Royal Bank of Canada v. Got (W.) & Associates Electric Ltd. et al., (1999) 247 N.R. 1 (SCC)

• Judge: L'Heureux-Dubé, Gonthier, Cory, McLachlin, Iacobucci, Bastarache and Binnie, JJ.
• Court: Supreme Court (Canada)
• Case Date: October 15, 1999
• Jurisdiction: Canada (Federal)
• Citations: (1999), 247 N.R. 1 (SCC);1999 CanLII 670 (SCC);139 CCC (3d) 492;[1999] 3 SCR 660

Royal Bk. v. Got & Assoc. Electric Ltd. (1999), 247 N.R. 1 (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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Temp. Cite: [1999] N.R. TBEd. OC.012

Royal Bank of Canada (appellant) v. W. Got & Associates Electric Ltd. and Donald E. Sanderlin (respondents)

(26081)

Indexed As: Royal Bank of Canada v. Got (W.) & Associates Electric Ltd. et al.

Supreme Court of Canada

L'Heureux-Dubé, Gonthier, Cory, McLachlin, Iacobucci, Bastarache and Binnie, JJ.

October 15, 1999.

Summary:

A bank, as secured creditor, applied for and obtained a court-appointed receiver-manager of the plaintiff company. The bank sued the company in debt for monies owing and sued Sanderlin on his guarantee for the same amount. The company counterclaimed against the bank and its receiver for damages for the loss of the assets of the company as a going concern, lost future profits and goodwill and exemplary damages for wrong­ful seizure. The company claimed the receiver was appointed on the basis of an improper affidavit and that it was not given a reasonable time to respond to any demand for payment before appointing a receiver. The company claimed the receiver was liable for gross mismanagement and negligent operation of the business.

The Alberta Court of Queen's Bench, in a judgment reported 150 A.R. 93, allowed the action and the counterclaim. The company was liable for the debt to the bank. The guarantor was discharged from liability by the bank's conduct. The bank was liable to the company for the net value of the com­pany, the value of the debt owed to the bank and the amount of accounts receivable. Additionally the bank, and to a lesser extent ($5,000) the receiver, were liable for $50,000 damages for lost profits. The bank's conduct warranted a $100,000 exemplary damage award.

The Alberta Court of Queen's Bench, in supplementary reasons for judgment reported 154 A.R. 277, awarded the company dam­ages of $83,200 for income taxes payable and $162,737 for deferred income taxes. The company was awarded prejudgment interest at various rates. The court awarded costs to the bank for the steps necessary to prove its claim, to the company and the guarantor for the costs of their defence, and to the com­pany for its costs on the counterclaim. The bank appealed and the company cross-ap­pealed.

The Alberta Court of Appeal, Hethering­ton, J.A., dissenting in part, in a judgment reported 196 A.R. 241; 141 W.A.C. 241, dismissed both the appeal and the cross-ap­peal. The bank appealed.

The Supreme Court of Canada dismissed the appeal. The bank was liable for breach of contract in failing to give proper notice. It was unnecessary to determine whether the bank was also liable in tort for conversion, as the damage award would be the same in tort as for breach of contract. The court affirmed the damage award.

Company Law - Topic 5439

Borrowing - Debentures - Wrongful seizure or improvident sale of assets - Damages - [See Damages - Topic 1816 ].

Creditors and Debtors - Topic 1065

Debtors' rights - Before payment - Rea­sonable notice of requirement to pay - [See Damages - Topic 1816 ].

Damages - Topic 1301

Exemplary or punitive damages - Wrong­ful seizure, detention or conversion of goods - A bank obtained a court-appoint­ed receiver by way of an affidavit that was flagrantly incomplete and misleading - The bank obtained the receiving order ex parte, with no intention of giving the debtor advance notice or a reasonable opportunity to pay - The trial judge stated that the bank's con­duct was open to "grave censure" - A major chartered bank should be trustworthy and beyond reproach - The bank's conduct constituted a serious affront to the adminis­tration of justice and offended "the ordi­nary standards of moral­ity or decent con­duct in the community in such marked degree that censure by way of damages is ... warranted" - The trial judge assessed $100,000 exemplary damages to emphasize that the court would not con­done (1) vio­lation of a debentureholder's duty to give a debtor reasonable time to pay and (2) the abuse of the court's pro­cess for commer­cial advantage - The Supreme Court of Canada, although em­phasizing that it would be rare to award exemplary dam­ages in commercial dis­putes, affirmed the award based on the bank's conduct - See paragraphs 26 to 29.

Damages - Topic 1305

Exemplary or punitive damages - Breach of contract - [See Damages - Topic 1301 ].

Damages - Topic 1816

Torts affecting goods - Conversion - Wrongful seizure - Business assets - A bank obtained an ex parte order for a court-appointed receiver without giving the debtor notice or a reasonable oppor­tunity to pay - The receiving order was improper­ly obtained with a flagrantly incomplete and misleading affidavit - The receiver sold assets, putting the debtor out of busi­ness - The trial judge held that the bank was liable in damages for conversion and trespass for the full value of converted assets - There was no failure to mitigate by failing to appeal the appointment or seek­ing to set it aside - The trial judge assessed damages as the value of inven­tory, accounts receivable, holdbacks, work in progress, shareholder's advances, advances to affiliated companies, market­able securi­ties, goodwill and fixed assets, less liabili­ties - Damages equalled the net value of the company plus the amount of indebted­ness to the bank and the amount of accounts payable, where the debtor was required to discharge the last two debts - In supplementary reasons for judgment, the trial judge awarded damages for income taxes payable and deferred income taxes - The Supreme Court of Canada affirmed the damage award on the basis of breach of contract, without finding it necessary to determine whether the bank was also liable in tort for conversion, because the damage award would be the same for breach of contract or conversion - See paragraphs 16 to 25.

Receivers - Topic 1607

Appointment - Improper appointment - Damages - A bank improperly appointed a receiver, which put the debtor out of busi­ness - The debtor claimed damages for lost profits - The trial judge stated that "in the context of the remedies for conver­sion, it is clear that damages for loss of profits consequential upon the wrongful taking are recoverable in addition to the value of the property will be allowed, and will not be regarded as double counting" - However, the trial judge stated that the possibility of significant profits was slim and speculative - Accordingly, the trial judge assessed $50,000 damages for future lost profits - The Supreme Court of Canada affirmed the damage award on the basis of breach of contract, without finding it necessary to determine whether the bank was also liable in tort for conversion, because the damage award would be the same for breach of contract or conversion - See paragraphs 16 to 25.

Receivers - Topic 1607

Appointment - Improper appointment - Damages - [See Damages - Topic 1816 ].

Torts - Topic 3107

Trespass - Trespass to goods - Conver­sion - Damages - General - [See Dam­ages - Topic 1816 ].

Torts - Topic 3108

Trespass - Trespass to goods - Conver­sion - Damages - Mitigation - [See Damages - Topic 1816 ].

Cases Noticed:

Lister (Ronald Elwyn) Ltd. et al. v. Dun­lop Canada Ltd., [1982] 1 S.C.R. 726; 42 N.R. 181; 41 C.B.R.(N.S.) 272; 135 D.L.R.(3d) 1; 18 B.L.R. 1; 65 C.P.R.(2d) 1, refd to. [para. 18].

Massey v. Sladen (1868), L.R. 4 Ex. 13, refd to. [para. 18].

Mister Broadloom Corp. (1968) Ltd. v. Bank of Montreal and Clarkson Co. (1979), 25 O.R.(2d) 198 (H.C.), revsd. (1983), 1 O.A.C. 52; 44 O.R.(2d) 368 (C.A.), refd to. [para. 18].

Pax Management Ltd. et al. v. Canadian Imperial Bank of Commerce, [1992] 2 S.C.R. 998; 141 N.R. 324; 15 B.C.A.C. 81; 27 W.A.C. 81, refd to. [para. 20].

Jeannette B.B.Q. Ltée v. Caisse Populaire de Tracadie Ltée (1991), 117 N.B.R.(2d)

129; 295 A.P.R. 129 (C.A.), refd to. [para. 20].

Kavcar Investments Ltd. v. Aetna Finan­cial Services Ltd. and Coopers Lybrand (1989), 35 O.A.C. 305; 70 O.R.(2d) 225 (C.A.), refd to. [para. 20].

Royal Bank of Canada v. Nobes (1982), 49 N.S.R.(2d) 634; 96 A.P.R. 634 (C.A.), refd to. [para. 20].

BG Checo International Ltd. v. British Columbia Hydro and Power Authority, [1993] 1 S.C.R. 12; 147 N.R. 81; 20 B.C.A.C. 241; 35 W.A.C. 241, refd to. [para. 22].

Vorvis v. Insurance Corp. of British Columbia, [1989] 1 S.C.R. 1085; 94 N.R. 321, refd to. [para. 26].

Counsel:

Frank R. Foran, Q.C., and M.G. Massicotte, for the appellant;

F. David Cook and John A. Weir, Q.C., for the respondents.

Solicitors of Record:

Howard, Mackie, Calgary, Alberta, for the appellant;

Weir, Bowen, Edmonton, Alberta, for the respondents.

This appeal was heard on December 2, 1998, before L'Heureux-Dubé, Gonthier, Cory, McLachlin, Iacobucci, Bastarache and Binnie, JJ., of the Supreme Court of Canada.

On October 15, 1999, the judgment of the Supreme Court of Canada was delivered jointly in both official languages by McLachlin and Bastarache, JJ.

Note that Cory, J., did not participate in the judgment.