NBD Bank Canada v. Dofasco Inc. et al.

• Jurisdiction: Ontario
• Court: Ontario Court of Justice General Division (Canada)
• Judge: Crane, J.
• Citation: (1997), 41 O.T.C. 321 (GD)
• Date: 27 March 1997

NBD Bk. v. Dofasco Inc. (1997), 41 O.T.C. 321 (GD)

MLB headnote and full text

Temp. Cite: [1997] O.T.C. TBEd. JN.142

NBD Bank Canada (plaintiff) v. Dofasco Inc., Percival Nicholas, John H. Rule and James T. Melville (defendants)

(3592/91)

Indexed As: NBD Bank Canada v. Dofasco Inc. et al.

Ontario Court of Justice

General Division

London

Crane, J.

March 27, 1997.

Summary:

Algoma Steel had a credit facility with the plaintiff bank. In 1988, Dofasco acquired all the shares of Algoma. Algoma's cash management functions were transferred to Dofasco. Due to certain events that occurred between August and December 1990, the plaintiff became concerned about Algoma's financial situation. In January 1991, the plaintiff had discussions with Nicholas (Dofasco employee in charge of Algoma's day to day banking) and Melville (Algoma's chief financial officer) concerning Algoma's financial situation. Melville informed the plaintiff that Algoma had a short term working capital problem in financing a "ramping up" following a four month strike. Melville stated the problem would be resolved by late March. He agreed to provide cashflow statements to the plaintiff. The statements were never provided. The cashflow statements indicated financial problems beyond ramping up. Dofasco believed that it would be imperiled by continued financial support of Algoma and resolved not to put any more money into Algoma. On January 10, 1991, $4 million was borrowed against Algoma's credit facility with the plaintiff. The plaintiff asked for the return of the borrowed money. Alternatively, the plaintiff proposed, inter alia, that the loan be secured by Algoma's U.S. accounts receivable and that Algoma and Dofasco promise that the proceeds from the sale of Algoma's U.S. coal assets would be applied to the credit facility. Melville indicated that Algoma's U.S. accounts receivable were not pledged. However, Algoma had already signed a pledge agreement with the Royal Bank. The plaintiff again unsuccessfully sought Algoma's cashflow statements. Further discussions with Nicholas suggested to the plaintiff that Dofasco was supporting the plaintiff's proposal. The plaintiff did not recover the full $4 million. The plaintiff sued Dofasco, Melville, Nicholas and Rule (another Dofasco employee) for deceit and negligent misrepresentation. The plaintiff claimed that, on the basis of discussions with Melville and Nicholas, as representatives for Algoma and Dofasco, it altered its loan position to its detriment. The action against Rule and Nicholas was withdrawn on the undertaking that Dofasco would be liable for any negligence by Rule or Nicholas.

The Ontario Court (General Division) allowed the plaintiff's action. The court held that Melville and Nicholas made negligent misrepresentations. The court held that Dofasco was vicariously liable. The court held that Melville was personally liable. The court held that the facts failed to establish deceit.

Equity - Topic 3607

Fiduciary or confidential relationships - General principles - Relationships which are not fiduciary - See paragraphs 98 to 104.

Equity - Topic 3713

Fiduciary or confidential relationships - Commercial relationships - Arm's length commercial transactions - See paragraphs 98 to 104.

Equity - Topic 3761

Fiduciary or confidential relationships - The creditor debtor relationship - See paragraphs 98 to 104.

Fraud and Misrepresentation - Topic 6

Fraudulent misrepresentation (Deceit) - General principles - What constitutes deceit or fraudulent misrepresentation - See paragraphs 48 to 51.

Fraud and Misrepresentation - Topic 2508

Misrepresentation - General principles - Negligent misrepresentation - See paragraphs 52 to 97.

Fraud and Misrepresentation - Topic 2707

Misrepresentation - What constitutes misrepresentation - Falsity by silence - See paragraphs 52 to 97.

Torts - Topic 2532

Vicarious liability - Master and servant - Employer - Liability for acts of employees - Exceptions - See paragraphs 87 to 97.

Cases Noticed:

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Derry v. Peek (1989), 14 App. Cas. 337 (H.L.), refd to. [para. 48, Appendix C].

Opron Construction Co. v. Alberta (1994), 151 A.R. 241 (Q.B.), refd to. [para. 52, Appendix C].

Edginton v. Fitzmaurice (1885), 29 Ch. 459 (C.A.), refd to. [para. 65, Appendix C].

London Drugs Ltd. v. Brassard and Vanwinkel, [1992] 3 S.C.R. 299; 143 N.R. 1; 18 B.C.A.C. 1; 31 W.A.C. 1, refd to. [para. 87, Appendix C].

International Corona Resources Ltd. v. LAC Minerals Ltd., [1989] 2 S.C.R. 574; 101 N.R. 239; 36 O.A.C. 57; 61 D.L.R.(4th) 14; 69 O.R.(2d) 287; 35 E.T.R. 1, refd to. [para. 98, Appendix C].

Hodgkinson v. Simms et al., [1994] 3 S.C.R. 377; 171 N.R. 245; 49 B.C.A.C. 1; 80 W.A.C. 1; 117 D.L.R.(4th) 161, refd to. [para. 98, Appendix C].

Kelly v. Cooper, [1993] A.C. 205; 144 N.R. 307 (P.C.), refd to. [para. 98, Appendix C].

Mouat v. Clark Boyce, [1994] 1 A.C. 428; 159 N.R. 311 (P.C.), refd to. [para. 98, Appendix C].

Mason (V.K.) Construction Ltd. v. Bank of Nova Scotia and Courtot Investments Ltd., [1985] 1 S.C.R. 271; 58 N.R. 195; 8 O.A.C. 381, refd to. [Appendix C].

Nocton v. Lord Ashburton, [1914] A.C. 932 (H.L.), refd to. [Appendix C].

Bisset v. Wilkinson, [1926] 3 W.W.R. 94 (P.C.), refd to. [Appendix C].

Smith v. Land and House Property Corp. (1884), 28 Ch. D. 7, refd to. [Appendix C].

Harland v. Fancsali (1993), 13 O.R.(3d) 103 (Gen. Div.), refd to. [Appendix C].

R. v. Theroux (R.), [1993] 2 S.C.R. 5; 151 N.R. 104; 54 Q.A.C. 184; 100 D.L.R.(4th) 624, refd to. [Appendix C].

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Sugar v. Peat Marwick Ltd. (1988), 66 O.R.(2d) 766 (H.C.), refd to. [Appendix C].

Spinks v. Canada (1996), 195 N.R. 184; 134 D.L.R.(4th) 223 (F.C.A.), refd to. [Appendix C].

Hedley Byrne & Co. v. Heller & Partners, [1964] A.C. 465 (H.L.), refd to. [Appendix C].

Dellelce Construction & Equipment v. Portec Inc. (1990), 73 O.R.(2d) 396 (H.C.), refd to. [Appendix C].

Cumming v. Shand (1860), 157 E.R. 1114, refd to. [Appendix C].

Thermo King Canada Ltd. v. Provincial Bank of Canada (1981), 34 O.R.(2d) 369 (C.A.), refd to. [Appendix C].

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Datile Financial Corp. et al. v. Royal Trust Corp. of Canada et al. (1991), 5 O.R.(3d) 358 (Gen. Div.), refd to. [Appendix C].

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Hivac Ltd. v. Park Royal Scientific Instruments Ltd., [1946] 1 Ch. 169 (C.A.), refd to. [Appendix C].

Canadian Aero Service Ltd. v. O'Malley (1973), 40 D.L.R.(3d) 371 (S.C.C.), refd to. [Appendix C].

Rainbow Industrial Caterers Ltd. v. Canadian National Railway (1988), 30 B.C.L.R.(2d) 273 (C.A.), refd to. [Appendix C].

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Caparo Industries v. Dickman et al., [1990] 1 All E.R. 568; 108 N.R. 81 (H.L.), refd to. [Appendix C].

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Elan Corp. and Nova Metal Products Inc. v. Comiskey (1990), 41 O.A.C. 282; 1 O.R.(3d) 289 (C.A.), refd to. [Appendix C].

Royal British Bank v. Turquand (1856), 199 E.R. 886 (K.B.), refd to. [Appendix C].

Bank of Montreal v. Vola (1980), 31 O.R.(2d) 60 (H.C.), refd to. [Appendix C].

Prosperity Ltd. v. Lloyd's Bank Ltd. (1923), 39 T.L.R. 372 (K.B. Div.), refd to. [Appendix C].

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Skovsgaard v. Toronto-Dominion Bank, [1995] O.J. No. 3090 (C.A.), refd to. [Appendix C].

Parna v. G. & S. Properties Ltd., [1971] 1 S.C.R. 306, refd to. [Appendix C].

R. v. Norman (D.L.) (1993), 68 O.A.C. 22; 16 O.R.(3d) 295 (C.A.), refd to. [Appendix C].

Raypath Resources Ltd. v. Toronto-Dominion Bank (1996), 184 A.R. 125; 122 W.A.C. 125; 135 D.L.R.(4th) 261 (C.A.), refd to. [Appendix C].

Edgeworth Construction Ltd. v. Lea (N.D.) & Associates Ltd. et al., [1993] 3 S.C.R. 206; 157 N.R. 241; 32 B.C.A.C. 221; 53 W.A.C. 221, refd to. [Appendix C].

Central Trust Co. v. Rafuse and Cordon, [1986] 2 S.C.R. 147; 69 N.R. 321; 75 N.S.R.(2d) 109; 186 A.P.R. 109; 37 C.C.L.T. 117; 42 R.P.R. 161; 31 D.L.R.(4th) 481; 34 B.L.R. 187, refd to. [Appendix C].

Anns v. Merton London Borough Council, [1978] A.C. 728 (H.L.), refd to. [Appendix C].

Toronto-Dominion Bank v. Leigh Instruments Ltd. (Bankrupt) et al. (1991), 51 O.A.C. 321 (Div. Ct.), refd to. [Appendix C].

Montreal Trust Co. of Canada et al. v. ScotiaMcLeod Inc. et al. (1995), 87 O.A.C. 129 (C.A.), refd to. [Appendix C].

Maritime Steel and Foundries Ltd. v. Whitman Benn & Associates Ltd. et al., [1996] N.S.J. No. 259, refd to. [Appendix C].

Canadian Storm Communications Inc. v. Lloyd, [1994] O.J. No. 2847 (Gen. Div.), refd to. [Appendix C].

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Highberm Holdings Inc. v. Ronzino, [1994] O.J. No. 2035 (Gen. Div.), refd to. [Appendix C].

Lyde v. Barnard (1836), 150 E.R. 363 (Ex. Ct.), refd to. [Appendix C].

Hirst v. West Riding Union Banking Co., [1901] 2 K.B. 560 (C.A.), refd to. [Appendix C].

Scheuerman v. Scheuerman (1915), 52 S.C.R. 625, refd to. [Appendix C].

Carr v. Bank of Montreal (1929), 63 O.L.R. 544 (H.C.), refd to. [Appendix C].

Multiform Manufacturing Co. et autres v. R. et autres, [1990] 2 S.C.R. 624; 113 N.R. 373; 32 Q.A.C. 241, refd to. [Appendix C].

Thomson v. Canada (Minister of Agriculture), [1992] 1 S.C.R. 385; 133 N.R. 345, refd to. [Appendix C].

R. v. McCraw, [1991] 3 S.C.R. 72; 128 N.R. 299; 49 O.A.C. 47, refd to. [Appendix C].

Cardinal et al. v. Canada, [1982] 1 S.C.R. 508; 41 N.R. 300, refd to. [Appendix C].

Anderson (W.B.) & Sons Ltd. v. Rhodes (Liverpool) Ltd., [1967] 2 All E.R. 850, refd to. [Appendix C].

Banbury v. Bank of Montreal, [1918-19] All E.R. 1 (H.L.), refd to. [Appendix C].

Goad v. Canadian Imperial Bank of Commerce, [1968] 1 O.R. 579 (H.C.), refd to. [Appendix C].

York Auto Bodies v. Frayne, [1968] 2 O.R. 728 (Co. Ct.), refd to. [Appendix C].

Coco v. Clark (A.N.)(Engineers) Ltd., [1969] R.P.C. 41 (Ch. D.), refd to. [Appendix C].

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Statutes Noticed:

Statute of Frauds, R.S.O. 1990, c. S-19, sect. 8 [para. 105].

Authors and Works Noticed:

Bamford, Colin, Article, International Business Lawyer (February 1997), vol. 25, No. 2, p. 74 [Appendix C].

Clerk & Lindsell on Torts (16th Ed. 1989), pp. 1036 to 1038 [Appendix C].

Crawford and Falconbridge, Banking and Bills of Exchange (8th Ed. 1986), vol. 1, pp. 750 to 754 [Appendix C].

Fleming, The Law of Torts (8th Ed. 1992), p. 639 [Appendix C].

Fridman, The Law of Torts in Canada (1990), vol. 2, pp. 126, 127 [Appendix C].

Klar, Tort Law (1991), p. 160 [para. 54, Appendix C]

Perell, The Fraud Elements of Deceit and Fraudulent Misrepresentation (1996), 18 Adv. Q. 23, p. 23 [Appendix C].

Counsel:

T.C. Corbett and K.D. Reason, for the plaintiff;

J. Leon and C. Staples, for the defendants, Dofasco Inc., Nicholas and Rule;

M. Barrett and G. Burt, for the defendant, Melville.

This action was heard in London, Ontario, on November 5 to 8, 12 to 15, 18 to 22, 25 to 27, December 9 to 13, 16, 18 1996 and in Hamilton, Ontario, on January 7 to 10, 1997, by Crane, J., of the Ontario Court (General Division), who released the following decision on March 27, 1997.