Mason (V.K.) Construction Ltd. v. Bank of Nova Scotia and Courtot Investments Ltd., (1985) 58 N.R. 195 (SCC)

• Jurisdiction: Federal Jurisdiction (Canada)
• Court: Supreme Court (Canada)
• Judge: Dickson, C.J., Ritchie, Estey, McIntyre, Chouinard, Lamer and Wilson, JJ.
• Citation: (1985), 58 N.R. 195 (SCC),58 NR 195,35 RPR 118,[1985] ACS no 12,1985 CanLII 608 (SCC),[1985] CarswellOnt 714,[1985] 1 SCR 271,[1985] SCJ No 12 (QL),16 DLR (4th) 598,30 ACWS (2d) 370,8 OAC 381
• Date: 04 April 1985
• Subject Matter: DAMAGES,INTEREST,FRAUD AND MISREPRESENTATION,CONTRACTS

Mason Constr. Ltd. v. BNS (1985), 58 N.R. 195 (SCC)

MLB headnote and full text

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

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V.K. Mason Construction Ltd. v. Bank of Nova Scotia and Courtot Investments Ltd.

(# 17437)

V.K. Mason Construction Ltd. v. Bank of Nova Scotia, Bregman and Hamann

(# 17435)

Indexed As: Mason (V.K.) Construction Ltd. v. Bank of Nova Scotia and Courtot Investments Ltd.

Supreme Court of Canada

Dickson, C.J., Ritchie, Estey, McIntyre, Chouinard, Lamer and Wilson, JJ.

April 4, 1985.

Summary:

A general contractor agreed to construct an office and retail shopping complex only after receiving a written assurance from the developer's bank that the project was adequately financed. Financing was inadequate and over $1,000,00 owing to the contractor was unpaid. The contractor filed a mechanics' lien. The bank sold the property under the power of sale in a mortgage included in a debenture. The monies left after paying the bank's claim were insufficient to meet the contractor's claim. The contractor commenced a mechanics' lien action against the bank and the developer, claiming that s. 4 of the Interest Act applied to limit the bank's interest claim to 5% and that the bank was estopped from claiming its priority as mortgagee. The contractor also commenced an action against the bank in contract and tort, claiming damages for negligent misrepresentation and claiming that the bank's written assurance of adequate financing constituted a guarantee, which was breached.

The trial judge allowed both actions. The court held that s. 4 applied to limit interest to 5%, thereby leaving sufficient monies to satisfy the contractor's claim. The court found it unnecessary to deal with the estoppel argument. In the second action, the court held that the bank's written assurance of adequate financing constituted a guarantee that was breached and that the assurance constituted negligent misrepresentation that was relied upon to the contractor's detriment. The bank appealed.

The Ontario Court of Appeal, in a judgment reported 39 O.R.(2d) 630, allowed the appeal in part. The court held that s. 4 of the Interest Act did not apply and that the bank was not estopped from claiming its priority as mortgagee. The court affirmed that the written assurance constituted a guarantee that was breached and that it was therefore unnecessary to deal with the issue of negligent misrepresentation. The bank appealed. The contractor cross-appealed.

The Supreme Court of Canada dismissed both appeals. The court held that the bank's written assurance of adequate financing did not constitute a guarantee, but affirmed the bank's liability for negligently misrepresenting that the project was adequately financed. The court also held that s. 4 of the Interest Act did not apply and that there was no basis for estoppel.

Contracts - Topic 1508

Formation of contract - Consensus or agreement - Intention - Inference from conduct - A contractor agreed to construct a building only after receiving a written assurance from the developer's bank that the project was adequately financed - The Supreme Court of Canada held that the written assurance did not constitute a contract of guarantee - The court stated that at best the assurance would be a unilateral contract, but that the requisite certainty of intention as a foundation to imply a contract could not be implied out of the combination of documents and course of conduct of the parties - See paragraphs 19 to 22.

Damages - Topic 3630

Deceit and misrepresentation - Negligent misrepresentation - A contractor was induced to contract to build an office and shopping complex by the developer's bank's negligent misrepresentation that the project was adequately financed - In awarding damages, the Supreme Court of Canada allowed the contractor's claim for both actual loss and loss of anticipated profit, the latter normally available only in contract actions - The court held that the commercial context in which the parties operated dictated that the loss should be calculated in the same way in tort as it would be in contract, ie. loss of anticipated profit rather than loss of opportunity - See paragraphs 27 to 29.

Fraud and Misrepresentation - Topic 2750

Misrepresentation - Negligent advice - Inducing contractual relations - A contractor agreed to construct an office and shopping complex only after receiving a written assurance from the developer's bank that the project was adequately financed - The Supreme Court of Canada held that the assurance constituted a negligent misrepresentation, because financing was not adequate; the assurance was made negligently where the bank knew it was untrue; the bank owed a duty of care to the contractor, which it breached; and the bank knew or should have foreseen that the assurance would be relied upon by the contractor to its detriment - See paragraphs 23 to 26.

Interest - Topic 3072

Statutory interest - Interest Act - Mortgages - Rate of interest - Certainty of - Section 4 stated that where the interest rate was based on a period of less than one year and the annual rate was not disclosed, interest was recoverable only at a rate of 5% - The section did not apply to "mortgages on real estate" - The Supreme Court of Canada held that a mortgage contained in a debenture as one component of the bank's security constituted a "mortgage on real estate", making s. 4 inapplicable - Alternatively, the court held that s. 4 should not be interpreted so as to allow a sophisticated commercial borrower who is not in need of protection to escape an otherwise valid arm's length financial transaction - See paragraphs 32 to 33.

Interest - Topic 5008

Interest as damages - Prejudgment interest - A contractor was awarded damages for its actual loss and for loss of anticipated profit after being induced to contract by a bank's negligent misrepresentation - The Supreme Court of Canada awarded prejudgment interest from the date of completion of the construction project, to compensate the contractor for loss of opportunity to invest the money - See paragraph 30.

Words and Phrases

Mortgages on real estate - The Supreme Court of Canada referred to the meaning of "mortgages on real estate" as found in s. 4 of the Interest Act, R.S.C. 1970, c. I-18 - See paragraphs 32 to 33.

Cases Noticed:

Carlill v. Carbolic Smoke Ball Co., [1893] 1 Q.B. 256 (C.A.), refd to. [para. 20].

Hedley Byrne and Co. Ltd. v. Heller and Partners Ltd., [1964] A.C. 465 (H.L.), appld. [para. 23].

Patrick L. Roberts Ltd. v. Sollinger Industries Ltd. and Ontario Development Corporation (1978), 19 O.R.(2d) 44 (Ont. C.A.), refd to. [para. 29].

Re Tudale Explorations Ltd. and Bruce (1978), 88 D.L.R.(3d) 584 (Ont. H.C.), refd to. [para. 34].

Elmvale Lumber Co. Ltd. v. Laurin (1977), 16 O.R.(2d) 241 (Ont. S.C.), refd to. [para. 35].

Statutes Noticed:

Mechanics' Lien Act, R.S.O. 1970, c. 267, generally [para. 1].

Interest Act, R.S.C. 1970, c. I-18, s. 4 [para. 13].

Authors and Works Noticed:

McGregor on Damages (14th Ed. 1980), p. 996 [para. 27].

Counsel:

John D. Brownlie, Q.C., and James A. Hodgson, for V.K. Mason Construction;

John J. Robinette, Q.C., John Sopinka, Q.C., D.B. Houston and Barry W. Earle, Q.C., for the Bank of Nova Scotia.

This appeal was heard at Ottawa, Ontario, on June 14, 1984, before Dickson, C.J., Ritchie, Estey, McIntyre, Chouinard, Lamer and Wilson, JJ., of the Supreme Court of Canada.

On April 4, 1985, Wilson J., delivered the following judgment for the Supreme Court of Canada.

Ritchie, J., did not participate in the judgment.