COURT OF APPEAL FOR ONTARIO
DATE: 2006-03-23
DOCKET: C42613
BEFORE: LABROSSE, BLAIR and ROULEAU JJ.A.
BETWEEN:
Calvin Forest Products and Christopher Whalley
Appellants, Respondents by way of cross-appeal
- and -
Tembec Inc.
Respondent, Appellant by way of cross-appeal
COUNSEL:
Ronald F. Caza and Justin Bertrand for the appellants, respondents by way of cross-appeal
Tomas V. Ozere and Vincent J. DeRose for the respondent, appellant by way of cross-appeal
HEARD: February 20, 2006
On appeal from the judgment of Justice Roydon Kealey of the Superior Court of Justice, dated October 7, 2004.
LABROSSE J.A.:
[1] This action, for negligent misrepresentation and breach of contract, was tried by Kealey J. with a jury. After the jury rendered its verdict in favour of the plaintiffs/appellants, Calvin Forest Products and Christopher Whalley (collectively "Calvin"), the trial judge granted a motion for non-suit. The motion had been brought at the end of the plaintiffs' case by the defendant/respondent, Tembec Inc. ("Tembec"), and by agreement of the parties, reserved until after the jury verdict.
[2] Calvin appeals the decision of the trial judge granting the motion for non-suit and the costs awarded to Tembec. In the event that Calvin is successful in its appeal and judgment is awarded in accordance with the jury's verdict, Tembec cross-appeals to have the verdict set aside and the action for negligent misrepresentation dismissed or, in the alternative, a new trial ordered. For the reasons that follow, I would allow the appeal and dismiss the cross-appeal.
The Facts
[3] Tembec, a major pulp and paper company, was granted licenses to harvest trees on Crown lands between 1994 and 1999. Tembec entered into annual harvesting contracts with Calvin, a tree harvester. Whalley is the principal of Calvin.
[4] Calvin used the traditional manual harvesting method to supply trees to Tembec. By the mid-1990's, companies in the forest industry had begun to mechanize. Mechanization increased productivity, resulting in greater revenues for harvesters and more logs for companies like Tembec. Tembec encouraged its harvesters to mechanize, including Calvin, its largest harvester in the Mattawa area. Tembec assisted Calvin in researching the necessary equipment and advanced funds by way of a loan to Calvin to assist with the financing required to mechanize. Calvin mechanized in two stages. In 1996, it purchased its first batch of equipment, and then bought more machinery in 1998.
[5] The essence of the action was that Calvin relied on Tembec's misrepresentations, both implicit and explicit, in proceeding to mechanize its operation. This resulted in financial disaster for Calvin. In order to establish that Tembec made negligent misrepresentations, Calvin had to show that (1) there was a duty of care based on a "special relationship"; (2) the representations in question were untrue, inaccurate, or misleading; (3) Tembec acted negligently in making the misrepresentations; (4) Calvin relied, in a reasonable manner, on the negligent misrepresentations; and, (5) the reliance was detrimental to Calvin in the sense that damages resulted: see Queen v. Cognos, 1993 146 (SCC), [1993] 1 S.C.R. 87 at 110. Issues relevant to establishing the claim included Tembec's method of calculating the price to be paid to Calvin (i.e., cost of harvest plus profit and risk vs. price based on market value of final product), and the types of cut blocks (i.e., areas to be harvested) assigned to Calvin.
[6] At the end of the presentation of Calvin's case, Tembec moved for a non-suit on the claim of negligent misrepresentation. Having been put to its election, Tembec proceeded to call evidence. In all, 22 witnesses testified, and substantial documentation was filed during the trial. In due course, the jury rendered its verdict and awarded damages to Calvin in the amount of $3,086,700 for negligent misrepresentation, and $60,864.69 for various breaches of contract.
[7] After the jury rendered its verdict, the trial judge granted Tembec's non-suit motion on the claim for negligent misrepresentation. The successful non-suit motion resulted in Calvin recovering only $60,864.69. Calvin's bill of costs totaled $303,279. On September 3, 2004, approximately three years after the issuance of the statement of claim and ten days before the commencement of the trial, Tembec submitted a Rule 49 offer to Calvin in the amount of $75,000 plus pre-judgment interest and costs on a partial indemnity basis. The trial judge reduced Calvin's costs to $75,000 and awarded costs to Tembec pursuant to Rule 49.10 on a partial indemnity scale from September 3, 2004 to the end of the trial in the amount of $136,234.82.
The Findings of the Jury
[8] The relevant questions submitted to the jury and the jury's answers can be found in the appendix to this judgment. In summary, the jury found as follows:
Tembec represented that it was prepared to back Calvin in its efforts to mechanize by assuring Calvin that sufficient business (i.e., wood supply and prices) would be made available and, in this way, Tembec would set the pace for a long-term commitment;
Tembec represented it would take care of Calvin;
the cut blocks assigned to Calvin contained an insufficient volume of wood at the prices paid to permit Calvin to function successfully;
the representation that Tembec would set the pace for a long-term commitment was inaccurate;
the representation that Tembec would take care of Calvin was untrue;
Tembec was negligent in making the representations in 4) and 5);
Calvin relied in a reasonable manner on the negligent misrepresentations; and
Calvin suffered damages.
[9] In arriving at these findings, the jury stated that it relied on the evidence of the following witnesses: Whalley; Roy Herault (a supervisor with Tembec); Kent Perry (Tembec's woodland supervisor from 1994-1996); George Bruemmer (Tembec's mill manager as of 1997); and Marc Bouthillier (a woodland manager for Tembec). As well, the jury stated that it relied on the documentary evidence.
Decision on the Motion for Non-Suit
[10] As stated earlier, the trial judge rendered his decision on the motion for non-suit after the jury's verdict. He set out the test for a non-suit to succeed. He then examined the evidence, the submissions of the parties and the elements of the claims. With respect to the negligent misrepresentation claim, he noted that Tembec had conceded that a "special relationship" existed between the parties so as to give rise to the necessary duty. However, Tembec argued that except for a written contract between the parties dated May 23, 1996, no representation was made to Calvin as to future pricing or contracts. As well, Tembec argued that there was no evidence of reliance by Calvin on any suggested misrepresentation. Calvin argued that Tembec's non-disclosure of its pricing methods, combined with its encouragement to mechanize, amounted to a negligent misrepresentation that the price paid for harvesting would either remain the same or increase after mechanization. Calvin submitted that comments made by Bruemmer to Whalley during an unplanned encounter in early 1997 supported the negligent misrepresentation claim. Tembec argued that these comments were casual statements made in a casual setting, and that nothing Bruemmer said was untrue, inaccurate or misleading.
[11] In the trial judge's view, there was no evidence of discussion about the price to be paid to Calvin for harvesting. Whalley testified that he was unconcerned about price because he assumed it would be reasonable, as it had been in the past. Further, the trial judge held that there was no evidence in the record to reasonably sustain a finding that Tembec committed the tort of negligent misrepresentation. Even if a negligent misrepresentation had been made by Tembec, there was no evidence that Calvin relied upon it in proceeding to mechanize. Whalley acted on the May 23, 1996 agreement and made assumptions about price. There was no suggestion of encouragement or discussion of any kind by Tembec regarding Calvin's acquisition of further mechanized equipment in 1998. At no material time did Calvin ever claim, suggest or infer that Tembec reneged or was acting contrary to any promise or representation that it made.
[12] In the trial judge's opinion, the jury could not have reasonably found that the reliance required to be proven for the tort of negligent misrepresentation was present on the facts. As well, the trial judge found that the evidence did not disclose the elements necessary to show an oral contract. The evidence available to support Calvin's claim of breach of oral contract was the same as that considered on the issue of negligent misrepresentation. The evidence did not disclose certainty of terms, consideration and other essentials necessary for a contract to be found.
The Test on a Motion for Non-Suit
[13] The legal test to be satisfied on a motion for non-suit has been well articulated by John Sopinka, Sidney N. Lederman and Alan W. Bryant in The Law of Evidence in Canada (2nd ed. 1999) at p. 139:
The judge must conclude whether a reasonable trier of fact could find in the plaintiff's favour if it believed the evidence given in the trial up to that point. The judge does not decide whether the trier of fact should accept the evidence, but whether the inference that the plaintiff seeks in his or her favour could be drawn from the evidence adduced, if the trier of fact chose to accept it.
[14] In determining a motion for non-suit, the trial judge must take into consideration the most favourable facts from the evidence led at trial, as well as all supporting inferences. In attempting to set aside the granting of the non-suit, a plaintiff simply has to show that there is evidence which, if believed, would form the basis for a prima facie case. A prima facie case is no more than a case for the defendant to answer (see Hall et al. v. Pemberton (1974), 1974 468 (ON CA), 5 O.R. (2d) 438 (C.A.) and Ontario v. Ontario Public Service Employees Union (1990), 37 O.A.C. 218 at 226 (Div. Ct.)).
Application to the Case at Bar
[15] Calvin submits that there is ample evidence on the record to meet the above test and establish a prima facie claim of negligent misrepresentation. It points to the following evidence in support of its position:
Calvin presented evidence of the log contract costing sheets provided to Calvin by Tembec when the parties were preparing annual contracts. The sheets contained cost estimates for every step in the tree harvesting process. The price which Tembec would pay was calculated as costs plus profit and risk. Calvin would review this estimate of the price for the area to be logged and would make adjustments, if necessary, to reflect any costs which were unaccounted for. The parties would then negotiate changes. Whalley testified that, in past negotiations, Calvin and Tembec agreed to prices which Whalley felt would cover the costs of harvesting. He affirmed that the contract negotiations were the same from one year to the next.
Tembec brought Whalley to see contractors working in the bush with mechanized equipment, and Perry and Whalley discussed the productivity and financial viability of a mechanized harvesting operation. Whalley testified that they estimated the revenue that could be generated by mechanized equipment by calculating the costs of operation plus profit and risk.
Whalley testified that, during his encounter with Bruemmer in 1997, Bruemmer reassured him that Tembec would take care of its main contractors. Whalley also testified that, in deciding to purchase a particular piece of machinery, he took into consideration reassurances by Tembec that there would be decent cut blocks and prices, and that business would continue on as it had in the past.
Perry testified that Tembec wanted to have their contractors start a mechanized operation. He testified that Tembec representatives assured contractors that if they committed to mechanizing, they could depend on Tembec for a long-term commitment. In the context, this could properly be inferred to mean both commitments in terms of wood volume and in terms of pricing. Perry further testified that he told Whalley, on behalf of Tembec, that the company wanted to see a long-term commitment and "we would set the pace for the long-term commitment, if he would mechanize".
[16] In my view, the trial judge was in error in granting the non-suit. He took into consideration Tembec's position on some of the evidence and the weight that Tembec felt should be given to various pieces of evidence. In effect, he focused on the evidence most favourable to Tembec and reached his own conclusions. As reviewed above, there was sufficient evidence, which if believed, could support a finding in favour of Calvin. The evidence establishes a prima facie case of negligent misrepresentation, satisfying the five Cognos factors listed above. The relevance of the evidence to various Cognos factors will be examined in greater detail in the context of the cross-appeal.
[17] Accordingly, Calvin's appeal is allowed.
The Cross-Appeal
[18] As Calvin has been successful in its appeal, it becomes necessary to deal with Tembec's cross-appeal.
[19] At the outset, it is helpful to reiterate that an appellate court must give great deference to a jury's verdict. This proposition has been stated in many different ways, but none is clearer than the statement of de Grandpré J. in Olmstead v. Vancouver-Fraser Park District, 1974 196 (SCC), [1975] 2 S.C.R. 831 at 839:
All of the relevant cases make it abundantly clear that jury verdicts must be treated with considerable respect and must be accorded great weight.
[20] The principle governing appellate review of a jury verdict was laid down in McCannell v. McLean, 1937 1 (SCC), [1937] S.C.R. 341 at 343, as follows:
The verdict of a jury will not be set aside as against the weight of evidence unless it is so plainly unreasonable and unjust as to satisfy the Court that no jury reviewing the evidence as a whole and acting judicially could have reached it.
[21] The grounds of appeal raised by Tembec deal with the charge to the jury on the issue of negligent misrepresentation, the charge to the jury on the issue of damages and the unreasonableness of the verdict.
(a) The charge to the jury on the issue of negligent misrepresentation
Issue (i)
[22] When dealing with certain alleged statements made by its employees, Tembec accepts that the trial judge's charge with respect to future occurrences or intention was correct. However, Tembec submits that the trial judge should have gone further and instructed the jury that statements of future intention cannot amount to misrepresentations at law, unless at the time they were made, the representor had already formed and held an intention to act in the future contrary to what had been represented.
Issue (ii)
[23] Tembec submits that the trial judge erred in failing to charge the jury that there was no evidence that Calvin had reasonably relied on Tembec's representations that Calvin would be provided with an adequate volume of wood at prices that would cover the costs of mechanization and would provide an element of profit.
Issue (iii)
[24] Tembec alleges that the trial judge erred in his review of the evidence of Perry. Tembec argues that the trial judge invited the jury to ground a finding of liability on a section of Perry's evidence that had been objected to and ruled inadmissible.
[25] These three complaints are being raised by Tembec for the first time on appeal. In G.K. v. D.K. (1999), 1999 935 (ON CA), 122 O.A.C. 36 (C.A.), Finlayson J.A., speaking for the majority of this court at para. 15, dealt with the failure to object at trial by stating that "[i]t is accepted that in civil cases, failure to object in these circumstances is usually fatal."
[26] In any event, these complaints are without merit.
[27] With respect to issue (i), the trial judge cautioned the jury that representations as to future occurrences cannot be used to establish negligent misrepresentation unless they involve a misstatement of an existing fact. It is also clear that the jury concluded that, at the time of making the representation, Tembec implied that it would provide a sufficient volume of wood at a price based on the actual cost of harvesting. The jury further concluded that at that time, Tembec had the intention to act contrary to the representation. Tembec always intended to pay a price based on the market value of its final product, thereby passing the market risk on to Calvin. The misrepresentation was not of a future intention to act; rather, it was a misrepresentation of an existing fact.
[28] With respect to issue (ii), there was clear evidence that Calvin had reasonably relied on the misrepresentations to proceed with mechanization. It was open to the jury to conclude that if Tembec had not made assurances and if Calvin had known about Tembec's true pricing method, Calvin would not have mechanized.
[29] As to issue (iii), it is questionable whether there had been an objection or simply a clarification of the evidence. In any event, this evidence was of little significance and was present elsewhere in the record.
(b) The charge to the jury on damages
Issue (i)
[30] Tembec alleges that the trial judge erred in failing to advise the jury that in assessing damages, the actual income earned by Whalley as of the date of trial and his ability to earn personal future income could be taken into account to reduce the damage award.
[31] The trial judge specifically charged the jury on this point and instructed the jury to take into consideration Whalley's present earnings in assessing his future earning capacity.
Issue (ii)
[32] Tembec alleges that the trial judge erred in failing to advise the jury of the relevance of the additional machinery bought later and that it was open to the jury to find that all damages flowed from the second stage of mechanization, and not the first.
[33] The evidence of the relevance of the additional machinery to an assessment of damages was led by expert witnesses. The trial judge instructed the jury on how to treat this evidence. Moreover, the jury was alive to this issue and took into account the additional machinery in finding contributory negligence on the part of Calvin.
(c) The unreasonable verdict
[34] Tembec alleges that the evidence at trial, taken at its highest with the most favourable inferences in favour of Calvin, cannot establish the elements of negligent misrepresentation. As such, Tembec argues that the findings of the jury are wholly unsupported by the evidence. Keeping in mind that jurors have no legal training and are not afforded much time to prepare written answers, the jury provided clear and concise reasons explaining why damages flowed from negligent misrepresentations. The jury cited portions of the evidence to support its findings. The evidence cited includes the following: Calvin was paid on a cost plus profit basis; Tembec wanted Calvin to mechanize; Tembec was prepared to back Calvin in its efforts to mechanize by assuring Calvin that sufficient business, in the form of wood supply and prices, would be available in order to cover the costs of mechanization; and, Tembec represented to Calvin that it would set the pace for a long-term commitment and that Calvin would be taken care of.
[35] It is evident that the jury relied upon much of the same evidence which I have relied upon in setting aside the successful motion for non-suit. The jury's findings are all supported by the evidence and it cannot be said that the jury's verdict is so plainly unreasonable that no jury reviewing the evidence as a whole and acting judicially could have reached it.
[36] Accordingly, the appeal is allowed, the granting of the motion for non-suit is set aside and judgment is to issue in accordance with the verdict of the jury. The cross-appeal is dismissed.
Costs
[37] Calvin has submitted a bill of costs claiming $190,772.76 for partial indemnity fees to September 3, 2004, the date of their offer to settle. Because the offer to settle was less than the amount awarded by the jury, Calvin thereafter claims the amount of $319,400.89 for substantial indemnity fees until the end of the trial. The fees plus disbursement and G.S.T. total $640,297.27
[38] This court, in recent years, has stated on numerous occasions that the costs award should reflect what the court views as a fair and reasonable amount that should be paid by the unsuccessful party rather than any exact measure of the actual costs to the successful litigant: see, for example, Zesta Engineering Ltd. v. Cloutier (2002), 2002 25577 (ON CA), 21 C.C.E.L. (3d) 161 (C.A.). This court has also emphasized the importance of assessing the reasonableness and fairness of counsel fees from the perspective of the reasonable expectations of the parties: see Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (C.A.).
[39] Without minimizing the importance of this trial, the bill of costs demonstrates that Calvin's counsel worked in excess of 2250 hours from the commencement of the matter to the commencement of the trial. The trial lasted eleven and a half days.
[40] In my view, the total fees for the trial requested by Calvin are not reasonable and fair and could not be in the reasonable expectation of Tembec.
[41] As reviewed earlier, as a result of the successful non-suit motion, the trial judge awarded costs to Calvin of $75,000 and costs to Tembec in the amount of $136,234.82. I am reluctant to second-guess Calvin with respect to disbursements which total $130,123.62 and which have not been attacked by Tembec. Accordingly, I would allow the disbursements as claimed and fix the total fees for the trial at $200,000 plus G.S.T.
[42] With respect to the appeal, Calvin requests $150,000 plus disbursements and G.S.T. Counsel for Tembec advised the court that if his client had been successful, on the appeal or cross-appeal, he would have requested $69,000 on behalf of his client. The appeal lasted one day. Once again, I am reluctant to interfere with the total disbursement listed at $19,110.25. I would allow the amount and fix the counsel fees at $70,000 plus G.S.T.
RELEASED:
Appendix: Questions to & Answers from the Jury
The questions answered by the jury that are relevant to this appeal and its reasons (in italics), are as follows:
Section II – Negligent Misrepresentation
5- (a) Did Tembec Inc. make representations to the plaintiffs, other than those set out in the Agreement of May 23, 1996 regarding mechanization by Calvin Forest Products Ltd.?
Yes__YES___ or No_____
(c) If your answer to question (a) is Yes, then please state fully and clearly the nature of these representations.
In the context of the industry at that time, and in the context of the relationship existing throughout the period between Tembec and Calvin Forest Products["C.F.P."], as presented in the evidence, the following representations were made by Tembec to Calvin Forest Products:
- Tembec considered C.F.P. as their largest and best wood harvester, and wanted C.F.P. to mechanize – supported by testimony of Chris Whalley, Ray Hereault (sic), Kent Perry, and Tab 34 of Exhibit 1.
- Tembec was prepared to back C.F.P. in its efforts to mechanize by assuring C.F.P. that sufficient business (i.e. wood supply and prices) would be made available to afford the cost related to mechanization, and, in this way, Tembec would set the pace for a long-term commitment – supported by testimony of Chris Whalley and Kent Perry.
- Tembec supported purchase of Feller-Buncher as indicated by Tab 46 of Exhibit 1 and delimber as supported by Tab 68 of exhibit 1, thus reinforcing the direction encouraged previously.
- Tembec gave assurances that C.F.P., as a main contractor would be taken care of. This is related to informal meeting on Weyrhauser (sic) Road and is supported in full by testimony of Mr. Whalley, and in part by testimony of Mr. Bruemmer and Mr. Bouthillier of Tembec.
6- (a) Was (were) the representation(s) "untrue, inaccurate, misleading?"
Yes__YES___ or No_____
(c) If your answer to question (a) is Yes, then state clearly and fully all particulars of how the representation(s) was untrue, inaccurate or misleading.
The McAuslan and Wyse cut blocks assigned to C.F.P. in '98-'99 contained insufficient volume at the prices paid or insufficient prices for the conditions present to allow C.F.P. to function successfully.
This illustrates that the representation that "Tembec would set pace for the long-term commitment" was inaccurate. As stated in evidence, the pricing and the wood flow or the wood vine that could be harvested were integral to this long-term commitment.
Furthermore, it illustrates that the representation that "Tembec would take care of their main contractors" was untrue, as it can reasonably be inferred that the conditions of the representation should have extended beyond a single year.
7- (a) Did Tembec Inc. act negligently in making the representation?
Yes___YES__ or No_____
(c) If your answer to question (a) is Yes, then state fully and clearly all particulars of the negligence.
Tembec would set the pace for long-term commitment – Tembec was negligent in making this misrepresentation as they had in hand sufficient information, including the 5 year plan, Tembec internal reports, Tembec public reports, Mattawa Mill reports and information that indicated that they may not be in a position to fully support C.F.P. through the long-term commitment.
Tembec would take care of their main contractor – Tembec was negligent in making this misrepresentation as they were fully aware, at that time, of what would be available in terms of cut blocks and pricing structure for at least the period until the end of 1999, the current 5-year plan.
8- (a) Did the plaintiffs rely in a reasonable manner on the negligent misrepresentation?
Yes__YES___ or No_____
(c) If your answer to (a) is Yes, then state fully and clearly all particulars of the plaintiff(s)' reasonable reliance on the representation.
Relying on these misrepresentations, C.F.P. proceeded to mechanize in a prudent and reasonable manner in the purchase of a fellerbuncher, and delimber, and other equipment associated with mechanization, and continued to negotiate and execute contracts in good faith.
9- (a) Was the plaintiffs' reliance detrimental in the sense that they suffered damages as a result thereof? YES
(c) If your answer to (a) is Yes, then state fully and clearly all particulars as to why their reliance was detrimental.
Their reliance was detrimental because the revenue generated failed to meet the expenses incurred, resulting in the requirement to liquidate assets, and the loss of present and future income.
If you have answered Yes to questions 5 to 9 inclusively, then you must consider whether there was negligence in the conduct of the plaintiffs in the circumstances and answer question 10.
10- (a) Were the plaintiffs negligent in any manner which contributed to their damages?
Yes___YES__ or No_____
(b) If your answer to (a) is Yes, then state fully and clearly what the negligence was.
Prior to further mechanization, it would have been reasonably prudent to consult formally with Tembec to seek reassurance that risk position was warranted.
Prior to signing harvesting contracts, it would have been reasonably prudent to have followed traditional procedures by walking the McAuslen and Wyse cut blocks and present a counter-proposal to Tembec, whether or not the counter-proposal would be accepted.
(c) Do you find it practicable to determine the respective degrees of fault or negligence on the part of the plaintiffs and the defendant?
Yes___YES__ or No_____
(d) If your answer to (c) is Yes, then state in percentages the degree of fault attributable to each.
Defendant – Tembec Inc. 60___%
Plaintiffs – Calvin Forest Products 40___ %
100%__
Section V – Damages – I repeat that regardless of how you have answered the questions 1 to 13 in sections I, II, III, IV, you are required to assess the plaintiffs' damages as if they had been 100% successful.
B – Damages for Negligent Misrepresentation – Collateral Contract
Write the amount which you assess for the plaintiffs' damages under the following headings:
Special Damages
- Past loss of income: $800,000
- loss on sale of Equipment: $92,500
- loss on the sale of the Commanda property: $39,000
- loss resulting from refinancing: $13,000
Loss of Future Income $4,200,000
[TOTAL $5,144,500
reduced by 40% = $3,086,700]