Court File and Parties
Court File No.: CV-16-550951 Date: 2017-10-16 Ontario Superior Court of Justice
Between: IMG Canada Limited, Plaintiff – and – General Motors of Canada Limited and MacLaren McCann Canada Inc., Defendants
Counsel: Carole J. Piovesan and Christine Wadsworth, for the Plaintiff Genna Wood, for the Defendants
Heard: June 13-16, 2017
Pollak J.
Reasons for Decision
Background and Parties’ Positions
[1] The Plaintiff, IMG Canada Limited (“IMG”), is a sports, media, events, and entertainment company.
[2] The Defendant General Motors of Canada Limited (“GM”) designs, manufactures, markets, and distributes vehicles and vehicle parts. Cadillac is a GM brand and a division of the General Motors Company.
[3] The Defendant MacLaren McCann Canada Inc. (“McCann”) is an advertising agency. Momentum is the “experiential” division of McCann.
[4] Cadillac was a major sponsor of Taste of Toronto in 2015. IMG claims that Cadillac agreed to be a major sponsor of Taste of Toronto in 2016 and 2017.
[5] IMG claims damages of $334,000 against the Defendants, Momentum and GM, for breach of contract for failure to comply with an alleged two-year sponsorship agreement for Taste of Toronto 2016 and 2017.
[6] IMG argues that it entered into an oral contract with GM through its agent Momentum, or alternatively, that it entered into a contract with Momentum, on November 3, 2015 during a telephone call between Mr. Sam Galet (Senior Vice-President and Managing Director with IMG) and Mr. Jay Lorencz (Group Account Director, Cadillac Momentum).
[7] Alternatively, IMG claims damages from Momentum for its alleged negligent misrepresentation that GM was “onboard” and would agree to a two-year sponsorship agreement for Taste of Toronto 2016 and 2017. IMG claims its “reasonable reliance” on these misrepresentations resulted in a loss of $358,300.
[8] The Defendants deny there was an oral contract and submit that a claim for negligent misrepresentation cannot be made out on the evidence.
Oral Contract Claim
[9] The parties agree that an oral agreement is enforceable if the following elements are present:
(i) offer, acceptance, and consideration; (ii) certainty of essential terms; and (iii) an intention to create a legally binding agreement.
[10] They also agree on the legal basis for determining whether there was a meeting of the minds. The question is whether it is clear to the objective reasonable bystander, in light of all the material facts, that the parties intended to contract and the essential terms of that contract can be determined within a reasonable degree of certainty: see UBS Securities Canada Inc. v. Sands Brothers Canada Ltd., [2008] O.J. No. 1676, at para. 40 (Ont. S.C.J.), citing G.H.L. Fridman, Q.C., The Law of Contract, 5th ed. (Toronto: Carswell, 2006) at p. 15. The parties also agree that factors such as words and conduct, future actions and representations by both parties, and reliance should be considered.
[11] IMG further submits that Momentum had actual or ostensible authority to bind GM, and used its authority to do so.
[12] Jason Sledziewski (National Marketing Manager for Cadillac) and Sandra Renwick (Account Director for Cadillac at McCann) testified that Momentum provides marketing services to Cadillac. There are other service providers for GM and Cadillac. These agencies would be consulted on strategy for Cadillac. McCann, being one of these agencies, would propose events to Cadillac.
[13] Mr. Sledziewski testified that none of these agencies, including McCann, have authority to enter into agreements on GM’s behalf.
[14] IMG relies on the following quote from G.H.L. Fridman, Canadian Agency Law (Markham: LexisNexis, 2009), at pp. 71—72:
Where an agent is employed to act for his principal in a certain place, market or business, then the agent is impliedly authorized to act according to the usages and customs of such place, market or business. So, applying the relevant custom, in Carmichael v. Bank of Montreal, the sub-agent of a real estate agent had authority to deal directly with the principal. Therefore, a contract negotiated by the sub-agent bound the vendor. In Royal Securities Corp. Ltd. v. Montreal Trust Co. a broker could accept an uncertified cheque in repayment of a loan. This was customary in the trade in question. Such customary authority is a variety of usual authority, itself an illustration or variety of the agent’s implied authority. [Footnotes omitted.]
[15] IMG’s evidence in this regard was presented by Mr. Galet who testified that he has been involved in completing over $150,000,000 worth of sponsorship agreements. He said that he knew that, in order to get Cadillac’s sponsorship, GM legal had to review and approve any agreements and that only GM could sign the agreements because McCann does not own the Cadillac trademark, which is the intellectual property of GM. However, he testified that IMG had to rely on Momentum to present its sponsorship proposals and negotiate essential terms for contracts on Cadillac’s behalf as IMG had no way of knowing what was happening between Cadillac and Momentum. Mr. Galet’s evidence is, however, that he knew that Momentum had no authority to bind GM.
[16] As mentioned above, Mr. Sledziewski confirmed, through his evidence, that McCann and the other agencies did not have the authority to enter into agreements on GM’s behalf for the sponsorship of events. McCann’s role and authority was only to present and propose potential events, which GM would either accept or reject.
[17] In 2015, GM and IMG had a sponsorship agreement for a “Taste Theatre” feature at the Taste of Toronto Food Festival 2015 (“2015 Agreement”). Mr. Galet had prepared a first draft of this agreement. He admitted that, at the time, he knew that McCann was not authorized to sign on behalf of GM and that GM would be paying the sponsorship fee.
[18] The 2015 Agreement between IMG and GM defined their relationship as “independent contractors”. The terms included a first right of renewal, provisions regarding insurance, and many other provisions that were negotiated between the parties. The 2015 Agreement was approved by GM legal and GM accounting, and signed by a Vice-President of GM with signing authority. The 2015 Agreement was executed before the event took place. Mr. Galet testified that IMG was only allowed to release the Cadillac logos after the 2015 Agreement was executed by GM. The cost of the sponsorship was $100,000. The term was for one year, with GM’s first right of refusal until October 31, 2015. Mr. Galet knew that the draft contract would be sent to GM’s legal department for review in 2015, and admitted that he received comments on his draft contract from the GM legal department before the execution of the contract by GM.
[19] On October 9, 2015, Mr. Galet sent a proposal to Mr. Lorencz and Mr. Sargent (a contract employee with McCann) regarding a potential GM sponsorship of the Dining Series at Taste of Toronto 2016 and 2017 (“October 9 Proposal”). This proposal outlined details about the terms of the proposed contract, including associative rights and benefits. This proposal had no insurance provisions, indemnification provisions, or any “boilerplate” or “legal points” that were not “business points” which had been negotiated and included in the 2015 Agreement. The price of the October 9 Proposal was originally $200,000 for each year. On October 27, 2015, a new proposal from IMG increased the annual price of the two year agreement to $250,000 per year.
[20] IMG alleges that on November 3, 2015 Mr. Galet and Mr. Lorencz agreed during a telephone conversation on all terms of the sponsorship as agreed until then, except that the price of the sponsorship would be reduced to $225,000 per year (“Oral Agreement”).
[21] Mr. Galet’s evidence is that he does not remember “exactly what was said” during the call. Mr. Lorencz ceased employment with McCann on March 22, 2016 and did not testify. Each party submits that the other party should have called him as a witness. The court does not make any inferences from the failure of either party to call him as a witness.
[22] The following summarizes the parties’ evidence with respect to what happened after this phone call:
- November 25, 2015: Mr. Galet sent a draft agreement to McCann. He testified that it was significantly different from the 2015 Agreement, with an effective date of January 1, 2016.
- December 18, 2015: a draft counter was prepared by Andrew Barrett (McCann’s consultant), and sent to Mr. Galet and GM legal.
- December 22, 2015: Mr. Sledziewski emailed Mr. Barrett that GM “had not committed to any events”. Mr. Lorencz was copied on the email. Mr. Sledziewski’s evidence was that at that time GM considered the proposed price to be too high.
- January 5, 2016: Mr. Barrett emailed Mr. Galet that the draft contract “sits with GM legal. Jay or I will let you know when it ‘pops’ out”.
- January 14, 2016: Mr. Lorencz emailed Mr. Galet that the draft contract was “[i]n with legal. Probably later in Jan. Clients onboard. Thx”.
- January 20, 2016: in response to Mr. Galet’s request to meet, Mr. Lorencz emailed: “[l]ets see how next week plays out… possibly Thurs [to meet for lunch]….eager to connect and also finalize Taste with Cadillac.”
- February 2016: Mr. Galet testified that by February he was receiving “pressure” from IMG’s financial unit and legal department.
- February 9, 2016: Mr. Lorencz emailed Mr. Galet: “[c]lient review today went well and onboard. Let me see on timing for signature etc. Cheers.”
- February 16, 2016: Mr. Galet emailed Mr. Lorencz asking for written confirmation that the sponsorship would proceed on the terms which he proposed on February 4, 2016:
- Mr. Galet wrote: “Have you heard back on signature? Meghan is waiting for signature before she can fully engage the chefs. When you have a chance. please advise.”
- Mr. Lorencz responded: “An actual signature will take weeks based on GM process…. lets figure out a solution that gives you enough confidence to make commitments”.
- Mr. Galet responded: “Even an email from GM or you that we are confirmed and committed to Taste for Toronto for 2016 @ $200k & $2017 @ $210k and in process of signing contract.”
- March 9, 2016: Mr. Galet is notified that the sponsorship will not proceed.
[23] The Defendants argue that, because the required elements for the formation of a contract had not been met, there could be no “oral agreement” between IMG and GM (or alternatively, with Momentum) on November 3, 2015. Further, they submit that the conduct of the parties after November 3, 2015 does not evidence an intention by either party to be bound by contract.
[24] The Defendants emphasize that GM did not accept IMG’s offer terms. The price was not agreed to and the contract was not signed and executed. They rely, in particular, on the following evidence:
- On October 9, 2015, IMG offered the sponsorship for 2016 and 2017 at $200,000 per year; on October 27, 2015, the proposal was for $250,000 per year.
- IMG alleges that on the date of the Oral Agreement, the price was for $225,000 per year. This price was in the draft contract Mr. Barrett sent to GM’s legal department.
- Many months after the alleged oral agreement, on February 4, 2017, the sponsorship price was changed again to $200,000 in 2016 and $210,000 in 2017.
- The October 9 Proposal did not have many important provisions that had been negotiated and included in the 2015 Agreement.
[25] The Defendants rely on the Court of Appeal for Ontario case of Bawitko Investments Ltd. v. Kernels Popcorn Ltd., [1991] O.J. No. 495, where the court stated as follows, at paras. 20—21:
As a matter of normal business practice, parties planning to make a formal written document the expression of their agreement, necessarily discuss and negotiate the proposed terms of the agreement before they enter into it. They frequently agree upon all of the terms to be incorporated into the intended written document before it is prepared. Their agreement may be expressed orally or by way of memorandum, by exchange of correspondence, or other informal writings. The parties may “contract to make a contract”, that is to say, they may bind themselves to execute at a future date a formal written agreement containing specific terms and conditions. When they agree on all of the essential provisions to be incorporated in a formal document with the intention that their agreement shall thereupon become binding, they will have fulfilled all the requisites for the formation of a contract. The fact that a formal written document to the same effect is to be thereafter prepared and signed does not alter the binding validity of the original contract.
However, when the original contract is incomplete because essential provisions intended to govern the contractual relationship have not been settled or agreed upon; or the contract is too general or uncertain to be valid in itself and is dependent on the making of a formal contract; or the understanding or intention of the parties, even if there is no uncertainty as to the terms of their agreement, is that their legal obligations are to be deferred until a formal contract has been approved and executed, the original or preliminary agreement cannot constitute an enforceable contract. In other words, in such circumstances the “contract to make a contract” is not a contract at all. The execution of the contemplated formal document is not intended only as a solemn record or memorial of an already complete and binding contract but is essential to the formation of the contract itself. [Emphasis added.]
[26] As well, the Defendants rely on the evidence that after the alleged Oral Agreement, Mr. Galet sent a draft agreement (from IMG’s legal department) to Mr. Lorencz. This draft was significantly different from the 2015 Agreement and included many important negotiated provisions which had not been discussed or agreed to in the November 3, 2016 telephone conversation. The Defendants submit that this is further proof that GM could not and did not accept these terms during the November 3, 2015 phone conversation.
[27] In response, IMG relies on the case of Amirault v. Minister of National Revenue, [1990] 1 C.T.C. 2432 (T.C.C.), for the proposition that the term of price may not be an essential term of a contract. The Defendants submit that this case is distinguishable and not applicable. It concerns an income tax assessment, wherein the parties agreed to make one amendment to the price of a stock option agreement and the amendment was made “solely to reflect the intent of what was intended at the time.” I agree that this case is not of assistance to this court as it is not applicable in this dispute.
[28] I agree with all of these submissions by the Defendants and find that no agreement was reached on November 3, 2015 with either GM or Momentum, as claimed by IMG.
Negligent Misrepresentation Claim
[29] In the alternative to IMG’s claim for breach of contract, IMG claims that Momentum negligently misrepresented that Cadillac had agreed to the essential terms of the sponsorship. I do not accept this claim because, as I have found above, there was no agreement on the essential terms. There therefore could not have been any misrepresentation in that regard.
[30] In the further alternative, IMG submits that Momentum negligently misrepresented to IMG that GM would agree to the contract. IMG argues that it was reasonably foreseeable that IMG would rely on representations made by Momentum as to what Cadillac’s position was with respect to GM’s sponsorship. The claim is that Momentum did not communicate Mr. Sledziewski’s concerns about the potential sponsorship to IMG. As a result of this failure by Momentum, IMG incurred damages. Specifically, Mr. Lorencz did not tell IMG that Cadillac had concerns with respect to the Taste of Toronto sponsorship. Rather, he gave IMG assurances that Cadillac was “onboard” and enthusiastic about the sponsorship. This, IMG submits, is also a misrepresentation upon which IMG relied on reasonably.
[31] The parties rely on the following test for negligent misrepresentation as set out in Queen v. Cognos Inc., [1993] 1 S.C.R. 87, at para. 34:
(a) there must be a duty of care based on a “special relationship” between the representor and the representee; (b) the representation in question must be untrue, inaccurate, or misleading; (c) the representor must have acted negligently in making the misrepresentation; (d) the representee must have relied in a reasonable manner on the negligent misrepresentation; and (e) the reliance must have been detrimental to the representee in the sense that damages resulted.
[32] IMG alleges that Mr. Lorencz knew, or should have known, that Cadillac was not “on board” with the sponsorship and would not sign an agreement for the sponsorship. Mr. Sledziewski testified that Cadillac had discussed the possibility of moving to an in-house model for brand activation rather than sponsoring individual outside events with Momentum. He testified that he had concerns about the Taste of Toronto sponsorship by mid-December 2015 because of the two-year term and the price. Cadillac was considering operating its own events rather than sponsoring outside events. He discussed his concerns about the overall sponsorship strategy and the Taste of Toronto sponsorship at meetings with Momentum. In his December 22, 2015 email which was copied to Mr. Lorenz, Mr. Sledziewski advised that “we have not committed to any events”. As of that date IMG would have had knowledge of Mr. Sledziewski’s concerns about the proposal.
[33] The date of Momentum’s knowledge that GM had serious concerns with respect to the potential 2016 sponsorship is important, because Momentum cannot be liable for failure to pass along this important information, which IMG allegedly acted on, if there is no evidence that Momentum had the information. This is particularly relevant in light of Mr. Galet’s evidence with respect to IMG’s inability to mitigate its damages after the Fall of 2015.
[34] IMG submits that throughout Fall 2015 and the early part of 2016 there was a disconnect between Cadillac’s views on the sponsorship and how Momentum was characterizing Cadillac’s views on the sponsorship to IMG. However, the evidence is that Mr. Lorencz knew about the concerns in mid-December and especially on December 22, 2015.
[35] On January 14, 2016, Mr. Lorencz sent an email to Mr. Galet that the contract was with Cadillac’s legal department and that the “client[’s] onboard.” On February 9, 2016, Mr. Lorencz emailed Mr. Galet that the client review went well and that Cadillac was “onboard”.
[36] IMG submits that damages awarded for negligent misrepresentation relate to the economic or financial loss it suffered. IMG should be placed in the position they would be in had the negligent misrepresentation not occurred.
[37] What are IMG’s alleged damages in this claim arising from Momentum’s failure to communicate to IMG Cadillac’s concerns with respect to the sponsorship? Mr. Galet testified that Lexus, a potential automotive sponsor, approached IMG on November 13, 2015 (after the alleged Oral Agreement) to ask if the auto category of sponsorship was available for Taste of Toronto 2016. IMG submits that because of Momentum’s representation that Cadillac had agreed to the essential terms of the sponsorship on November 3, 2015, Mr. Galet advised Lexus that the auto sponsorship was not available for the next two years. I have found that there was no oral agreement. Mr. Galet could have pursued the Lexus opportunity and did not.
[38] Mr. Galet’s evidence is that, after IMG turned down the Lexus opportunity IMG could not do anything to mitigate its losses in the automotive category because it was too late. All of the other potential automotive sponsors already had their budgets for 2016 committed by the Fall of 2015.
[39] Momentum’s alleged misrepresentation (Mr. Lorencz’s failure to communicate Cadillac’s concerns to IMG) was allegedly made, as I have found, beginning in mid-December or on December 22, 2015, when Mr. Lorencz got a copy of Mr. Sledziewski’s email. Had Mr. Lorencz communicated Cadillac’s concerns to IMG after that date it would, on the basis of Mr. Galet’s evidence, have been too late for IMG to obtain another automotive sponsor. Mr. Galet testified that there are only 10 to 11 automotive companies that could potentially have fit with Taste of Toronto 2016-2017. He testified that he spoke with Lexus, Infiniti, BMW, Jaguar, Porsche, Mercedes, and Lincoln. There is no evidence that had Mr. Lorencz told Mr. Galet about Cadillac’s concerns after December 22, 2015, IMG would have been able to mitigate its damages. In other words, IMG’s damages did not result from reliance on Momentum’s failure to communicate Cadillac’s position once it was known. On the evidence, the damage was already done.
[40] As IMG cannot prove that it has suffered damages as a result of Momentum’s alleged misrepresentations, it is not necessary for this court to rule on whether IMG’s claim for negligent misrepresentation succeeds against Momentum.
[41] For all of these reasons, the claims of IMG in this action are dismissed.
Costs
[42] If the parties are unable to agree on costs, they may make brief written submissions to me no longer than three pages in length. The Defendants’ submissions are to be delivered by 12:00 p.m. on October 26, 2017, and the Plaintiff’s submissions are to be delivered by 12:00 p.m. on November 6, 2017. Any reply submissions are to be delivered by 12:00 p.m. on November 14, 2017.