Topic 6511

Breach - Remedies of buyer - Rescission - Time for - [See Sale of Goods - Topic 6507 ].

Sale of Goods - Topic 6608

Breach - Breach by seller - Fraudulent misrepresentation - [See Sale of Goods - Topic 6507 ].

Words and Phrases

Other legal proceedings - The Manitoba Court of Appeal discussed the meaning of this phrase as used in s. 12 of the Currency Act, R.S.C. 1985, c. C-52 - See paragraphs 75 to 77.

Cases Noticed:

Sylvan Lake Golf & Tennis Club Ltd. v. Performance Industries Ltd. and O'Connor (No. 2), [2002] 1 S.C.R. 678; 283 N.R. 233; 299 A.R. 201; 266 W.A.C. 201; 2002 SCC 19, refd to. [para. 33].

Hardy & Co. v. Hillerns and Fowler, [1923] 2 K.B. 490 (C.A.), refd to. [para. 41].

Alkins Brothers v. Grier (G.A.) & Sons Ltd. (1924), 55 O.L.R. 667 (App. Div.), refd to. [para. 41].

United Shoe Machinery Co. of Canada v. Brunet and Others, [1909] A.C. 330 (H.L.), refd to. [para. 45].

Bertrand et al. v. Racicot et al., [1979] 1 S.C.R. 441; 44 N.R. 602, refd to. [para. 46].

Showtime Marketing Services Ltd. v. Lower Fraser Valley Exhibition Association, [1991] B.C.J. No. 3779 (S.C.), refd to. [para. 49].

Staiman Steel Ltd. v. Franki Canada Ltd. (1985), 23 D.L.R.(4th) 180 (Ont. C.A.), refd to. [para. 50].

Steedman v. Frigidaire Corp., [1933] 1 D.L.R. 161 (P.C.), refd to. [para. 51].

Spence v. Crawford, [1939] 3 All E.R. 271 (H.L.), refd to. [para. 60].

McCarthy v. Kenny, [1939] 3 D.L.R. 556 (Ont. S.C.), refd to. [para. 61].

Kupchak et al. v. Dayson Holdings et al. (1965), 53 D.L.R.(2d) 482 (B.C.C.A.), refd to. [para. 62].

Wadinger v. Lake (1977), 16 O.R.(2d) 362 (Ont. H.C.), refd to. [para. 62].

Lasby v. Royal City Chrysler Plymouth (1987), 59 O.R.(2d) 323 (Div. Ct.), refd to. [para. 62].

Atherton v. N.B. Plumbing & Heating Ltd., [1985] B.C.J. No. 930 (S.C.), refd to. [para. 62].

Halleran v. O'Neill Brothers Auto Ltd. (1971), 1 Nfld. & P.E.I.R. 455 (Nfld. C.A.), refd to. [para. 63].

Alati v. Kruger, [1955] 94 C.L.R. 216 (Aust. H.C.), refd to. [para. 64].

Vadasz v. Pioneer Concrete (Sa) Pty Ltd. (1995), 184 C.L.R. 102 (H.C.), refd to. [para. 64].

Redican v. Nesbitt, [1924] S.C.R. 135, refd to. [para. 65].

Carter et al. v. Golland, [1937] O.R. 881 (C.A.), refd to. [para. 65].

Print Three Franchising Corp. v. McLennan Printing Inc. et al. (2001), 153 Man.R.(2d) 32; 238 W.A.C. 32; 2001 MBCA 1, refd to. [para. 68].

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; 57 D.L.R.(4th) 321; [1989] 3 W.W.R. 385, refd to. [para. 68].

Photo Production Ltd. v. Securicor Transport Ltd., [1980] A.C. 827 (H.L.), refd to. [para. 68].

Guarantee Co. of North America v. Gordon Capital Corp., [1999] 3 S.C.R. 423; 247 N.R. 97; 126 O.A.C. 1, refd to. [para. 69].

Holt, Renfrew & Co. v. Burlington Northern Air Freight (Canada) Ltd., [1990] O.J. No. 1579 (C.A.), refd to. [para. 69].

Lau et al. v. 1755 Holdings Ltd. (1996), 83 B.C.A.C. 198; 136 W.A.C. 198; 6 R.P.R.(3d) 152 (C.A.), refd to. [para. 69].

Majdpour et al. v. M&B Acquisition Corp. et al. (2001), 151 O.A.C. 351; 56 O.R.(3d) 481 (C.A.), refd to. [para. 69].

Fraser Jewellers (1982) Ltd. v. Dominion Electric Protection Co. et al. (1997), 101 O.A.C. 56 (C.A.), refd to. [para. 69].

Genesis Tower Ltd. v. Cheung et al. (2002), 174 B.C.A.C. 107; 286 W.A.C. 107; 2002 BCCA 582, refd to. [para. 69].

Davis v. First Choice Industries Ltd., [1992] O.J. No. 1256 (Gen. Div.), refd to. [para. 69].

Infotec Leasing Ltd. v. Lumac Holdings Ltd. (1994), 145 N.B.R.(2d) 1; 372 A.P.R. 1 (Q.B.), refd to. [para. 69].

LeBlanc v. Brett (Lorne) Chev Olds Ltd. (1986), 69 N.B.R.(2d) 193; 177 A.P.R. 193 (Q.B.), refd to. [para. 69].

Baumgartner v. Carsley Silk Co. (1971), 23 D.L.R.(3d) 255 (Que. C.A.), refd to. [paras. 73, 141].

Rizzo & Rizzo Shoes Ltd. (Bankrupt), Re, [1998] 1 S.C.R. 27; 221 N.R. 241; 106 O.A.C. 1, refd to. [para. 77].

Champion International Corp. v. Ship Sabina et al. (2003), 227 F.T.R. 107; 24 C.P.R.(4th) 363; 2003 FCT 39, refd to. [para. 79].

Trans North Turbo Air Ltd. v. North 60 Petro Ltd., [2003] Y.J. No. 60; 2003 YKSC 26, refd to. [para. 79].

Gatineau Power Co. v. Crown Life Insurance Co., [1945] S.C.R. 655, refd to. [paras. 90, 121].

Custodian v. Blucher - see National Bank fur Deutschland v. Blucher.

National Bank fur Deutschland v. Blucher, [1927] S.C.R. 420, refd to. [paras. 90, 119].

S.S. Celia v. S.S. Volturno, [1921] 2 A.C. 544 (H.L.), refd to. [paras. 90, 118].

United Railways of the Havana and Regla Warehouses Ltd., Re, [1960] 2 All E.R. 332; [1961] A.C. 1007 (H.L.), refd to. [paras. 91, 123].

Miliangos v. Frank (George) Textiles Ltd., [1976] A.C. 443 (H.L.), refd to. [para. 93, 125].

William & Glyn's Bank Ltd. v. Belkin Packaging Ltd. (1979), 108 D.L.R.(3d) 585 (B.C.S.C.), revd. (1981), 123 D.L.R.(3d) 612 (B.C.C.A.), affd. [1983] 1 S.C.R. 661; 47 N.R. 241, refd to. [paras. 97, 128].

N.V. Bocimar S.A. v. Century Insurance Co. of Canada (1984), 53 N.R. 383; 7 C.C.L.I. 165 (F.C.A.), revd. [1987] 1 S.C.R. 1247; 76 N.R. 212, refd to. [paras. 98, 128, 132].

Am-Pac Forest Products Inc. v. Phoenix Doors Ltd. et al. (1979), 12 C.P.C. 97; 14 B.C.L.R. 63 (S.C.), refd to. [paras. 98, 133].

Agrex S.A. v. Canadian Dairy Commission et al. (1984), 24 B.L.R. 206 (F.C.T.D.), refd to. [paras. 98, 133].

Prasad v. Frandsen (1985), 60 B.C.L.R. 343 (S.C.), refd to. [para. 99].

Banque Indosuez v. Canadian Overseas Airlines Ltd. (1990), 40 C.P.C.(2d) 33 (B.C.S.C.), affd. [1992] B.C.J. No. 578 (C.A.), refd to. [paras. 99, 136].

Dino Music AG v. Quality Dino Entertainment Ltd., [1994] 9 W.W.R. 137; 96 Man.R.(2d) 46 (Q.B.), refd to. [paras. 100, 136].

C-L & Associates Inc. v. Airside Equipment Sales Inc. et al., [2001] 4 W.W.R. 42; 151 Man.R.(2d) 220; 2000 MBQB 203, refd to. [paras. 100, 137].

Stevenson Estate v. Siewert et al. (2001), 286 A.R. 181; 253 W.A.C. 181; 202 D.L.R.(4th) 295; 2001 ABCA 180, refd to. [para. 103].

Lyne v. McClarty et al. (2003), 170 Man.R.(2d) 161; 285 W.A.C. 161; 2003 MBCA 18, refd to. [para. 113].

Di Ferdinano v. Simon, Smits & Co., [1920] 3 K.B. 409 (C.A.), refd to. [para. 117].

Services Europe Atlantique Sud (SEAS) of Paris v. Stockholms Rederiaktiebolag Svea of Stockholm; Despina, R., The, (Folias, The), [1979] A.C. 685 (H.L.), refd to. [para. 127].

Schorsch Meir G.m.b.H. v. Hennin, [1975] Q.B. 416 (C.A.), refd to. [para. 130].

First National Bank of Oregon v. Watson (A.H.) Ranching Ltd. (1984), 57 A.R. 169 (Q.B.), refd to. [para. 133].

Batavia Times Publishing Co. v. Davis (1978), 88 D.L.R.(3d) 144 (Ont. H.C.), refd to. [para. 134].

East India Trading Co. v. Carmel Exporters and Importers Ltd., [1952] 2 Q.B. 439, refd to. [para. 134].

Prasad v. Frandsen (1985), 60 B.C.L.R. 343 (S.C.), refd to. [para. 136].

Salzburger Sparkasse v. Total Plastics Service Inc. (1988), 28 C.P.C.(2d) 120 (B.C.S.C.), refd to. [para. 136].

Alpine Canada Alpin v. Oppenheim et al. (1999), 245 A.R. 252 (Q.B.), refd to. [para. 136].

Stevenson Estate v. Siewert et al. (2001), 286 A.R. 181; 253 W.A.C. 181; 202 D.L.R.(4th) 295; 2001 ABCA 180, reconsidering (2000), 266 A.R. 35; 228 W.A.C. 35; 191 D.L.R.(4th) 151; 2000 ABCA 222, refd to. [para. 136].

Promech Sorting Systems B.V. v. Bronco Rentals & Leasing Ltd. et al., [1994] 4 W.W.R. 374 (Man. Q.B.), revd. [1995] 4 W.W.R. 484; 100 Man.R.(2d) 185; 91 W.A.C. 185 (C.A.), refd to. [para. 137].

Authors and Works Noticed:

Bowles, Roger A., and Whelan, Christopher, J., Foreign Money Liabilities, Working Paper No. 33 (1982), 60 Can. Bar Rev. 805, generally [para. 105].

British Columbia, Law Reform Commission, Report on Foreign Money Liabilities (1983), pp. 11 [para. 73]; 34 [para. 105]; 44 [para. 76, footnote 1]; 46 [para. 76]; 47 [paras. 78, 142].

Fridman, G.H.L., The Law of Contract in Canada (4th Ed. 1999), p. 864 [para. 54].

Fridman, G.H.L., Restitution (2nd Ed. 1992), pp. 203 [para. 58]; 204 [para. 59].

Maddaugh, Peter D., and McCamus, John D., The Law of Restitution (1990), p. 457 [para. 56].

Orkin, Mark M., The Law of Costs (2nd Ed.) (2003 Looseleaf), para. 219 [para. 112].

Pitch, Harvin D., and Snyder, Ronald M., Damages for Breach of Contract (2nd Ed. 1989) (Looseleaf), pp. 13-1, 13-2 [para. 104].

Riordan, Brian, The Currency of Suit in Actions for Foreign Debts (1978), 24 McGill L.J. 422, pp. 425 [para. 92]; 437 [para. 81, footnote 3]; 438, 439 [para. 76, footnote 1]; 440 [para. 109].

Tigges, J.H., Circumstances Justifying Delay in Rescinding Land Contract After Learning of Ground of Rescission (1965), 1 A.L.R.(3d) 542, p. 545 [para. 55].

Waddams, S.M., The Law of Damages (2003 Looseleaf Ed.), paras. 7.100 [para. 106]; 7.140, fn. 34 [paras. 103, 128]; 7.150 [para. 81]; 7.300 [paras. 96, 110, 137]; p. 52 [para. 84].

Counsel:

R.J. Handlon, R.P. Sokalski and K.A. Johnston, for the appellants;

D.W. Leslie and D.J. Kroft, for the respondent.

This matter was heard on November 18 and 27, 2003, before Scott, C.J.M., Twaddle and Steel, JJ.A., of the Manitoba Court of Appeal. On May 4, 2004, the judgment of the Court of Appeal was delivered and the following judgments were filed:

Scott, C.J.M. and Steel, J.A. - see paragraphs 1 to 114;

Twaddle, J.A., dissenting in part - see paragraphs 115 to 148.