White v. Colliers Macaulay Nicholls Inc.

95 O.R. (3d) 680

Court of Appeal for Ontario,

Winkler C.J.O., Moldaver and Blair JJ.A.

May 29, 2009

Torts -- Negligent misrepresentation -- Shareholders' agreement requiring plaintiff to sell his shares to defendant upon termination of his employment at price to be determined in accordance with formula set out in agreement -- Plaintiff entering into retirement agreement with defendant that provided that his shares were to be dealt with under shareholders' agreement as to value and timing -- Defendant not purchasing plaintiff's shares immediately because of liquidity problems -- Plaintiff suing defendant and ultimately entering into settlement pursuant to which his shares were purchased at price determined in accordance with formula set out in shareholders' agreement -- Plaintiff subsequently suing defendant for negligent misrepresentation based on allegations that representations were made to him during settlement negotiations that nothing unusual was happening that would affect price of shares whereas defendant had embarked on search for liquidity capital which resulted in change of control and increase in value of its shares -- Trial judge properly dismissing action -- Alleged misrepresentations immaterial to value of plaintiff's shares as effect of shareholders' agreement and retirement agreement was to crystallize his entitlements -- Plaintiff not sustaining any damages as result of alleged misrepresentations.

The plaintiff was a vice-chair and a major shareholder of the defendant. In 2001, he was asked to retire and entered into an agreement which stipulated that he was to be paid a retirement allowance and that his shares were to be dealt with under the Shareholders' Agreement "as to value and timing". The Shareholders' Agreement required him to sell his shares to the defendant upon the termination of his employment at a price to be determined in accordance with a formula set out in the Agreement. At the time of his retirement, the value of the shares was US$5.21. However, the defendant had liquidity problems at the time and did not immediately purchase the plaintiff's shares. The plaintiff sued. The lawsuit was settled in June 2004. Pursuant to the terms of the settlement agreement, the defendant purchased the plaintiff's shares at a price of US$5.21. [page681] The plaintiff brought a second action against the defendant, alleging that he was induced to enter into the settlement by misrepresentations made on behalf of the defendant to the effect that nothing was happening that would affect the price of the shares and that, in fact, the defendant had embarked on a formal search for liquidity capital which resulted in a third party acquiring 70 per cent of its shares at a price of US$10.06 per share. The action was dismissed. The plaintiff appealed.

Held, the appeal should be dismissed.

The evidence amply supported the conclusion that the alleged misrepresentations were not, in fact, made. Even if they were made, they were immaterial to the value of the plaintiff's shares and could not form the basis of an action in misrepresentation because it was unreasonable for him to rely on them in the circumstances. The relationship between the plaintiff and the defendant at the time of the settlement negotiations was that of creditor and debtor. The effect of the Shareholders' Agreement and the Retirement Agreement was to crystallize the plaintiff's entitlements. As a result, he had no right to receive anything more than US$5.21 for his shares. Although he technically remained a shareholder, his shares were no longer his to sell. The plaintiff failed to establish that he sustained any damages as a result of the alleged misrepresentations. He was contractually bound to sell his shares upon the termination of his employment at the price fixed by the formula in the Shareholders' Agreement. Finally, the plaintiff executed a full and final release as part of the settlement, and that release was a complete bar to the second action.

APPEAL from the judgment of Hoilett J., 2008 4269 (ON SC), [2008] O.J. No. 458, 44 B.L.R. (4th) 108 (S.C.J.) dismissing an action for damages for negligent misrepresentation.

Cases referred to

Boulanger v. Johnson & Johnson Corp., 2003 52154 (ON CA), [2003] O.J. No. 2218, 174 O.A.C. 44, 123 A.C.W.S. (3d) 808 (C.A.); Brideau v. Gravel, 1969 856 (NB CA), [1969] N.B.J. No. 64, 5 D.L.R. (3d) 89, 1 N.B.R. (2d) 372 (C.A.); Canada Trustco Mortgage Co. v. Bartlet & Richardes (1996), 1996 526 (ON CA), 28 O.R. (3d) 768, [1996] O.J. No. 1551, 91 O.A.C. 33, 62 A.C.W.S. (3d) 1222 (C.A.); Francis v. Dingman (1983), 1983 1985 (ON CA), 43 O.R. (2d) 641, [1983] O.J. No. 3204, 2 D.L.R. (4th) 244, 23 B.L.R. 234, 22 A.C.W.S. (2d) 275 (C.A.), revg [1981] O.J. No. 817, 15 B.L.R. 190 (H.C.J.); Humbruff v. Ontario Municipal Employees Retirement Board (2006), 2005 39859 (ON CA), 78 O.R. (3d) 561, [2005] O.J. No. 4667, 260 D.L.R. (4th) 161, 203 O.A.C. 234, 48 C.C.P.B. 214, 143 A.C.W.S. (3d) 931 (C.A.); Kingu v. Walmar Ventures Ltd., 1986 142 (BC CA), [1986] B.C.J. No. 597, 10 B.C.L.R. (2d) 15, 38 C.C.L.T. 51 (C.A.); McClurg v. Canada, 1990 28 (SCC), [1990] 3 S.C.R. 1020, [1990] S.C.J. No. 134, 76 D.L.R. (4th) 217, 119 N.R. 101, [1991] 2 W.W.R. 244, J.E. 91-67, 50 B.L.R. 161, [1991] 1 C.T.C. 169, 91 D.T.C. 5001, 24 A.C.W.S. (3d) 566; Queen v. Cognos Inc., 1993 146 (SCC), [1993] 1 S.C.R. 87, [1993] S.C.J. No. 3, 99 D.L.R. (4th) 626, 147 N.R. 169, J.E. 93-270, 60 O.A.C. 1, 45 C.C.E.L. 153, 14 C.C.L.T. (2d) 113, 93 CLLC Â14,019 at 12082; R. v. Sheppard, [2002] 1 S.C.R. 869, [2002] S.C.J. No. 30, 2002 SCC 26, 210 D.L.R. (4th) 608, 284 N.R. 342, J.E. 2002-582, 211 Nfld. & P.E.I.R. 50, 162 C.C.C. (3d) 298, 50 C.R. (5th) 68, 52 W.C.B. (2d) 360; Samson v. Lockwood (1998), 1998 1920 (ON CA), 40 O.R. (3d) 161, [1998] O.J. No. 2471, 110 O.A.C. 301, 39 B.L.R. (2d) 82, 18 R.P.R. (3d) 32, 80 A.C.W.S. (3d) 454 (C.A.); St. Lawrence & Hudson Railway Co. (Re), [1998] O.J. No. 3934, 76 O.T.C. 115, 82 A.C.W.S. (3d) 895 (Gen. Div.)

Statutes referred to

Business Corporations Act, R.S.O. 1990, c. B.16, s. 22 [as am.] Canada Business Corporations Act, R.S.C. 1985, c. C-44, s. 24 [page682]

Alan J. Lenczner, Q.C., for appellant. Barry H. Bresner and Elissa Goodman, for respondent.

The judgment of the court was delivered by

BLAIR J.A.:--

I. Introduction

[1] Mr. White seeks to set aside the judgment of Justice Keith Hoilett of the Superior Court of Justice dismissing his action for damages for breach of contract, breach of fiduciary duty and misrepresentation. The appeal concerns only the dismissal of the misrepresentation claim.

[2] For the reasons that follow, I would dismiss the appeal.

II. Facts

[3] The appellant joined the predecessor of Colliers Macaulay Nicholls Inc. ("Colliers") in 1975, when it was a small real estate service company with a professional staff of a dozen people. By the time he was asked to retire in 2001, the company had grown to over 1,500 employees and had operations throughout Canada and the United States. Mr. White had risen through the ranks over the years and served for a lengthy period as the president of the company. He became vice-chair in 1997, a position he retained until he left.

[4] The appellant was also the third largest shareholder of the company -- the holder of 400,050 shares, representing 5.6 per cent of the outstanding common shares. He was party to a Shareholders' Agreement dated February 10, 1998 which required him to sell his shares to Colliers -- and Colliers to buy [^1] -- upon the termination of his employment (whether voluntary or involuntary) at a price to be determined in accordance with a formula set out in the Agreement. There is no dispute that based on the date of his departure, in March 2001, the price generated by that formula was US$5.21 per share. [page683]

[5] The appellant's departure was not voluntary. He was asked to retire. However, his retirement did not take place until after an oral agreement had been struck between him and the chairman and CEO of Colliers, John McLernon, in December 2000 and the agreement had been confirmed by a letter dated March 9, 2001 and signed by the appellant on March 15 (I shall refer to the oral agreement, as confirmed by the March letter, as "the Retirement Agreement"). The Retirement Agreement called for a "retirement allowance" of $400,000 to be paid in accordance with an attached payment schedule and stipulated that the appellant's shares were to be "dealt with under the Shareholders Agreement as to value and timing". As I have indicated, there has never been any disagreement as to the "value" to be paid for the shares under the Shareholders' Agreement and the Retirement Agreement -- US$5.21 per share. It is the "timing" element that has been the catalyst for the lawsuits that followed.

[6] Colliers did not pay the appellant in the timely fashion he expected. Colliers had liquidity and financial problems in the late 1990s and early 2000s, particularly following the events of "9/11" in September 2001. It also had a sizeable list of other departing shareholders in a similar position to Mr. White and generating similar buy-out obligations on the part of the company. Colliers did not have the cash to meet these obligations. It justified the failure to pay Mr. White at the time by relying on a provision in the Shareholders' Agreement making the purchase of shares subject to permission from the company's lenders and stating that its principal lender, HSBC, prohibited it from using its capital to purchase shares.

[7] The appellant was unhappy with Colliers' failure to honour the Retirement Agreement in a timely fashion. He was anxious as well to preserve his price of US$5.21 as the market value of the Collier shares was falling at the time (it reached a low of US$3 per share in late 2002). In November 2002, the appellant sued Colliers, claiming damages consisting primarily of compensation for his shares at the US$5.21 price in accordance with the Shareholders' Agreement and the Retirement Agreement (the "2002 Lawsuit"). Alternatively, he claimed damages in a similar amount for negligent misrepresentations, allegedly inducing him to enter into the Retirement Agreement.

[8] The 2002 Lawsuit was settled on June 22, 2004 -- a settlement in which Mr. White achieved virtually everything he sought in the lawsuit plus an additional CDN$150,000. In accordance with the settlement, [page684] (a) Colliers agreed to purchase the appellant's 400,050 common shares, and the appellant transferred those shares to the company, for a total amount of US$2,083,548.08; (b) Mr. White received the sum of US$500,000 immediately. He received a US$1,583,548.08 promissory note as security for the balance payable in four equal annual instalments of US$395,887.02, each with interest at HSBC prime plus 1 per cent per annum on each anniversary of June 22, 2004; (c) Colliers agreed to pay the appellant an additional amount of CDN$150,000, payable by way of $50,000 to the appellant's counsel, immediately, for costs, and a further $100,000 secured by a promissory note, payable on January 4, 2005, with interest (as above); (d) Colliers and the appellant also signed consents to judgment on the promissory notes, to be held in trust by counsel for the appellant and to be released to the appellant, and acted on, only in the event of default under either promissory note; and (e) the appellant executed a full and final general release in favour of Colliers.

[9] Colliers has paid, and the appellant has continued to accept, the various payments called for under the settlement agreement as they have become due. In spite of this, the appellant sued again, in 2005 (the "2005 Lawsuit"). It is the circumstances surrounding the settlement of the 2002 Lawsuit that he says form the basis of his entitlement to succeed in the present action. He alleges that he was induced to enter into the settlement of that action by misrepresentations made on behalf of Colliers by its senior officers during the period leading up to the settlement in June 2004.

[10] The misrepresentations alleged at trial and on appeal -- although not pleaded -- are said to have been made by Mark Cowie, a senior employee of Colliers who had been asked by Collier's CEO, Douglas Frye, to negotiate a settlement of the 2002 Lawsuit, and by Mr. Frye himself. The thrust of the misrepresentations is that nothing was happening in Colliers at the time that would affect the value of its shares. The appellant alleges this was false.

[11] The appellant testified that Mark Cowie called him at the end of March 2004 and told him the company wished to settle the pending lawsuit -- which was scheduled for trial in November of that year -- and was then in a position to do so because a number of senior executives had guaranteed a note with HSBC [page685] that would make money available to do so. Mr. White says he was curious why senior executives would suddenly do that and why there was such urgency in settling the action. He says he asked:

So I asked him [Cowie] if anything was happening with the company that was going to affect the value of the shares and he said not to his -- I believe the answer was not to his knowledge, no.

[12] Mr. White further testified that on May 31, 2004, Douglas Frye telephoned him, expressing a desire to get the deal done and completed. He says he asked Mr. Frye why the company was proceeding to settle at this point and whether there was anything happening in the company that would affect the value of the shares. The answer was "no". This was his testimony:

Q. And what did Mr. Frye say to you? Tell us what you remember of that call? A. Well, I -- he expressed a desire to get this deal done and completed. . . . He -- I asked him why they were proceeding at this point in time and what effect this would have -- was there anything happening in the company that would affect the value of these shares. And he said no, that he was proceeding at this point in time because he had been getting a great deal of heat from the shareholder employees about the company's inability to deal with departed shareholders and he wanted to resolve that and clean that mess up. I had some sympathy with that position in from what I had heard, he had had a lot of heat on that issue. Q. And are you clear that you asked him if there was anything happening which would affect the value of the company and his answer being no? A. Absolutely.

[13] The appellant alleges these representations were untrue because Colliers by that time had embarked on a formal search for liquidity capital in a process that could well result in a change of control transaction. He says that he relied upon the representations and would not have settled the 2002 Lawsuit had he known -- as he submits is the case -- they were not true. The allegation that they were not true arises in the following context.

[14] During the Fall of 2003, Colliers' board of directors decided to formalize its search for fresh capital. On the advice of an independent directors' committee established for that purpose, Colliers retained William Blair & Company in early December to advise it in that regard. The board appointed a Special Committee, chaired by Paul Echenberg, to work with William Blair and to develop proposals for the recapitalization of Colliers. The Special Committee and William Blair embarked upon a conventional approach to raising capital. They sent out [page686] "teaser" information packages to about 170 potentially interested parties. They received about 30 expressions of interest, reduced to seven who forwarded non- binding preliminary letters of interest by mid-June 2004. Those seven were then provided with further detailed information, subject to confidentiality agreements, and were invited to meet with management and conduct further due diligence. Only FirstService Corporation responded further and, eventually, in October 2004, agreed to acquire 70 per cent of the shares of Colliers at a price of US$10.06 per share through a court-approved plan of arrangement.

[15] Not surprisingly, the price of US$10.06 per share caught the appellant's attention. He now says that he was "stone walled" by Mr. Echenberg, who refused to provide him with any information about the details of the recapitalization process, and that he was induced to settle his lawsuit by the misrepresentations of Messrs. Cowie and Frye outlined above. He maintains that, had he known there was a potential control transaction in the making, he would not have settled but would have maintained his 2002 action, gone to trial as scheduled and simply amended his claim to assert a right to a price of US$10.06 per share, rather than the US$5.21 he claimed. On what basis he would have been permitted to do this, he does not say.

[16] For its part, Colliers says that the appellant's outstanding lawsuit was viewed as an impediment to the recapitalization efforts and needed to be settled in order to pave the way for a resolution of its liquidity and other financial problems. Douglas Frye testified that the appellant was made aware of these concerns. Indeed, the members of Colliers' senior management team agreed at the time -- reluctantly -- to the risky step of extending personal guarantees of $1 million. On the basis of those personal guarantees, Colliers' lenders agreed to extend credit in the amount of $3 million that would permit the company to pay out the appellant and other departed shareholders who were entitled to be paid out before him (based on their retirement date).

[17] The appellant was aware prior to and during the period of settlement negotiations that the Special Committee and William Blair were preparing to go to the market to determine the best way to raise capital. The trial judge found as a fact (at para. 31) that:

The plaintiff [the appellant] was kept informed by the defendant [Colliers] of the financial exigencies under which the defendant was operating and of the steps taken by the defendant to mitigate those circumstances.

The plaintiff was aware that funding the repurchase of shareholders' shares was only one of the objectives of the defendants' search for funding, and that a "liquidity event" or sale of the company were possible outcomes of the [page687] search for financing . . . . The plaintiff was fixed with that knowledge, at least as of . . . October 10, 2001. (References to trial exhibits omitted; emphasis added)

[18] The record, including the cross-examination of Mr. White, clearly supports these findings. Moreover, the fact that the appellant was aware Colliers' recapitalization efforts might result in a change of control transaction is evidenced by his negotiation of the acceleration clause in the promissory notes taken as part of the settlement. The notes provided that all sums were to become due and payable in the event of default. An "Event of Default" was defined to include:

(e) a cash offer for the purchase of all the then issued and outstanding shares in the capital of [Colliers] is accepted by shareholders of [Colliers] holding in excess of 75 per cent of such shares.

[19] The appellant acknowledged that he attempted to negotiate a lower threshold of 40 per cent as a trigger for the acceleration clause in order to protect himself against "a possible Change of Control transaction" and that he could have sought other forms of protection (e.g., a percentage of any increase in the share price in the event of such a transaction), but did not do so.

[20] The evidence is also clear that during the settlement negotiations, the parties proceeded on the understanding that the appellant's share price was fixed at US$5.21 per share. This, notwithstanding the appellant's testimony that he was aware at the time of the settlement that by then the value of the shares had increased to US$5.95 per share.

[21] On his examination for discovery, the appellant said that the events relating to the recapitalization of Colliers during the Spring of 2004 were not relevant to the determination of his share price. At trial he changed this testimony. The following exchange took place during his cross-examination at trial:

Q. And if you look at question 82 [of the examination for discovery], it states: QUESTION: And you knew what was happening in 2004 wasn't relevant to the price you were entitled to on your Shareholder Agreement, correct? ANSWER: Correct. Were you asked that question and did you give that answer? A. Yes, I did. Q. Are you now changing that answer? A. Yes, I am. Q. So, you didn't answer truthfully on your discovery? A. I didn't answer correctly. [page688] Q. And you did not correct your answer at any time between May 3, 2006 and now? A. Well, I think the action in my suit indicates that I felt it was -- I didn't refer back to this. Q. I'm sorry, this is your examination for discovery in this suit, Mr. White, you appreciate that? A. Correct. Q. Then I didn't understand your answer, I'm sorry? A. Well, I probably didn't express myself correctly. I didn't understand the implications of the question when it was asked. (Emphasis added)

[22] The trial judge made no specific findings with respect to this evidence or with respect to the alleged misrepresentations attributed to Messrs. Cowie and Frye. Nonetheless, he clearly and specifically rejected the appellant's contention at trial "that [Colliers] saw on the horizon a potentially rich pay day, a prospect it failed to disclose to the plaintiff, and they were anxious to be rid of the plaintiff's claim". He recited the defendant's counter arguments and then concluded, at para. 47:

Given all the circumstances in this case, I find much more compelling the argument of the defendant than that of the plaintiff concerning the defendant's motivation for settling the plaintiff's action when it did. The stench I have been invited by counsel for the plaintiff to import to the defendant's conduct is not, in my opinion warranted. On the contrary, the conduct bore the hallmark of good business decisions. Were that not the case, the plaintiff's contention would be much more deserving of credit. (Emphasis added)

III. Analysis

[23] There are four primary reasons why, in my view, the appeal cannot succeed. First, the trial judge's findings, cited above, effectively negative the making of the misrepresentations alleged. More importantly, however, even if the misrepresentations were made by Messrs. Cowie and Frye as alleged, they were immaterial to the value of the appellant's shares and cannot form the basis of an action in misrepresentation because it was unreasonable for him to rely on them in the circumstances. Secondly, there was no detrimental reliance on the alleged misrepresentations in any event, even if they were made, since no damages flowed from them. Thirdly, the appellant's argument that, as a shareholder, he was entitled to be treated equally with other shareholders -- including some other departing shareholders -- who received the US$10.06 price paid by FirstService in the control transaction, has no merit in the circumstances of this case. Finally, the release [page689] executed by the appellant is a bar to the 2005 Lawsuit and no attempt is made to set it or the settlement aside.

The law

[24] The Supreme Court of Canada has stated the requirements for the tort of negligent misrepresentation in Queen v. Cognos Inc., 1993 146 (SCC), [1993] 1 S.C.R. 87, [1993] S.C.J. No. 3, at p. 110 S.C.R., as follows:

The required elements for a successful Hedley Byrne claim have been stated in many authorities, sometimes in varying forms. The decisions of this Court cited above suggest five general requirements: (1) there must be a duty of care based on a "special relationship" between the representor and the representee; (2) the representation in question must be untrue, inaccurate, or misleading; (3) the representor must have acted negligently in making said misrepresentation; (4) the representee must have relied, in a reasonable manner, on said negligent misrepresentation; and (5) the reliance must have been detrimental to the representee in the sense that damages resulted.

[25] To that I would simply add that to succeed in a negligent misrepresentation claim, a plaintiff must prove that the misrepresentation was material in the sense that it would be likely to influence the conduct of the plaintiff or would be likely to operate upon his judgment: Humbruff v. Ontario Municipal Employees Retirement Board (2006), 2005 39859 (ON CA), 78 O.R. (3d) 561, [2005] O.J. No. 4667 (C.A.), at paras. 87-89; Canada Trustco Mortgage Co. v. Bartlet & Richardes (1996), 1996 526 (ON CA), 28 O.R. (3d) 768, [1996] O.J. No. 1551 (C.A.), at p. 773 O.R.

Even if the representations were made, they were not material

[26] Even if the representations put forward at trial and on appeal were made, they could not have materially affected the price of the appellant's shares and he could not reasonably have relied on them. Accordingly, they were not actionable.

Whether the representations were made

[27] The trial judge made no explicit finding about whether the alleged representations attributed to Messrs. Cowie and Frye were in fact made. However, his rejection of the appellant's contention that Colliers was acting improperly in hastily pressuring the appellant to settle, and his findings that the appellant was kept apprised of the steps being taken by Colliers to mitigate its financial problems and that the appellant knew "that a 'liquidity event' or a sale of the company were possible outcomes of the search for financing" -- all imply that he rejected the appellant's allegations in this respect. [page690]

[28] There was ample evidence in the record to justify his doing so. For example, the specific representations the appellant said at trial he relied on -- and continues to pursue on appeal -- were neither pleaded nor mentioned on discovery or at any time prior to trial. When asked on discovery what was discussed with Mr. Cowie, the appellant was silent about any representation to the effect that nothing was happening in the company that would affect the value of his shares. The representation pleaded was based on Colliers' alleged omission to inform him that Colliers was looking to recapitalize itself and, to that end, had formed a Special Committee and retained William Blair. At trial, the appellant conceded that he was aware of these facts at the material times. He also alleged in his reply to demand for particulars of the misrepresentations alleged that during the settlement negotiations he asked Douglas Frye "about the company, what it was doing and in what direction it was heading" and that Mr. Frye responded that "the company was continuing to operate as usual and that HSBC had relented after a number of years and was making monies available to fund the purchases of inactive shareholders". These answers, if given, were true.

[29] In the end, the appellant failed to prove any of the alleged misrepresentations pleaded or referred to on his examination for discovery. Mr. Frye testified that the appellant did not make the alleged inquiry of him, but was solely concerned with getting his share price of US$5.21. The appellant, himself, acknowledged that his objective at that time was to get the money as soon as he could.

Whether the representations were material

[30] However, even if the representations attributed to Messrs. Cowie and Frye were made, they could not have affected the amount that the appellant was entitled to receive -- and that Colliers was required to pay -- for his shares. As the trial judge found, the relationship between the appellant and Colliers at the time of the settlement negotiations was that of debtor and creditor. He correctly concluded (at para. 32) that:

The plaintiff's entitlements at the time of the termination of his association with the defendant were crystallized in an agreement between the parties. An essential term of the agreement was an agreement on the value to be assigned to the plaintiff's shares; namely $5.21 per share. The effect of that agreement was to freeze the value of the shares and to create a debt obligation on the part of the defendant. . . . The plaintiff, by virtue of the contract forming the basis of his November 27, 2002 action, was insulated from the vicissitudes of the company's fortunes . . . [page691]

[31] In short, his employment having been terminated, the appellant was contractually bound to sell his shares to Colliers, and Colliers was contractually bound to purchase those shares at a formula-fixed price that both parties accept was US$5.21 per share. The effect of the Shareholders' Agreement and the Retirement Agreement in December 2000 and March 2001 was to crystallize those rights and obligations. As a result, the appellant had no right to receive anything more (nor was he obliged to accept anything less) than US$5.21 for his shares, whether the share value changed as a result of market forces, a financial restructuring or a sale of the company and/or a change in control. As the trial judge noted, the appellant "was insulated from the vicissitudes of the company's fortunes". Although he technically remained a shareholder, the 400,050 shares were no longer his to sell.

[32] Moreover, the appellant expected and anticipated nothing less. He acknowledged that he knew the market value of the shares had increased to US$5.95 per share when he agreed to the settlement. That change did not matter. Why, if his theory is correct? The appellant was insistent during a period when the company's shares fell below US$5.21 in value that he had a deal at that price. As noted above, when the 2002 Lawsuit was launched in November of that year, the value of Colliers' shares had dropped to $3.00 per share. The appellant acknowledged that what he sued for, effectively, "was that $5.21 U.S. per share plus interest on it from the date [he] felt [he] should have been first paid". Earlier, on August 30, 2002, Mr. Lenczner had written to Mr. Frye on the appellant's behalf, insisting that:

Whatever may be the situation with other shareholders, it does not apply to Mr. White. We expect the company to honour its agreement and to provide the payments set forth in our letter of July 8, 2002. (Emphasis added)

[33] Finally, the appellant conceded that at the time of the settlement negotiations the issue was whether, and how soon, he would get his US$5.21. The following exchange took place during his cross-examination:

Q. Based on everything you've told me, Mr. White, I suggest to you it wouldn't make the slightest difference to you whether or not some of the shares of Colliers were sold, 70 per cent of them or all of them, so long as you got your $5.21, isn't that right? A. You've made that point a number of times before. Q. But that's right, [isn't] it? A. That's obviously what my interest was in the fact that I initiated a lawsuit. [page692] Q. So whether or not there's an expressed reference to the possibility of a sale of control, that's not the issue here is it? The issue for you at this time is whether or not...? A. It became the issue, didn't it? Q. You don't get to ask the questions. A. I beg your pardon? Q. You don't get to ask questions sorry, Mr. White. The issue at this time was whether or not you'd get your $5.21 and how soon you could get your hands on it? A. That is correct. (Emphasis added)

[34] Even after learning about the FirstService transaction in October 2004, the appellant's major concern was whether the "change of control" acceleration provision in his promissory notes had been triggered, entitling him to receive the balance owing to him under the settlement in one lump-sum out of the closing funds. In an e-mail sent to Colliers on November 1, 2004, the question he posed was: "My question is that I assume the outstanding balance owing me for the sale of my shares will be paid at the closing of the sale of [Colliers] to FirstService. Please confirm."

[35] In the end, the fact that Colliers had launched a search for new financing that ultimately led to the acquisition of 70 per cent of its shares by FirstService at a price of US$10.06 per share was irrelevant to the resolution of the appellant's lawsuit and he could not reasonably have relied upon any representation to that effect to decline to settle: Queen v. Cognos, at p. 110 S.C.R. (requirement #4). The representations, if made, were not actionable.

No detrimental reliance or damages

[36] Additionally, for a representation to be actionable, damages must result from relying on it: Queen v. Cognos, at p. 110 S.C.R. (requirement #5).

[37] Here, for much the same reasons as those outlined in the preceding section of these reasons, the appellant has not established that he sustained any damages as a result of the alleged misrepresentations. He was contractually bound to sell his shares upon the termination of his employment (whether voluntary or otherwise) at the price fixed by the formula for the valuation of the company shares in the Shareholders' Agreement. Although the appellant casually maintains that, had he known about the potential control transaction, he would simply have [page693] declined to settle, gone to trial in November 2004 and amended to claim his US$10.06 per share like any other shareholder, I am at a loss to understand on what legal basis he would have been permitted to do so. He is not like any other shareholder.

[38] That this was so is confirmed by the negotiations leading up to the Retirement Agreement. Colliers' representatives urged the appellant to consider the option of leaving a portion of his shareholdings in the company (thereby reducing the company's buy-out obligation at that time). In a letter dated August 12, 2001, Mr. McLernon put forward the following as one of two sets of alternatives for the repurchase of the appellant's shares: [^2]

Repurchase 75%-80% of your shares at $5.21 per share in 5 equal payments over four years with the balance left in the firm with the same rights and privileges of other common shareholders. Interest would be payable as above. Any shares left in the firm will be subject to an amended Shareholders' Agreement that limits future share repurchases. There is, however, a specific liquidity plan in four years' time (sooner depending on market conditions) in which all common shareholders will have the opportunity to sell. (Emphasis added)

[39] The appellant declined this alternative because he wished to have his money to be able to plan for his full retirement and for other personal reasons. It follows from this refusal, however, that he understood the shares he sold back to Colliers would not be subject to "the same rights and privileges of other common shareholders". It is also of peripheral interest, at any rate, that he declined this alternative in the face of discussions with Mr. McLernon and others to the effect that the value of Colliers' shares might increase to between $7 and $15-$20 over the next few years.

[40] Moreover, there is simply no basis for concluding on this record that the FirstService transaction -- or any other transaction -- would have been completed had the appellant's 2002 Lawsuit not been settled and the situation respecting the buy-out of his shares resolved. As noted above, Colliers' senior management considered the 2002 Lawsuit to be an impediment to the company's restructuring efforts. Mr. Frye considered it "a road block" and felt that they "were not going to be successful" in doing a recapitalization "with a lawsuit hanging over [their] head". FirstService's preliminary letter of interest, submitted on June 17, 2004, stipulated that "The amounts owing to departed shareholders will be settled prior to the Closing Date or reserved [page694] for out of the closing funds and will be paid in accordance with their terms."

[41] The fact that the FirstService transaction ultimately contained a provision calling for the then non-active shareholders to be paid out at US$10.06 per share is not determinative. Whatever practical and tactical decisions the Colliers' board of directors may have made to facilitate the completion of the transaction has nothing to do with the legal rights and obligations of the appellant. To repeat what the appellant's counsel said in his letter to Colliers dated August 30, 2002, "[w]hatever may be the situation with other shareholders, it does not apply to Mr. White". Nor can it be assumed that Colliers would have made the same decision to pay the other non-active shareholders on a basis different than that provided for in the Shareholders' Agreement if the appellant's shares had remained in the mix.

Non-equal treatment as a shareholder

[42] Mr. Lenczner submits that the appellant is entitled to be paid for his shares on the same basis as the other non- active shareholders on the principle that all shareholders of the same class are to be treated equally. This argument does not assist the appellant in the circumstances of this case, however, for essentially the same reasons as I have just articulated.

[43] From a legal perspective, the appellant is not in the same position as other common shareholders of his class. We do not even know if he is in the same position as other non-active shareholders (whether ahead of him or behind him in the queue) because his Retirement Agreement -- as he stresses -- has some different nuances from a strict application of the Shareholders' Agreement. It binds him in a debtor/creditor relationship, in any event, to sell his shares to Colliers at the US$5.21 price and neither permits him to benefit from "the same rights and privileges of other common shareholders" (to adopt the language of the pre-Retirement Agreement negotiations) nor exposes him to "the vicissitudes of the company's fortunes" (to adopt the language of the trial judge).

[44] The common law recognizes a presumption of equality amongst shares and the right of shareholders to participate in the benefits of membership equally: McClurg v. Canada, 1990 28 (SCC), [1990] 3 S.C.R. 1020, [1990] S.C.J. No. 134. The common-law rule is carried forward in statutory form in the Canada Business Corporations Act, R.S.C. 1985, c. C-44, s. 24, and its various provincial counterparts: see, e.g., Business Corporations Act, R.S.O. 1990, c. B.16, s. 22. These statutes stipulate that where a corporation has only one class of shares, the rights of the holders of [page695] those shares are to be equal in all respects. However, while shareholders within the same class are required to be treated proportionately and equally, they do not necessarily have to be dealt with in the same fashion. Different treatment is acceptable, so long as it is justifiable and not disproportionate and unequal: see, e.g., St. Lawrence & Hudson Railway Co. (Re), [1998] O.J. No. 3934, 76 O.T.C. 115 (Gen. Div.), at paras. 36-37.

[45] Here, the different treatment of the appellant is justified, from a legal perspective, and not disproportionate or unequal, because of the benefits of the Shareholders' Agreement and the Retirement Agreement to which the appellant freely subscribed. That there may be a downside to his having done so is not material.

The release is a bar

[46] The trial judge was correct in holding that the full and final release executed by the appellant as part of the settlement in June 2004 is a complete bar to the 2005 action. It was, as he said, "couched in the broadest of language", and full and final releases are not a matter of mere formality.

[47] In Kingu v. Walmar Ventures Ltd., 1986 142 (BC CA), [1986] B.C.J. No. 597, 10 B.C.L.R. (2d) 15 (C.A.), at pp. 20-21 B.C.LR., McLachlin J.A. set out a series of eight criteria on the basis of which a contract may be rescinded for non-fraudulent misrepresentation: see, also, Brideau v. Gravel, 1969 856 (NB CA), [1969] N.B.J. No. 64, 1 N.B.R. (2d) 372 (C.A.). Kingu has been referred to in at least two authorities in this court, but not in the context of an attempt to set aside a release and a settlement agreement: see Boulanger v. Johnson & Johnson Corp., 2003 52154 (ON CA), [2003] O.J. No. 2218, 174 O.A.C. 44 (C.A.), at para. 19; Samson v. Lockwood (1998), 1998 1920 (ON CA), 40 O.R. (3d) 161, [1998] O.J. No. 2471 (C.A.), at p. 172 O.R. Indeed, in the only Ontario authority that appears to have dealt with the release/settlement agreement issue directly, however, the trial judge refused to set aside a release notwithstanding that he found there had been a negligent misrepresentation: Francis v. Dingman, [1981] O.J. No. 817, 15 B.L.R. 190 (H.C.J.). The decision was overturned on appeal, but on the basis that this court found the misrepresentation to have been fraudulent rather than negligent: (1983), 1983 1985 (ON CA), 43 O.R. (2d) 641, [1983] O.J. No. 3204 (C.A.). The Court of Appeal took no issue with the trial judge's refusal to set aside the release on the basis of a negligent misrepresentation. Francis v. Dingman preceded Kingu, however. Thus, there may be circumstances in which a release -- and the contract underlying it (i.e., the settlement agreement) -- could be set aside on the basis of a non-fraudulent misrepresentation. It is not necessary to [page696] resolve that issue here, though, because this is not such a case in any event.

[48] I say this for the principal reason that, even though there may be cases where a release can be set aside on the basis that it has been induced by a misrepresentation, the appellant did not claim rescission of the settlement agreement or of the release in the action. He sought damages predicated on breach of contract, breach of fiduciary duty and misrepresentation. Nor does an attack on the release form a ground of appeal. He argues on the appeal, nonetheless, that the release should be set aside on the basis of the misrepresentations discussed above. Leaving aside my conclusion that the alleged misrepresentations -- even if made -- were not actionable in the circumstances, I would not give effect to this submission.

[49] The appellant's actions have affirmed, and continue to affirm, the settlement agreement. He accepted the initial payment of $500,000 on account of his shares and has insisted upon receiving -- and has received -- the annual instalment payments due under the promissory note. In addition, he has received and accepted the additional payment of $150,000. No suggestion has been made that he is willing to return those funds or even that he is willing to take back the shares that he transferred as part of the settlement. Colliers has fully performed the settlement. The appellant cannot have it both ways: he cannot take the benefit of all of the provisions in the settlement agreement favouring him and at the same time seek to set aside the release favouring Colliers, which clearly formed an integral part of the settlement.

The reasons are adequate

[50] Finally, the appellant submits that the trial judge's reasons are so opaque that no reviewing court can comprehend how the issue was addressed: R. v. Sheppard, 2002 SCC 26, [2002] 1 S.C.R. 869, [2002] S.C.J. No. 30. I disagree.

[51] While the trial judge did not specifically refer to Queen v. Cognos, he nonetheless addressed his mind to the appellant's misrepresentation claim. He was clearly alive to all of the evidence, including the evidence impugning Colliers' motivation and the evidence concerning the alleged failure to disclose the details of ongoing negotiations. At para. 16 of his reasons, the trial judge identified the appellant's position, accurately, as follows:

That position is that he sought information from company officials concerning what was happening in respect to the company's quest for financing, and, in particular, was anything happening that might affect the value of the company's shares. According to the plaintiff, he was led to believe that the [page697] company was not for sale, or, in other words, a control transaction was not contemplated. Had he been told otherwise, the plaintiff maintains, he would, or, at least, may have held on to his shares pending the company finding a suitable financial partner, with the attendant prospects of obtaining more than the agreed upon $5.21 per share.

[52] Moreover, he specifically touched on the allegation that the appellant had been told the company was not for sale (an allegation he rejected) and thus again, at least implicitly, on the allegation that he had been told nothing was happening that would affect the value of the company's shares. When that trial judge's reasons are read as a whole, they show: (a) that he concluded the relationship between the appellant and Colliers was that of debtor-creditor as of the date of the Settlement Agreement; (b) that he found that Colliers had no duty to disclose the details of any ongoing negotiations respecting its search for refinancing; (c) that he did not accept the claim that Colliers had failed to inform the appellant of the details of "what was going on" and that the appellant did not know the company was for sale must be rejected; and (d) that he did not accept the appellant's contention that Colliers failed to disclose the prospect of a "potentially rich payday" to the appellant in order to pressure him into settling the 2002 Lawsuit hastily.

[53] On this basis, the reasons make it clear that a claim for negligent misrepresentation had not been made out on any of the following grounds: (i) the requisite duty of care between the parties did not exist in the circumstances; (ii) the alleged misrepresentations had not been made; or (iii) if they had been made, the debtor-creditor relationship rendered them immaterial. The claim was properly rejected on any or all of these grounds, in my view.

Costs

[54] The appellant filed a supplemental notice of appeal attacking the trial judge's disposition as to costs on a substantial indemnity basis. Mr. Lenczner did not address this issue either in his factum or in oral argument. It is therefore unnecessary to deal with it, but I would reject this ground of appeal in any event. [page698]

[55] The trial judge based his decision primarily on the language of the full and final release executed by the appellant as part of the settlement. The release provided that if the appellant commenced an action to which it applied -- which the trial judge had found to be the case -- "and the Releasees (or any of them) [were] added to such proceeding in any manner whatsoever, whether justified in law or not . . . [the appellant] will be jointly and severally liable to the Releasees for the legal costs incurred in any such proceeding, on a solicitor and his own client scale". The trial judge viewed this as a solemn agreement.

[56] It was open to the trial judge to arrive at this disposition, and I see no basis for interfering with his decision in this regard.

IV. Disposition

[57] For the foregoing reasons, I would dismiss the appeal.

[58] The respondent is entitled to its costs of the appeal fixed in the amount of $10,000, all inclusive.

Appeal dismissed.

Notes

[^1]: The Shareholders' Agreement permitted other shareholders to buy the shares of a departing shareholder should Colliers initially choose not to do so. However, if no other shareholders offered to but, Colliers was obliged to do so. The parties have approached this case on the basis that Colliers was required to buy the appellant's shares.

[^2]: The other alternative being the repurchase of 100 per cent of the appellant's shares are US$5.21, with interest in accordance with the Shareholders' Agreement.