Strand et al. v. Strand et al., (2014) 603 A.R. 200 (QB)

• Judge: Dario, J.
• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: January 22, 2014
• Citations: (2014), 603 A.R. 200 (QB);2014 ABQB 754

Strand v. Strand (2014), 603 A.R. 200 (QB)

MLB headnote and full text

Temp. Cite: [2015] A.R. TBEd. JA.024

Donald Douglas Strand and 101131440 Saskatchewan Ltd. (plaintiffs) v. Richard Gordon Strand, Farrago Investments Ltd. and Homes Investment Management Inc. (defendants)

(1001 10706; 2014 ABQB 754)

Indexed As: Strand et al. v. Strand et al.

Alberta Court of Queen's Bench

Judicial District of Calgary

Dario, J.

December 11, 2014.

Summary:

This dispute arose following a breakdown in an investment and employment relationship between brothers and their privately held companies. The plaintiffs (Douglas Strand and his company, 101131440 Sask. Ltd.), sued the defendants (Richard Strand and his company, Homes Investment Management Inc. et al.), alleging that the defendants breached their contractual commitments. Alternatively, the plaintiffs asserted that negligent misrepresentations were made by the defendants that impacted the plaintiffs' decision to invest in the corporate defendant's business.

The Alberta Court of Queen's Bench allowed the plaintiffs' action on their primary claim for breach of contract in respect of unpaid salary (of $72,500) and consulting fees (of $79,062.27), which in aggregate amounted to $151,562.27. They also succeeded in their secondary claim for damages for negligent misrepresentation regarding the loaned amounts in the amount of $197,200.

Contracts - Topic 3523

Performance or breach - Breach - What constitutes a breach - This dispute arose following a breakdown in an investment and employment relationship between brothers and their privately held companies - The plaintiffs (Douglas Strand and his company, 101131440 Sask. Ltd.), sued the defendants (Richard Strand and his company, Homes Investment Management Inc. et al.), alleging breach of contract (i.e., loan and subordination agreements between the parties) - The Alberta Court of Queen's Bench interpreted the individual contracts and allowed the plaintiffs' breach of contract claim in respect of unpaid salary and consulting fees - See paragraphs 117 to 179.

Damages - Topic 3630

Deceit and misrepresentation - Negligent misrepresentation - The Alberta Court of Queen's Bench reviewed the remedies available for negligent misrepresentation (rescission of contract or damages in tort) - The court reviewed the principles applicable to each remedy - See paragraphs 87 to 115.

Damages - Topic 3630

Deceit and misrepresentation - Negligent misrepresentation - The plaintiffs sued the defendants alleging that a negligent misrepresentation regarding a trading loss was made by the defendants that impacted the plaintiffs' decision to invest in the corporate defendant's business - The Alberta Court of Queen's Bench found that there was a negligent misrepresentation and determined that the appropriate remedy was damages, as opposed to rescission - Damages in this case consisted of the repayment of all out-of-pocket amounts lost by the plaintiffs - See paragraphs 91 to 106.

Estoppel - Topic 1072

Estoppel in pais (by conduct) - Representation - General principles - [See Practice - Topic 1628 ].

Fraud and Misrepresentation - Topic 2508

Misrepresentation - Negligent misrepresentation - In Queen v. Cognos Inc. (SCC 1993), the court set out a five part test for negligent misrepresentation - The second and third parts of the test required that the representation in question had to be untrue, inaccurate or misleading, and that the representator had to have acted negligently in making the representation - The Alberta Court of Queen's Bench stated that courts had long recognized that a negligent misrepresentation could occur by omission - The court noted two factual situations where a misstatement by omission could occur: "1. where an event occurs in the course of the parties' dealings in relation to the contract which creates a duty of disclosure; and, 2. where the parties' relationship itself creates a duty of care" - The court thereafter elaborated on the duty of disclosure in this context - See paragraphs 33 to 38.

Fraud and Misrepresentation - Topic 2508

Misrepresentation - Negligent misrepresentation - At issue was whether part one of the Queen v. Cognos (SCC 1993) test (determining whether there was a special relationship), included a determination that the representee would rely on the statements of the representor (part four) - As such, where there was a special relationship, the reasonable reliance required for part four of the test could generally be inferred - The Alberta Court of Queen's Bench stated: "That is not how I read the test in Cognos. Cognos sets out the elements required to establish negligent misrepresentation, including that there must be a special relationship between the representor and the representee (part one of the test), and that the representee must have reasonably relied on the misrepresentation (part four of the test) ... If I accept the plaintiffs' argument, there would not be a need to ever establish reasonable reliance, as there must always be a special relationship to satisfy the first part of the test in Cognos. To successfully make out their claim for negligent misrepresentation, the plaintiffs must establish both that they relied upon the misrepresentations made, and that such reliance was reasonable" - See paragraph 39.

Fraud and Misrepresentation - Topic 2508

Misrepresentation - Negligent misrepresentation - This dispute arose following a breakdown in an investment and employment relationship between brothers and their privately held companies - The plaintiffs (Douglas Strand and his company, 101131440 Sask. Ltd.), sued the defendants (Richard Strand and his company, Homes Investment Management Inc. et al.), alleging that negligent misrepresentations were made by the defendants that impacted the plaintiffs' decision to invest in the corporate defendant's business - In particular, the plaintiffs alleged that the defendants made a negligent misrepresentation with respect to the contents of a seven page financial "snapshot" of the corporate defendant (the snapshot agreement), by failing to provide audited financial statements and a trading loss (i.e., negligent misrepresentation by omission) - The Alberta Court of Queen's Bench, applying the test in Queen v. Cognos (SCC 1993), found that there was no negligent misrepresentation by the defendants relating to the snapshot agreement or in the failure to provide financial statements - However, the failure to disclose the trading loss as a contingent liability in a timely manner constituted a negligent misrepresentation - See paragraphs 30 to 76.

Fraud and Misrepresentation - Topic 2831

Misrepresentation - Defences - Waiver - [See Practice - Topic 1628 ].

Practice - Topic 1335

Pleadings - The issues - Issues to be raised must be pleaded - [See Practice - Topic 1628 ].

Practice - Topic 1628

Pleadings - The defence - Defences which must be pleaded - The plaintiffs sued the defendants, alleging that a negligent misrepresentation regarding a trading loss was made by the defendants that impacted the plaintiffs' decision to invest in the corporate defendant's business - The defendants argued that even if there was a negligent misrepresentation, the plaintiffs' conduct constituted a waiver of the right to pursue their claim or that estoppel applied - The defendants pointed to the plaintiffs' delay in bringing the action and the fact that the plaintiffs continued to loan money even after becoming aware of the trading loss - The Alberta Court of Queen's Bench found that there was a negligent misrepresentation - However, the court noted that the defendants did not plead waiver or estoppel in accordance with the Alberta Rules of Court (rule 13.6), nor did they seek to amend their pleadings - Even if they had, the requirements for waiver or estoppel were not met in this case - See paragraphs 77 to 86.

Cases Noticed:

Farrago Investments Ltd. v. 101070373 Saskatchewan Ltd. et al., [2014] A.R. Uned. 821; 2014 ABQB 755, refd to. [para. 4].

Queen (D.J.) v. Cognos Inc., [1993] 1 S.C.R. 87; 147 N.R. 169; 60 O.A.C. 1, refd to. [para. 31].

Condominium Corp. No. 0321365 et al. v. 970365 Alberta Ltd. et al. (2012), 519 A.R. 322; 539 W.A.C. 322; 2012 ABCA 26, refd to. [para. 31].

Opron Construction Co. v. Alberta (1994), 151 A.R. 241 (Q.B.), refd to. [para. 33].

Drew Oliphant Professional Corp. et al. v. Harrison et al., [2011] A.R. Uned. 283; 56 Alta. L.R.(5th) 233; 2011 ABQB 216, refd to. [para. 56].

Georgian Windpower Corp. et al. v. Stelco Inc., [2012] O.T.C. Uned. 3759; 113 O.R.(3d) 81; 2012 ONSC 3759, refd to. [para. 56].

Saskatchewan River Bungalows Ltd. and Fikowski v. Maritime Life Insurance Co., [1994] 2 S.C.R. 490; 168 N.R. 381; 155 A.R. 321; 73 W.A.C. 321, refd to. [para. 81].

John Burrows Ltd. v. Subsurface Surveys Ltd., [1968] S.C.R. 607, refd to. [para. 84].

Maracle v. Travellers Indemnity Co. of Canada, [1991] 2 S.C.R. 50; 125 N.R. 294; 47 O.A.C. 333, refd to. [para. 85].

Blue Range Resource Corp., Re (2000), 259 A.R. 30; 2000 ABQB 4, refd to. [para. 87].

Laidler v. Richer, [1999] O.T.C. Uned. 281 (Gen. Div.), refd to. [para. 88].

Beer et al. v. Townsgate I Ltd. et al. (1997), 104 O.A.C. 161; 36 O.R.(3d) 136 (C.A.), refd to. [para. 88].

Xerex Exploration Ltd. v. Petro-Canada et al. (2003), 343 A.R. 347; 2003 ABQB 746, affd. (2005), 367 A.R. 201; 346 W.A.C. 201; 2005 ABCA 224, refd to. [para. 88].

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; 1991 SCC 27, refd to. [para. 92].

McConnel v. Wright, [1903] 1 Ch. 546 (C.A.), refd to. [para. 96].

Hedley Byrne & Co. v. Heller & Partners, [1963] 2 All E.R. 575; [1964] A.C. 465 (H.L.), refd to. [para. 97].

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. 105].

Sethi v. Dawnne, [2002] A.R. Uned. 409; 10 Alta. L.R.(4th) 294; 2002 ABQB 736, refd to. [para. 109].

Abbey Glen Property Corp. v. Stumborg et al., [1978] 4 W.W.R. 28; 9 A.R. 234 (C.A.), refd to. [para. 109].

Kingu v. Walmar Ventures Ltd. (1986), 10 B.C.L.R.(2d) 15 (C.A.), refd to. [para. 110].

Canada Deposit Insurance Corp. v. Canadian Commercial Bank (1987), 83 A.R. 349 (Q.B.), refd to. [para. 112].

Samson v. Lockwood et al. (1998), 110 O.A.C. 301; 40 O.R.(3d) 161 (C.A.), refd to. [para. 114].

Creston Moly Corp. v. Sattva Capital Corp. (2014), 461 N.R. 335; 358 B.C.A.C. 1; 614 W.A.C. 1; 2014 SCC 53, refd to. [para. 134].

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, refd to. [para. 179].

Counsel:

Gary B. Laviolette and Marc Matras, for the plaintiffs;

Brent L. Robinson, for the defendants.

This decision was heard on January 22, 2014, before Dario, J., of the Alberta Court of Queen's Bench, Judicial District of Calgary, who delivered the following decision on December 11, 2014.