COURT OF APPEAL FOR ONTARIO
RE: POLAROID CANADA INC. (Plaintiff/Respondent)
v. CONTINENT-WIDE ENTERPRISES LIMITED (Defendant/ Appellant)
AND RE: CONTINENT-WIDE ENTERPRISES LIMITED (Plaintiff by Counterclaim/Appellant) v. POLAROID CANADA INC., RICHARD GERASCH and TRECK PHOTOGRAPHIC INC. (Defendants by Counterclaim/Respondents)
BEFORE: LABROSSE, ROSENBERG and MacPHERSON JJ.A.
COUNSEL: Chris G. Paliare and Martin Mason, for the appellant
Jeffrey B. Simpson and James B. Musgrove, for the respondents
HEARD: June 12 and 13, 2000
On appeal from the decision of Mr. Justice Spence dated November 15, 1994
E N D O R S E M E N T
[1] The appellant, Continent-Wide Enterprises Limited ("CW") appeals the judgment of Spence J. (the "trial judge") which awarded to the respondent Polaroid Canada Inc. ("Polaroid") damages for breach of contract plus interest and costs. A counterclaim by CW was dismissed.
[2] Polaroid is in the business of distributing photographic products. CW carries on the business of dealing in a wide range of consumer and industrial goods. The claim and counterclaim resulted from the dealings between the parties with respect to the sale and distribution of Polaroid photographic products. The dispute centered on the practice of "transhipping" whereby CW acquired goods from Polaroid in Canada and allegedly exported these goods for resale in another jurisdiction. In general terms, as a result of transhipping, CW could take advantage of resale price benefits, such as favourable currency exchange rates. However, transhipping also adversely affected Polaroid’s global export systems and led to price and supply problems in Canada. In an attempt to curtail the practice of transhipping on the part of CW, Polaroid introduced an "export price policy" charging its Canadian dealers who sold its products outside Canada a higher price than the domestic price for goods sold in Canada.
[3] Subsequently, Polaroid demanded payment of the export price for certain goods sold to CW, which Polaroid alleged had been sold outside Canada. CW refused to pay. Furthermore, in order to monitor the CW purchases, Polaroid would only sell to CW at export prices. Upon receiving satisfactory assurance as to the extent to which the goods had been re-sold and distributed for sale in Canada, Polaroid would remit the amount of any excess payment to CW. In the end, Polaroid terminated its relationship with CW and commenced this action.
[4] The trial judge carefully reviewed the evidence of the entire relationship between the parties. He concluded that CW was an "authorized dealer for the purposes of Polaroid’s pricing policies". He also concluded that Polaroid was at liberty to change its terms of business with CW, that it was not precluded from imposing the export price policy and that CW became contractually bound by the export policy when it received proper notice of the policy. The trial judge determined the date of effective notice to be October 10, 1986. Finally, he also concluded that there had been no waiver of the export price policy by Polaroid.
[5] In our view, these findings of the trial judge are all reasonable and supported by the evidence.
[6] For the purpose of this appeal, CW restricted its attack to the issues of restraint of trade and penalty, which were determined in favour of Polaroid, and the calculation of damages.
[7] It was submitted that the export price policy constituted an illegal contract in restraint of trade and, accordingly, was unenforceable. As part of this submission, it was also argued that the policy was contrary to the Competition Act, R.S.C. 1985, c. C-34.
[8] The trial judge correctly considered this issue in light of the decision of this court in Tank Lining Corp. v. Dunlop Industrial Ltd. (1982), Source decision, 40 O.R. (2d) 219. He stated that he had no doubt that, on its specific wording, the export price policy was a restraint of trade. The respondent has submitted that the trial judge was in error in concluding that the export price policy was a restraint of trade, arguing that the policy falls outside the scope of the common-law doctrine of restraint of trade. It is not necessary to decide this issue because, in any event, the trial judge concluded that the policy satisfied the test of being "reasonable in the interests of the parties" and not contrary to the public interest (including the Competition Act). We agree with the trial judge’s conclusion on this issue.
[9] It was also submitted that the export price policy was a penalty clause. The trial judge considered that a penalty clause is an obligation to pay damages by reason of a breach of the agreement. This was not the present case as it applied in the absence of any breach. He also considered the provision in the policy that the surcharge was in addition to any other right that Polaroid may have had. He remarked that this was not the language of a penalty clause. He concluded that the export price policy was not a penalty. We agree with this conclusion.
[10] With respect to damages, the trial judge concluded that as of October 10, 1986, CW was on notice of the export price policy and that all purchases completed after that date were subject to the policy. It was open to the trial judge to find that orders made prior to October 10th were subject to the policy, having regard to the circumstances under which those orders were placed by CW. The trial judge did not distinguish between industrial and consumer goods and, as the appellant points out, CW did not have the industrial export price list until sometime in 1987. However, it is apparent that the critical factor for finding that CW was bound by the two-price policy was its receipt of the October 7th letter. At this point, CW knew that Polaroid intended the relationship to be governed by the policy. This was essentially a finding of fact and we have not been persuaded that it is inconsistent with the trial judge's earlier comments concerning the lack of a price list. Accordingly, we are not persuaded that there was any error on these issues.
[11] Similarly, the trial judge's decision not to include all orders after March 1986 was based on his assessment of the evidence of the witnesses and especially the equivocal conduct of Polaroid's sales staff prior to October 10th. This finding of fact should not be disturbed and therefore the cross-appeal must also be dismissed.
[12] The appeal and the cross-appeal are therefore dismissed with costs.
(signed) "J. M. Labrosse J.A."
(signed) "M. Rosenberg J.A."
(signed) "J. C. MacPherson J.A."