Smith v. Union of Icelandic Fish Producers Ltd. et al., (2005) 238 N.S.R.(2d) 145 (CA)

• Judge: MacDonald, C.J.N.S., Freeman and Cromwell, JJ.A.
• Court: Court of Appeal of Nova Scotia (Canada)
• Case Date: September 20, 2005
• Jurisdiction: Nova Scotia
• Citations: (2005), 238 N.S.R.(2d) 145 (CA);2005 NSCA 145

Smith v. UIFP (2005), 238 N.S.R.(2d) 145 (CA);

    757 A.P.R. 145

MLB headnote and full text

Temp. Cite: [2005] N.S.R.(2d) TBEd. NO.031

The Union of Icelandic Fish Producers Ltd. (S.I.F.) and S.I.F. Canada Limited, a body corporate (appellants) v. Roger H. Smith (respondent)

(CA 237340; 2005 NSCA 145)

Indexed As: Smith v. Union of Icelandic Fish Producers Ltd. et al.

Nova Scotia Court of Appeal

MacDonald, C.J.N.S., Freeman and Cromwell, JJ.A.

November 15, 2005.

Summary:

The plaintiff sold a salt fish processing and marketing company to the defendant, Union of Icelandic Fish Producers Ltd. (referred to as "SIF"). The plaintiff subsequently sued SIF, claiming that it had assured him an employment contract with the company. SIF counterclaimed for damages for breach of a non-competition clause, which was included in the agreement of purchase and sale. SIF also sought a refund of $25,000 which it had paid to the plaintiff to prepare a report that was never completed. Issues of liability and damages were separated.

The Nova Scotia Supreme Court, in a decision reported at 224 N.S.R.(2d) 358; 708 A.P.R. 358, tried the liability issues. The court held that since there was no acceptance of the plaintiff's offer to work for SIF by SIF's board of directors, there was no contract for the plaintiff's employment with SIF. However, the court held that SIF's president had represented to the plaintiff that there would be no problem in obtaining the agreement of SIF's board of directors to employ the plaintiff and the plaintiff was entitled to be compensated for the damages flowing from that negligent misrepresentation. Further, since the plaintiff had entered into the non-competition agreement as a result of the misrepresentation, the court set aside the non- competition agreement and declared it to be null and void ab initio. The $25,000 which SIF paid to the plaintiff for a report was to be set off against any damages recovered by the plaintiff. SIF appealed, arguing that the court erred: (1) in its finding concerning the nature of SIF's representations; (2) in finding the representations to be actionable; and (3) in linking the representations to the non-competition agreement and setting that agreement aside.

The Nova Scotia Court of Appeal allowed the appeal in part. The court rejected SIF's first and second arguments, but accepted the third. The court held that the trial judge erred by linking the representations to the non-competition agreement and in setting that agreement aside. The court held that the plaintiff should have an opportunity to prove his damages flowing from the negligent misstatement at an assessment and that the issues raised by SIF's counterclaim for damages for breach of the non-competition agreement also remained open. Costs of the appeal, fixed at $4,000 plus disbursements, were left to the judge deciding the assessment of damages and the counterclaim.

Business Law - Topic 2511

Sale of a business - Non-competition clauses - The plaintiff sold a company to the defendant company (SIF) - The trial judge found that the plaintiff was entitled to be compensated for the damages flowing from a negligent misrepresentation made by SIF's president - Further, since the plaintiff had entered into a non-competition agreement as a result of the misrepresentation, the trial judge set aside the non-competition agreement and declared it to be null and void ab initio - On appeal, the Nova Scotia Court of Appeal held that the trial judge erred in setting side the non-competition agreement where it was part of the overall transaction of purchase and sale and it could not be divorced from that overall transaction - See paragraphs 107 to 112.

Fraud and Misrepresentation - Topic 2502

Misrepresentation - General principles - Elements of actionable misrepresentation - The plaintiff sold a company to the defendant company (SIF) - The plaintiff subsequently sued SIF, claiming that it had assured him an employment contract with the company - The trial judge held that there was no binding agreement where there had been no approval from SIF's board of directors to employ the plaintiff - However, the trial judge held that SIF's president had represented to the plaintiff that there would be no problem in obtaining the agreement of SIF's board of directors to employ the plaintiff and the plaintiff was entitled to be compensated for damages flowing from that negligent misrepresentation - SIF appealed, arguing that the representations were not actionable because they related to future events - The Nova Scotia Court of Appeal rejected the argument - The essence of the representation found by the trial judge did not relate to a future event, but rather to a statement of the present fact that there was a place for the plaintiff with SIF - See paragraphs 74 to 93.

Fraud and Misrepresentation - Topic 2516

Misrepresentation - General principles - Contracts - The plaintiff sold a company to the defendant company (SIF) - The plaintiff subsequently sued SIF, claiming that it had assured him an employment contract with the company - The trial judge dismissed the claim in contract, finding that there could be no binding agreement where there had been no approval from SIF's board of directors to employ the plaintiff - However, the trial judge held that SIF's president had represented to the plaintiff that there would be no problem in obtaining the agreement of SIF's board of directors to employ the plaintiff and the plaintiff was entitled to be compensated for the damages flowing from that negligent misrepresentation - SIF appealed, arguing that there was an inconsistency between the trial judge's finding that there was no contract for future employment and his finding that there was an actionable representation in the same terms - The Nova Scotia Court of Appeal held that there was no inconsistency between the trial judge's findings on the contract and negligent misstatement aspects of the case - See paragraphs 71 and 72.

Fraud and Misrepresentation - Topic 2535

Misrepresentation - Elements - Reliance - [See both Fraud and Misrepresentation - Topic 2825 ].

Fraud and Misrepresentation - Topic 2825

Misrepresentation - Defences - Lack of reliance - The plaintiff sold a company to the defendant company (SIF) - The plaintiff subsequently sued SIF, claiming that it had assured him an employment contract with the company - The trial judge held that there was no binding agreement where there had been no approval from SIF's board of directors to employ the plaintiff - However, the trial judge held that SIF's president had represented to the plaintiff that there would be no problem in obtaining the agreement of SIF's board of directors to employ the plaintiff and the plaintiff was entitled to be compensated for the damages flowing from that negligent misrepresentation - SIF appealed, arguing that the trial judge erred in finding that the plaintiff had relied on the representation in the face of the plaintiff's attempts before and after closing to tie SIF down about the particulars of his place with SIF - The Nova Scotia Court of Appeal rejected the argument - The fact that the plaintiff sought to put more meat on the bones of the position that SIF assured him existed did not undermine the trial judge's acceptance of his testimony that he relied on SIF's assurances in agreeing to proceed with the transaction - See paragraphs 96 to 99.

Fraud and Misrepresentation - Topic 2825

Misrepresentation - Defences - Lack of reliance - The plaintiff sold a company to the defendant company (SIF) - The plaintiff subsequently sued SIF, claiming that it had assured him an employment contract with the company - The trial judge found that there was no binding agreement where there had been no approval from SIF's board of directors to employ the plaintiff - However, the trial judge held that SIF's president had represented to the plaintiff that there would be no problem in obtaining the agreement of SIF's board of directors to employ the plaintiff and the plaintiff was entitled to be compensated for the damages flowing from that negligent misrepresentation - SIF appealed, arguing that the plaintiff should have dismissed the statements made to him as mere "puff" and that a reasonable person would not have relied on the representation without a firm and detailed commitment from SIF's president and/or its board of directors - The Nova Scotia Court of Appeal rejected the argument - The dealings between the parties had been characterized by a high degree of trust and relative informality - Having given the assurances in that atmosphere, SIF could not now complain that the plaintiff took them at face value - See paragraphs 100 to 106.

Fraud and Misrepresentation - Topic 2830

Misrepresentation - Defences - No detrimental reliance (damages) - The plaintiff sold a company to the defendant company (SIF) - The plaintiff subsequently sued SIF, claiming that it had assured him an employment contract with the company - Issues of liability and damages were separated - The trial judge, trying the issues of liability only, held that there was no binding agreement where there had been no approval from SIF's board of directors to employ the plaintiff - However, the trial judge held that SIF's president had represented to the plaintiff that there would be no problem in obtaining the agreement of SIF's board of directors to employ the plaintiff and the plaintiff was entitled to be compensated for the damages flowing from that negligent misrepresentation - SIF appealed, arguing that the plaintiff had not proven detrimental reliance on the representations because he had not proven that he had suffered any damages in the sense of a financial loss - The Nova Scotia Court of Appeal rejected the argument - The plaintiff's reliance on the representations at the very least deprived him of an opportunity to negotiate more acceptable terms or seek another buyer - The representations also induced him to enter into a non-competition agreement - In the context of separate trials of liability and damages, that was sufficient to permit the plaintiff to have an opportunity to prove his damages at an assessment - See paragraphs 107 to 123.

Practice - Topic 5408

Judgments and orders - Inconsistent judgments - [See Fraud and Misrepresentation - Topic 2516 ].

Cases Noticed:

Queen (D.J.) v. Cognos Inc., [1993] 1 S.C.R. 87; 149 N.R. 169; 60 O.A.C. 1, refd to. [para. 33].

Dauphinee et al. v. Fralick Estate et al. (2003), 219 N.S.R.(2d) 238; 692 A.P.R. 238 (C.A.), refd to. [para. 42].

Housen v. Nikolaisen et al., [2002] 2 S.C.R. 235; 286 N.R. 1; 219 Sask.R. 1; 272 W.A.C. 1; 211 D.L.R.(4th) 577, refd to. [para. 43].

Delgamuukw et al. v. British Columbia et al., [1997] 3 S.C.R. 1010; 220 N.R. 161; 99 B.C.A.C. 161; 162 W.A.C. 161, refd to. [para. 43].

K.V.P. v. T.E., [2001] 2 S.C.R. 1014; 275 N.R. 52; 156 B.C.A.C. 161; 255 W.A.C. 161, refd to. [para. 43].

Arrow Construction Products Ltd. v. Nova Scotia (Attorney General) (1996), 150 N.S.R.(2d) 241; 436 A.P.R. 241 (C.A.), refd to. [para. 75].

Williams v. Board of Education of School District No. 63 (Saanich) (1986), 37 C.C.L.T 203 (B.C.S.C.), affd. (1987), 17 C.C.E.L. 257 (C.A.), consd. [para. 83].

Reid v. Marr's Leisure Holdings Inc. et al., [1994] 7 W.W.R. 542; 95 Man.R.(2d) 36; 70 W.A.C. 36 (C.A.), consd. [para. 86].

Budd v. Bath Creations Inc., [1998] O.J. No. 5468 (Gen. Div.), consd. [para. 90].

Manders v. Petro-Canada, [2000] O.T.C. Uned. 534 (Sup. Ct.), refd to. [para. 98].

Murray v. Tilley et al. (2005), 244 Nfld. & P.E.I.R. 1; 726 A.P.R. 1 (N.L.T.D.), refd to. [para. 100].

Rainbow Industrial Caterers Ltd. et al. v. Canadian National Railway Co. et al., [1991] 3 S.C.R. 3; 126 N.R. 354; 3 B.C.A.C. 1; 7 W.A.C. 1, refd to. [para. 116].

Nykredit Mortgage Bank Plc. v. Erdman (Edward) Group Ltd. (No. 2) - see South Australia Asset Management Corp. v. York Montague.

South Australia Asset Management Corp. v. York Montague, [1997] 1 W.L.R. 1627; 222 N.R. 66 (H.L.), consd. [para. 120].

Manuge v. Prudential Assurance Co. (1977), 27 N.S.R.(2d) 183; 41 A.P.R. 183 (T.D.), consd. [para. 121].

Authors and Works Noticed:

Fridman, Gerald Henry Louis, The Law of Torts in Canada (2nd Ed. 2002), p. 417 [para. 114].

Halsbury's Laws of England (1998) (4th Ed. - Reissue), vol. 31, paras. 703, 705, 706 [para. 76].

Linden, Allen M., Canadian Tort Law (7th Ed. 2001), pp. 104, 105 [para. 114].

Ogus, A.I., The Law of Damages (1973), p. 2 [para. 119].

Rainaldi, Linda A., Remedies in Tort Law (2005 Looseleaf Update, Release 3), vol. 2, c. 16, Part 4, para. 26 [para. 114].

Counsel:

Alexander Beveridge, Q.C. and Andrew Fraser, for the appellants;

Andrew Nickerson, Q.C., for the respondent.

This appeal was heard on September 20, 2005, at Halifax, Nova Scotia, before MacDonald, C.J.N.S., Freeman and Cromwell, JJ.A., of the Nova Scotia Court of Appeal. The following judgment of the Court of Appeal was delivered by Cromwell, J.A., on November 15, 2005.