DATE: 20041209

DOCKET: C39931

COURT OF APPEAL FOR ONTARIO

LASKIN, MacPHERSON and LANG JJ.A.

B E T W E E N :

J B PRINTING LIMITED

Colin Still for the respondent

Respondent (Plaintiff)

• and -

829085 ONTARIO LIMITED, carrying on business as SQUIRE GRAPHIC ASSOCIATES, STARR TOOF, a division of STARR PRINTING CO. INC., and KBA PLANETA NORTH AMERICA

R. Paul Steep and Sarah Chesworth for the appellant Starr Toof

Appellant (Defendants)

Heard: November 24, 2004

On appeal from the judgment of Justice Harry J. Keenan of the Superior Court of Justice dated March 27, 2003.

LANG J.A.:

[1] After a twelve-day trial, the trial judge found as a fact that Starr Toof voluntarily responded to inquiries from J B Printing Limited (“JB”). Those inquiries were made while JB was at Starr Toof’s premises inspecting a printing press that JB was considering buying through KBA Planeta North America, a broker. The press had been previously owned by, was being stored by, and was most recently used by Starr Toof. JB’s questions of Starr Toof were directed at the state of repair and the performance abilities of the press.

[2] In response to those inquiries, both Starr Toof’s pressman and its general manager, separately told JB’s representatives that “it was a good press,” “it’s a great press,” “there was nothing wrong with it.” Further, Starr Toof told JB that the press had served Starr Toof well, that Starr Toof had “made a lot of money from the press, and it should do the same for” JB. When JB specifically asked each of Starr Toof’s representatives what would next need repair on the press, those representatives separately responded that there was nothing seriously wrong with the press, and “it should be fine,” “it should work great for you.”

[3] These statements did not reflect the true state of the press. As found by the trial judge, an important component of the press was damaged, compromising its operation and its performance.

[4] With these factual findings, the trial judge considered the principles applicable to negligent misrepresentation. He reviewed the circumstances in which the statements were made and determined that the relationship between the parties gave rise to a duty of care. The trial judge found that Starr Toof ought to have known that JB would rely on its assurances as to the state of the press and that, on an objective standard, JB would have been led “by Starr Toof’s words and conduct to believe that he had an assurance of Starr Toof’s taking reasonable care.” After considering the indicia referenced in Hercules Management Ltd. v. Ernst & Young, 1997 345 (SCC), [1997] 2 S.C.R. 165 at pp. 201-202, the trial judge found JB’s reliance on Starr Toof to be reasonable.

[5] While another judge may have come to a different conclusion, that is not the question before us. Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235 set the standard for review of a trial judge’s decision. While a trial judge must be correct on principles of law, a trial judge’s findings of fact, and the inferences drawn from those facts, where evidence exists to support those inferences, are entitled to a high degree of deference. Such findings are not to be set aside absent palpable and overriding error on the part of the trial judge.

[6] Applying a legal standard to findings and inferences of fact involves a finding of mixed law and fact. A finding of negligence is an example of such a finding. Housen, itself a negligence case, held that unless the trial judge erred in the legal principle or the application of that principle, his or her finding is subject to review only in the presence of palpable and overriding error.

[7] This is the standard of review to be applied to this negligence case.

[8] In comprehensive reasons, the trial judge made findings of fact and applied the correct legal principles to those facts. There is no basis to set aside his conclusion that Starr Toof was liable to JB on the basis of Starr Toof’s negligent misrepresentation. In those circumstances, the trial judge was entitled to award $36,500 against Starr Toof as Starr Toof’s share of the losses suffered by JB.

[9] Starr Toof raises additional concerns. First, it takes exception to the trial judge’s finding of liability against it, particularly when the broker who purchased the press for JB was exculpated from any liability. While Starr Toof may have a concern in this regard, there is no appeal before us with respect to the trial judge’s dismissal of JB’s claim against the broker. The only issue before us is that of Starr Toof’s liability.

[10] However, and although they have no impact on the result, I share Starr Toof’s concerns about two other aspects of the trial judge’s reasons: his application of Browne v. Dunne (1893), 1893 65 (FOREP), 6 R. 67 (H.L.) and his comments about the conduct at trial of Starr Toof’s counsel.

[11] On the first aspect, the trial judge expressed concern about what he saw as Starr Toof’s infringement of the evidentiary issues raised by Browne v. Dunne. In my view, the defence evidence to which the trial judge took exception was not relevant to the truthfulness or credibility of the earlier JB witnesses. Accordingly, the trial judge erred in finding the credibility of Starr Toof’s defence to be compromised by that evidence.

[12] On the second aspect, the trial judge made adverse comments about the conduct of Starr Toof’s counsel during the trial. JB’s counsel fairly acknowledged that he was surprised by these comments. I have reviewed the record in its entirety and can find absolutely no reason or justification for those comments. The experienced counsel for Starr Toof conducted the trial in an entirely appropriate manner.

[13] I am satisfied, however, that neither of these errors affected the validity of the trial judge’s factual findings or his application of the correct principles of law.

[14] Finally, Starr Toof raised an issue as to whether JB’s pleading, which pled fraudulent misrepresentation, also raised the necessary components of negligent misrepresentation. On this point, the trial judge was in the best position to weigh the issues raised by the pleadings that were alive during the trial. I see no basis to interfere with his decision that the pleadings “on the whole” raised negligent misrepresentation. Clearly, Starr Toof defended the action on the basis that it made no misrepresentations or, alternatively, that JB had failed to establish the legal principles applicable to negligent misrepresentation. There was no prejudice to Starr Toof.

[15] I would dismiss the appeal.

Costs

[16] I would award costs to the respondent in the amount of $10,000, inclusive of disbursements and G.S.T.

Released: DEC 09 2004 Signed: “Susan Lang J.A.”

JIL “I agree. J.C. MacPherson J.A.”

LASKIN J.A. (Dissenting):

[17] I do not agree with my colleague’s reasons. In my view, the trial judge’s conclusion that Starr Toof is liable to JB Printing for negligent misrepresentation cannot be supported. I would allow the appeal and dismiss the action against Starr Toof.

[18] Before addressing the trial judge’s conclusion on liability, I will deal with three related matters, each of which casts serious doubt on the soundness of his decision.

[19] First, the trial judge granted relief for a cause of action that JB Printing did not expressly assert in its statement of claim. JB Printing sued Starr Toof for “deliberate”, not negligent misrepresentation. The trial judge made no finding of deliberate or fraudulent misrepresentation. Nonetheless, he found that “the pleadings are constructed in such a manner that, on the whole, a claim for negligent misrepresentation is made.” In so finding he relied on two paragraphs in the amended claim where JB Printing alleged that Starr Toof represented “there were no hidden defects of the Miller Press” and the “printing press would be in satisfactory working condition, and suitable for the purposes of the plaintiff”.

[20] Even accepting the trial judge’s generous reading of the statement of claim, he ultimately imposed liability on Starr Toof, not for what it said to Mr. King (the principal of JB Printing) but for what it did not say. Although an omission can amount to negligent misrepresentation, nowhere in the pleading does JB Printing claim that Starr Toof should be liable for a failure to disclose.

[21] Second, the trial judge strongly criticized counsel for Starr Toof for failing to adhere to the rule in Browne v. Dunn in his cross‑examination of King, for his “protracted and misleading cross‑examinations”, and for having “deceived” the court about the estimated length of the trial. I have carefully reviewed the record in this case, and like my colleagues, I cannot find any evidence that supports these criticisms. Counsel for Starr Toof conducted the trial ably and professionally. The principle in Browne v. Dunn had no relevance to his cross‑examination of King because the evidence in question could not possibly have affected King’s credibility. My colleague says that the trial judge’s criticism of defence counsel’s conduct of the trial, though unfounded, had no bearing on the result. I doubt that this is so. These criticisms are summarized in a part of the trial judge’s reasons titled “credibility issues”, in which he at least acknowledges that defence counsel’s presentation had reinforced his conclusions on liability.

[22] Third, while finding Starr Toof liable in negligent misrepresentation, the trial judge dismissed identical allegations against Squire Graphic. Respectfully these results are perverse. Squire Graphic was the expert King hired and admittedly relied on to find a press, to gather information on its condition, and to advise on its reliability for JB Printing’s needs. In short, King relied on Squire’s expertise to buy the press. In contrast, King had no relationship with Starr Toof, knew when he visited Memphis that Starr Toof no longer owned the press, and did not tell Starr Toof how he intended to use the press.

[23] I turn from these three considerations to the trial judge’s liability findings. I take issue with the trial judge’s finding that Starr Toof owed JB Printing a duty of care, with his finding of reliance, and with his finding of misrepresentation.

[24] A duty of care must be based on a “special relationship” – a relationship of “proximity” – between the representor (Starr Toof) and the representee (JB Printing). For that special relationship to have existed, Starr Toof ought reasonably to have foreseen that King would rely on its representations, and King’s reliance must have been reasonable.

[25] Although the trial judge correctly stated this test, in my view he did not take any account of the numerous considerations that served to negate any special relationship between the parties. These considerations include:

• Starr Toof and King were strangers. They had never met, did not know each other, and did not know of each other’s reputation.

• King made no arrangement with Starr Toof to discuss the condition of the press or to have Starr Toof’s personnel operate the press. Indeed, Starr Toof had no idea who was coming to look at the press. It agreed to demonstrate the press for King only because he had failed to bring a press man with him.

• When King visited Starr Toof’s plant, he knew that Starr Toof had already sold the press and, therefore, had no financial interest in it.

• King did not tell any of Starr Toof’s personnel the use JB Printing intended to make of the press – printing cardboard – a use for which the press was not designed.

• King brought his own expert, Squire, to Memphis to advise him on whether to buy the press.

• The representations on which the trial judge relied – that it was a “great press”, “had served him well” and “made him a lot of money” – took place in a brief and casual conversation while King was being shown Starr Toof’s plant.

• King was an experienced business man. He paid $430,000 for the press, the single largest purchase he had ever made. Yet he asked Starr Toof no questions about its repair and maintenance history or about its current condition.

• King did not discuss with Starr Toof either the price or the terms of purchase of the press.

[26] In my view, these considerations demonstrate overwhelmingly that King was not justified in thinking that liability would attach to Starr Toof’s general statements about the press. The circumstances of their brief discussion gave rise neither to a duty of care on Starr Toof’s part nor to reasonable reliance on King’s part.

[27] Finally, I am not even persuaded that Starr Toof made untrue, inaccurate, or misleading representations. The trial judge acknowledged that the general statements Starr Toof did make – “great press”, “served him well”, and “made him a lot of money” – standing on their own may have been true. He concluded that Starr Toof was liable for negligent misrepresentation because, in his view, it failed to disclose “the damage that resulted in the repair to the cylinders”. Two findings of fact were essential to that conclusion: “King made inquiries as to repair and the performance of the press in the past, and was given only the positive side of the story.”

[28] As I read the record, both findings are palpably wrong. First, during his cross‑examination, King admitted that he never asked Starr Toof employees about the press’s repair history, its maintenance, or its condition. That he admitted not asking these questions is evident from the following passage in his cross‑examination:

Mr. Ferguson: Q. Now in the discussion that you had with Mr. Martin, you did not ask him any questions specific about any of the parts of the press, did you?

A. Specific, no I didn’t know the specifics of them.

Q. You didn’t ask any questions about the feed board and its condition?

A. No.

Q. You didn’t ask any questions specific about any of the five colour units and their condition?

A. No.

Q. You didn’t ask any questions about the delivery unit and its condition?

A. No.

Q. You did not ask any questions specific about the condition of the plate cylinder, the blanket cylinder or the impression cylinder on any of the units?

A. No.

Q. You asked no specific questions about the condition of the ink rollers on any of the units?

A. No.

Q. You had no specific questions to Ricky Martin about the maintenance of this press and the maintenance records that they may have had, or repairs that may have been done on the press when Starr Toof owned it, correct?

A. Correct.

[29] Second, during the pre-purchase inspection, Starr Toof did tell King’s expert, Squire, about a number of problems with the press, including damage to the cylinders, the damage relied on by the trial judge. Some of those problems are reflected in Squire’s notes of his pre‑purchase discussions. Others – and it was a second‑hand or used press – were readily apparent on an inspection of it.

[30] These palpable factual errors are also overriding. They irretrievably taint the trial judge’s finding of misrepresentation. Because of these errors, that finding cannot stand.

[31] I would allow the appeal, set aside the trial judge’s order imposing liability on Starr Toof, and dismiss the action against it.

Signed: “John Laskin J.A.”