Supreme Court of Canada
Rockland Industries, Inc. v. Amerada Minerals Corporation of Canada, 1980 CanLII 188 (SCC), [1980] 2 SCR 2
Date: 1980-03-18
Rockland Industries, Inc. (Plaintiff) Appellant;
and
Amerada Minerals Corporation of Canada Ltd. (Defendant) Respondent.
1979: November 1; 1980: March 18.
Present: Martland, Ritchie, Dickson, Beetz and Estey JJ.
ON APPEAL FROM THE SUPREME COURT OF ALBERTA, APPELLATE DIVISION
Contracts—Agency—Agent clothed with actual authority to negotiate for sale of sulphur and to effect its sale—Curtailment of agent’s real authority effected without knowledge of purchaser—Representation of authority by principal relied on by purchaser—Refusal to supply promised sulphur—Breach of contract—Damages.
This appeal arose out of a claim made by the appellant against the respondent for damages resulting from the respondent’s refusal to deliver 50,000 tons of sulphur to the appellant pursuant to a contract to sell and deliver the same to the appellant, which the appellant claimed was made between the parties.
In seeking to effect a purchase of sulphur, the appellant was put into contact with one Kurtz who was in the employ of the respondent’s parent corporation as manager of petrochemicals and specialty products, responsible, inter alia, for sales of sulphur. Kurtz conducted the negotiations for the respondent, including the terms of sale. On September 5, 1974, in a telephone conversation between Kurtz on the one hand and two negotiators for the appellant on the other (Powers and Leaderman), two minor objections to matters discussed in an earlier telephone conversation were raised by Kurtz. Leaderman, on behalf of the appellant, agreed to the matters suggested by Kurtz and Kurtz then said “We have a deal”. When asked when the formal contract would be ready, Kurtz advised that that was a rubber stamp matter, that there was no possibility of a holdup.
In the meantime and before the telephone conversation of September 5, Kurtz had prepared and initialled a memorandum of the transaction for his superior (Deverin). The memorandum was dated September 5, 1974, which was the date on which it was typed. It was dictated on September 3, 1974, and the contents were verbally transmitted to Deverin by Kurtz on that date. On that occasion, Deverin told Kurtz that it would be
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necessary for Kurtz to get Executive Operating Committee approval to this sale, and indeed the memorandum was required so that he could have the details to take to the Executive Operating Committee of which he, Deverin, was a member.
The trial judge held that Kurtz had actual authority to make the sale on September 3, 1974, that on September 3, 1974, his authority was qualified in that Executive Operating Committee approval had to be obtained and that this limitation upon the authority of Kurtz was not communicated to the appellant. He held that a contract had been concluded between the parties. He also held that the memorandum dictated by Kurtz on September 3, and typed on September 5, which he initialled, fulfilled the requirements of s. 7 of The Sale of Goods Act, R.S.A. 1970, c. 327.
The trial judge accepted the evidence of Powers that the first time he heard of the Executive Operating Committee was on September 6, 1974, when, during a telephone conversation with both Kurtz and Deverin, he was informed that the Committee had approved the transaction but that, as a matter of corporate courtesy, all transactions had to be signed by the chairman of the board but that this was just a rubber stamp of approval.
The respondent refused to supply the sulphur promised. The appellant, in an effort to replace the 50,000 tons contracted for, was only successful in replacing 25,000 tons. This alternative source was in a more remote area and accordingly greater costs were incurred to remove the sulphur. The trial judge awarded damages for the failure to deliver the first 25,000 tons at $161,838.45.
With regard to the remaining 25,000 tons which the appellant was unable to obtain from an alternative source, the trial judge awarded damages in the sum of $525,000 and in addition thereto the sum of $2,490 was awarded for demurrage charges. In result, the judgment totalled $689,328.45 together with costs.
On appeal, in separate judgments, Prowse J.A. and Moir J.A. allowed the appeal. Morrow J.A. concurred with each judgment. Moir J.A. went on to say that if his conclusion as to liability was in error, the damages should be reduced to $313,328.45. The other two members of the Court agreed.
Held: The appeal should be allowed and the judgment at trial restored.
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The finding of the trial judge that Kurtz had actual authority to conclude an agreement with the appellant prior to his conversation with Deverin on September 3, 1974, was not disturbed by the Appellate Division. There was no onus on the appellant to inquire as to the extent of Kurtz’s authority on September 5 when he said “We have a deal”. In view of the fact that he had actual authority up to September 3, the appellant should have been notified of the limitation placed on his authority on that date. There was a representation by the respondent of the authority of Kurtz to negotiate the sale on which the appelant relied.
As to the application of s. 7 of The Sale of Goods Act, the judgment of the trial judge should not be reversed.
On the question of damages, the Court of Appeal would not have disturbed the award for the failure to deliver the first 25,000 long tons. As to the second 25,000 long tons the trial judge found that the appellant suffered a loss of profits in the sum of $525,000. He arrived at this amount by taking the average of sale prices per ton for sulphur during the period in which the appellant would have been taking deliveries of sulphur from the respondent, as being the figure at which the appellant could reasonably have been expected to resell the 25,000 tons of sulphur. The difference between that price and the cost per ton to the appellant of putting the sulphur on board a vessel at Quebec City, if the contract had not been breached, represented the loss of profit per ton which the appellant could reasonably have expected to earn.
Both of the parties to the contract were experienced traders. It was known to both that the appellant wished to purchase the sulphur for purposes of resale and that the appellant would seek to obtain the best price which it could. The Appellate Division relied on the evidence that because the appellant, at the time the contract was made, was contemplating possible potential profits of $6 per ton, its loss, because of the breach of contract, should be restricted to that amount. Had the appellant made firm commitments at that time at prices resulting in a $6 per ton profit, the situation would be different. But no such commitments had been made. That being so, the respondent could not complain if the appellant’s loss of profits are determined on the basis adopted by the trial judge.
APPEAL by the plaintiff from a judgment of the Supreme Court of Alberta, Appellate Division1, allowing an appeal by the defendant of an award of $689,328 in damages for breach of
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contract. Appeal allowed and judgment at trial restored.
A.D. Hunter and M.K. Machida, for the plaintiff, appellant.
R.S. Dinkell, Q.C., for the defendant, respondent.
The judgment of the Court was delivered by
MARTLAND J.—This appeal arises out of a claim made by the appellant against the respondent for damages resulting from the respondent’s refusal to deliver 50,000 tons of sulphur to the appellant pursuant to a contract to sell and deliver the same to the appellant, which the appellant claims was made between the parties.
The appellant is a textile manufacturer with head office in Brooklandville, Maryland, and markets its products worldwide. In 1974, the appellant was also engaged in the purchase and resale of sulphur in the world market. A.J. Leaderman was Chairman of the Board of the appellant and C.I. Powers was the Export Manager of the International Division of the appellant. J.K. Kirkpatrick was commissioned by the appellant to act on its behalf to acquire sulphur in the Canadian market-place.
The respondent is a Canadian subsidiary of Amerada Hess Corporation (“Amerada”). Amerada is engaged on a worldwide basis in the exploration for, and the production and marketing of, petroleum products, with sales, in 1976, of four billion dollars and a complement of 6,600 employees, with its main and head office in New York City. The respondent is a producer of natural gas in the Province of Alberta and has an interest in a gas processing plant in Olds, Alberta. In the processing procedure, sulphur is extracted from sour natural gas to make the gas suitable for commercial sale. The raw sulphur is stored in block at the plant site.
At the material time, Amerada had in its employ J. Kurtz as Manager of Petrochemicals/Specialty Products. The powers, duties and responsibilities attached to this office are defined in a
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Management Position Guide issued by Amerada, which was filed as an exhibit at the trial. The relevant portions of that document are as follows:
Basic Purpose/Objective of Position:
Responsible for all domestic and foreign marketing/cargo sales—exchanges—purchases of Petrochemicals (Benzene, Toluene, Xylene) and Specialty Products (Sulfur, Coke, St. Croix Propane)—involving planning, initiating, developing, and penetrating new markets/sales and consistent with established company policies, practices, goals and objectives.
Major Responsibilities:
A. Overall planning, initiating, and developing bulk/ cargo sales of Petrochemicals/Specialty Products.
B. Direct marketing/sales of benzene, toluene, xylene, sulfur, coke and St. Croix propane. This includes visiting customers, preparation, negotiation, commitment, administration and follow-up of all sales contracts.
Principal Relationships:
Outside Company
Develop and maintain close working relationship with purchasing agents, top corporate executives, and other managers concerned with purchasing chemical/petroleum feedstocks. These contacts include customers, the Petroleum/Chemical Industry, other companies, and appropriate government agencies.
In evidence, Kurtz, after stating that he was employed by Amerada as manager of petrochemicals and specialty products, was asked the following questions and gave the following answers:
Q. Can you tell us in a general way what your duties are in that position?
A. Basically I have total responsibility for domestic and foreign sales and marketing of petrochemicals, which are benzene, toluene and xylene and specialty products that include sulphur, coke and propane.
Q. Do your duties include the administration of sulphur in the Province of Alberta?
A. Yes, sir.
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Kurtz reported to B.T. Deverin, senior vice-resident of Amerada, a member of the Board of Directors of Amerada, and a member of the Executive Operating Committee of Amerada in charge of procurement of sales of company products including sulphur. Both Kurtz and Deverin carried out their duties at New York City.
In 1974 and at the material time, R.E.A. Logan, the president of Real Marketing Ltd., an Alberta company engaged in the marketing of sulphur and knowledgeable as to who had sulphur available for sale, located the respondent as a potential vendor of sulphur and communicated this information to Kirkpatrick. This communication went forward to Kirkpatrick by the solicitors representing Real Marketing Ltd. after it was established that Real Marketing Ltd. would receive 50¢ per long ton sold to Rockland. Real Marketing Ltd. agreed to split this 500 per long ton with a Mr. Bozman, Bozman having “found” the prospective purchaser.
Logan entered into communication with Kurtz. On July 30, 1974, Kurtz sent a telex message to Logan which read:
THIS WILL CONFIRM OUR TELEPHONE CONVERSATION THIS DATE RE THE FOLLOWING OFFER BY AMERADA HESS SUBJECT TO FINAL APPROVAL BY AMERADA HESS AND REAL MARKETING.
1974—50,000 LONG TONS SULFUR AT DLRS 8.00 PER LONG TON—F.O.B. AMERADA HESS STOCK PILE, C.P. RAIL ALBERTA. REAL MARKETING, LTD. RESPONSIBLE FOR SHIPPING, MEETING ENVIRONMENTAL CONDITIONS AND ANY CLEANUP OPERATIONS THAT MAY BE NECESSARY.
1975—50,000 LONG TONS PRICE NEGOTIATED AT TIME.
1976—50,000 LONG TONS PRICE NEGOTIATED AT TIME.
PLEASE INDICATE YOUR CONDITIONAL ACCEPTANCE SUBJECT TO FURTHER DISCUSSIONS, BY RETURN TELEX NO LATER THAN AUGUST 1, 1974 AT CLOSE OF BUSINESS 5 P.M. NEW YORK TIME.
Logan replied by telex on August 1, as follows:
SUBJECT TO FURTHER DISCUSSIONS WE CONDITIONALLY ACCEPT YOUR OFFER.
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Following the identification of the potential vendor, the appellant on August 22, 1974, through its negotiators Powers and Leaderman, by telephone discussed with Kurtz at Amerada the quantity of sulphur available for delivery, which they understood to be 50,000 tons at a price net to Amerada of $8 per ton. The movement of the sulphur by the appellant was discussed and it was agreed that Kurtz would meet Kirkpatrick at the offices of the respondent in Calgary, Alberta, the following week. Kurtz characterized this visit to Calgary as a normal routine marketing sales call.
Kurtz met with Kirkpatrick at the offices of the respondent in Calgary the week of August 26th and discussed with Kirkpatrick pricing, the logistics of removing and moving the sulphur, and the ability of the appellant to handle the transaction. Kurtz also introduced Kirkpatrick to R.C. McReynolds, the local Amerada Manager, and invited Kirkpatrick to visit the plant of the respondent where the sulphur was located. Thereafter, Kirkpatrick visited the plant and had certain telephone conversations with McReynolds relative to the logistics of moving the sulphur.
Kurtz’s discussions and communications with McReynolds were related to the logistics of the move and the securing of environmental clearance for the move, and, to Kurtz’s knowledge, McReynolds secured the environmental clearance.
Following the meeting in Calgary between Kurtz and Kirkpatrick, there were two further telephone conversations between Kurtz on the one hand and Messrs. Powers and Leaderman on the other hand. The first call was originated by Powers and Leaderman and was on August 30, 1974. This was a call to Kurtz in New York City and in this telephone conversation the terms of a formal agreement were discussed. Powers testified that Kurtz promised to send a draft form of agreement. This was denied by Kurtz.
The second call occurred on September 5, 1974, and was originated by Kurtz to Powers at Baltimore, Maryland. In this telephone conversation, in which Leaderman also took part, two minor objections to the matters discussed in the earlier
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telephone conversation of August 30th were raised by Kurtz. Leaderman, on behalf of the appellant, agreed to the matters suggested by Kurtz and Kurtz then said “We have a deal”. When asked when the formal contract would be ready, Kurtz advised that that was a rubber stamp matter, that there was no possibility of a holdup.
In the meantime and before the telephone conversation of September 5, Kurtz had prepared and initialled a memorandum of the transaction for his superior, Deverin. The memorandum is dated September 5, 1974, which is the date on which it was typed. It was dictated on September 3, 1974, and the contents were verbally transmitted to Deverin by Kurtz on that date. On that occasion, Deverin told Kurtz that it would be necessary for Kurtz to get Executive Operating Committee approval to this sale, and indeed the memorandum was required so that he could have the details to take to the Executive Operating Committee of which he, Deverin, was a member.
There was a conflict in the evidence of Kurtz with that of Powers and Leaderman as to what Kurtz had said as to his authority. The trial judge rejected the evidence of Kurtz and accepted the evidence of Powers and Leaderman and held that Kurtz had actual authority to make the sale on September 3, 1974, that on September 3, 1974, his authority was qualified in that Executive Operating Committee approval had to be obtained and that this limitation upon the authority of Kurtz was not communicated to the appellant. He held that a contract had been concluded between the parties. He also held that the memorandum dictated by Kurtz on September 3, and typed on September 5, which he initialled, fulfilled the requirements of s. 7 of The Sale of Goods Act, R.S.A. 1970, c. 327.
The trial judge accepted the evidence of Powers that the first time he heard of the Executive Operating Committee was on September 6, 1974, when, during a telephone conversation with both Kurtz and Deverin, he was informed that the Committee had approved the transaction but that, as a matter of corporate courtesy, all transactions
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had to be signed by the chairman of the board but that this was just a rubber stamp of approval.
The respondent refused to supply the sulphur promised. The appellant, in an effort to replace the 50,000 tons contracted for, was only successful in replacing 25,000 tons. This alternative source was in a more remote area and accordingly greater costs were incurred to remove the sulphur. The trial judge awarded damages for the failure to deliver the first 25,000 tons at $161,838.45.
With regard to the remaining 25,000 tons which the appellant was unable to obtain from an alternative source, the trial judge awarded damages in the sum of $525,000 and in addition thereto the sum of $2,490 was awarded for demurrage charges.
In result, the judgment totalled $689,328.45 together with costs.
On appeal, in separate judgments, Prowse J.A. and Moir J.A. allowed the appeal. Morrow J.A. concurred with each judgment. Moir J.A. went on to say that if his conclusion as to liability was in error, the damages should be reduced to $313,328.45. The other two members of the Court agreed.
The judgment at trial contains some important findings of fact which are significant in relation to the legal issues involved in this appeal. They appear in the following passages from the judgment, which also state the reasons for giving judgment in favour of the appellant:
I am satisfied that the evidence clearly establishes that Kurtz did in fact have the authority of the defendant to negotiate for the sale of sulphur and to commit the defendant on such sales. The evidence makes it clear that he not only had such authority but that it was his responsibility and duty to do so.
The evidence on behalf of the defendant, however, is to the effect that such authority and responsibility did not extend to a sale of such magnitude as that proposed to the plaintiff and particularly where it involved the disposition of the major portion of the sulphur inventory
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of the defendant at its gas plant in Olds, Alberta. Both Kurtz and his superior, one, Deverin, gave evidence that on a sale such as that contemplated by the plaintiff, the approval of the said Executive Operating Committee had to be obtained.
I accept the evidence that such a limitation was placed upon the authority of Kurtz with respect to the proposed sale to the plaintiff but at the same time find that such limitation did not come into being until September 3, 1974, during a discussion between Kurtz and Deverin, when Kurtz reported on the sale to Deverin and Deverin in turn notified Kurtz that the approval referred to would have to be obtained.
Notwithstanding such finding, however, it is my view that since Kurtz did have the express authority of the defendant generally to negotiate for and to commit the defendant to sales of sulphur, any limitation or restriction upon such authority would not result in the defendant not being bound by a contract entered into by Kurtz which fell within such limitation on his authority unless the party with whom Kurtz dealt was aware of such limitation.
As noted, the defendant takes the position that the representatives of the plaintiff were made well aware of the limitation upon the authority of Kurtz. Kurtz gave evidence to the effect that on numerous occasions throughout the course of the negotiations and including the negotiations of September 5, 1974, he notified the representatives of the plaintiff that before there could be a. concluded contract, the approval of the Executive Operating Committee had to be obtained to any proposed contract. I do not accept the evidence of Kurtz that he had warned the representatives of the plaintiff of any limitation on his authority prior to September 5, 1974.
In his reasons in the Appellate Division, Prowse J.A. reviewed the evidence with respect to the authority of Kurtz. He went on to say this:
The above is a brief summary of the evidence relating to the legal relationship between Kurtz and Amerada dealing with his authority to act on their behalf. On that evidence the trial judge found that Mr. Kurtz had actual authority to bind Amerada to sell 50,000 tons of sulphur until September 3rd, that Kurtz’s authority was limited and restricted on September 3rd, and consequently that he did not have actual authority to bind on September 5th.
In my view, on the above evidence, it was open to the trial judge to hold that it was within Mr. Kurtz’s general
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authority to conclude an agreement with Rockland prior to his conversations with Mr. Deverin on September 3rd and further, to hold that it was within Mr. Deverin’s authority to revoke Mr. Kurtz’s authority on making the decision that the matter should be dealt with by the executive operating committee.
As noted above, Morrow J.A. concurred with these reasons. We thus have concurrent findings in the Courts below that Kurtz, who was negotiating on behalf of the respondent for the sale of the sulphur to the appellant, had actual authority to bind the respondent to the sale of the sulphur up to September 3.
Prowse J.A. then went on to consider whether Kurtz had apparent authority to bind the respondent on September 5. He stated that the question he had to consider was whether Kurtz, having regard to the nature and extent of his authority prior to September 3 “ …could clothe himself with apparent authority” so that he could bind the respondent after his authority was revoked and before the revocation had been communicated to the appellant.
His conclusion is stated in the following passage:
Rockland in fact made no enquiries of Mr. Kurtz and if any acts by Kurtz may be considered representations by him, such representations could not bind Amerada. They did not constitute a full disclosure of Mr. Kurtz’s actual authority and that alone is what he was authorized to disclose. In my view if Rockland had sought information from Amerada regarding the nature and extent of Mr. Kurtz’s authority, it would have learned that his authority was subject to the limitations set out above which were given effect to on September 3rd. Such disclosure by Amerada or Mr. Kurtz would not give rise to apparent authority on that (sic) part of Mr. Kurtz on September 5th, the day on which the trial judge found that Kurtz had purported to bind Amerada.
Moir J.A. expressed some difficulty in supporting the finding of the trial judge that Kurtz’s actual authority had existed up to September 3. He said:
The learned trial judge found that Kurtz did not have “actual” authority on September 5, the date of the contract. He found that Kurtz’s authority was taken away on September 3 by Deverin. As I stated earlier it is difficult to support that finding in the light of the telex
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and Logan’s evidence but the fact is that Kurtz had no “actual” authority to bind the appellant on the day the learned trial judge found he had entered into the contract. In my respectful opinion that is the end of the “actual” authority argument insofar as binding the appellant is concerned.
The evidence of Logan (of Real Marketing Ltd.) to which reference is made was “that my understanding was as usual with that firm (i.e. Amerada) is that any dealings with them had to be approved by the proper corporate authorities”.
The telex to which Moir J.A. refers is the one previously quoted between Kurtz and Logan which contained the phrase “ …subject to final approval of Amerada Hess and Real Marketing”.
Whatever may have been Logan’s understanding of the practice of Amerada, he did not communicate it to the appellant. The statement in the telex did not disclose any limitation on the authority of Kurtz to sell sulphur for the respondent, but only indicated that, at that stage, the negotiations were not yet final.
However, the position taken by Moir J.A. is that, in any event, Kurtz lacked actual authority on September 5.
Having disposed of the issue of actual authority, Moir J.A. went on to find that, in relation to apparent authority, the evidence did not meet the tests defined by Diplock L.J. (as he then was) in Freeman & Lockyer v. Buckhurst Park Properties (Mangal) Ltd.2, at pp. 505-06:
If the foregoing analysis of the relevant law is correct, it can be summarised by stating four conditions which must be fulfilled to entitle a contractor to enforce against a company a contract entered into on behalf of the company by an agent who had no actual authority to do so. It must be shown:
(1) that a representation that the agent had authority to enter on behalf of the company into a contract of the kind sought to be enforced was made to the contractor;
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(2) that such representation was made by a person or persons who had “actual” authority to manage the business of the company either generally or in respect to those matters to which the contract relates;
(3) that he (the contractor) was induced by such representation to enter into the contract, that is, that he in fact relied upon it; and
(4) that under its memorandum or articles of association the company was not deprived of the capacity either to enter into a contract of the kind sought to be enforced or to delegate authority to enter into a contract of that kind to the agent.
As stated previously, Moir J.A. and the other members of the Court disagreed with the trial judge as to the amount of damages and would, if liability existed, have reduced them to $313,-328.45.
I will deal first with the issue of liability. On this issue, the finding of the trial judge, supported by Prowse J.A. and Morrow J.A., that Kurtz had actual authority to negotiate a sale up to September 3, 1974, is of prime importance.
I am not prepared to disturb this finding. Moir J.A. did not expressly disagree with it, though giving reasons why it was difficult to maintain. Those reasons are not, in my opinion, sufficient to warrant a reversal of that finding.
The appellant was dealing with Amerada, a very large corporation,. In seeking to effect a purchase of sulphur, the appellant had been put into contact with the manager Petrochemicals/Specialty Products, responsible, inter alia, for sales of sulphur. Kurtz conducted the negotiations for Amerada, including the terms of sale. He had prepared a memorandum embodying the terms of sale and on September 5, after Leaderman had agreed to certain matters suggested by Kurtz, Kurtz said “We have a deal”.
In that situation I do not agree that an onus rested on the appellant to inquire as to the extent of Kurtz’s actual authority on September 5 to conclude the deal. Rather, in view of the fact that
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Kurtz had been clothed with actual authority up to September 3, it is my opinion that the respondent should have notified the appellant of the limitation on the authority of Kurtz before the deal was made.
The view which I hold is stated in Bowstead on Agency, 14th ed., p. 434. In Article 139, on that page, under the heading “Apparent Authority Where Actual Authority Revoked”, the author writes:
Where a principal, by words or conduct, represents or permits it to be represented that an agent is authorized to act on his behalf, he is bound by the acts of the agent, notwithstanding the determination of authority otherwise than by the death or bankruptcy of the principal, to the same extent as he would have been if the authority had not been determined, with respect to any third person dealing with the agent on the faith of any such representation, without notice of the determination of his authority.
The reasons for judgment in the Court below indicate the view that, having disposed of the matter of actual authority by the finding at trial that it did not exist on September 5, the only issue is as to the existence of apparent authority on that date. The evidence is then examined to ascertain if it satisfies the requirements defined by Diplock L.J. in the Freeman & Lockyer case, previously quoted. The Court appears to be of the view that the existence of actual authority up to September 3 has little, if any, relevance to this issue.
I do not share this view. In his judgment in the Freeman & Lockyer case, Diplock L.J. said at pp. 503-04:
The representation which creates “apparent” authority may take a variety of forms of which the commonest is representation by conduct, that is, by permitting the agent to act in some way in the conduct of the principal’s business with other persons. By so doing the principal represents to anyone who becomes aware that the agent is so acting that the agent has authority to enter on behalf of the principal into contracts with other persons of the kind which an agent so acting in the conduct of his principal’s business has usually “actual” authority to enter into.
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Surely there can be no stronger instance of representing an agent as having permission to act in the conduct of the principal’s business with other persons than by permitting an agent to negotiate who is clothed with actual authority so to do. Kurtz, who had actual authority to negotiate for the sale of the sulphur and to effect its sale, was permitted by the respondent to negotiate with the appellant for that purpose. This is not a case of an agent, without authority, representing that he had an authority to deal which, in fact, he lacked. His lack of authority on September 5 was the result of a curtailment of his real authority effected without the knowledge of the appellant. In my opinion, there was here a representation of authority by the respondent on which the appellant relied.
On this issue, with great respect, I agree with the views of the trial judge rather than those of the Appellate Division.
At trial, there was in issue the application of s. 7 of The Sale of Goods Act. This question was not dealt with in the Appellate Division because, in view of their conclusions on the main issue, it was unnecessary to do so. This defence to the action was not raised by the respondent on the appeal to this Court either in its factum or in oral argument. I am not prepared to reverse the trial judge on this issue.
The remaining issue is as to the amount of damages.
The trial judge awarded damages in the sum of $689,328.45 for breach of contract as follows:
As to the first 25,000 long tons
$ 161,838.45;
As to the second 25,000 long tons
$ 525,000.00;
Demurrage charges
$ 2,490.00.
His awards of $161,838.45 and $2,490 were not disturbed by the Appellate Division but the Appellate Division would have substituted the sum of $150,000 for the $525,000 awarded relative to the second 25,000 long tons.
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The trial judge approached the matter of damages by segregating the contracted quantity of 50,000 long tons to two lots of 25,000 long tons each. With respect to the first 25,000 long tons, the evidence was that the appellant was able to secure replacement sulphur. The trial judge held:
As soon as it became abundantly clear to the plaintiff that the defendant was going to continue with its refusal to deliver the sulphur it had contracted to sell to the plaintiff, the representatives of the plaintiff made a concerted effort to find an alternative source of supply of sulphur and I am satisfied that they took all such reasonable steps as they could in this regard. As a result of such efforts, however, they were only able to obtain two contracts to purchase sulphur, each being for 12,500 tons at a purchase price in each contract of $7.50 per ton. While the plaintiff only received delivery of 23,200 tons of this alternative sulphur, it is my opinion that since it was entitled to receive 25,000 tons pursuant to the contracts it had entered into that in assessing damages I should do so on the assumption that it did receive the full 25,000 tons.
The appellant sold all of this replacement sulphur. The trial judge reviewed the evidence and found that the damages due to the appellant by reason of the failure to deliver the first 25,000 long tons was $164,328.45. The Appellate Division would not have disturbed this award.
As to the second 25,000 long tons, the trial judge reviewed the evidence and held that the appellant in taking delivery of the sulphur over the period to January of 1975 would have been able to sell that sulphur in a rapidly rising market where the prices were running from $52 per ton in August of 1974 to $73 per ton in early 1975, and found that the appellant thereby suffered a loss of profits in the sum of $525,000. He arrived at this amount by taking the average of sale prices per ton for sulphur during the period in which the appellant would have been taking deliveries of sulphur from the respondent, as being the figure at which the appellant could reasonably have been expected to resell the 25,000 tons of sulphur. The difference between that price and the cost per ton to the appellant of putting the sulphur on board a vessel at Quebec City, if the contract had not been
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breached, represented the loss of profit per ton which the appellant could reasonably have expected to earn.
Moir J.A. in the Appellate Division, with whom Prowse and Morrow JJ.A. concurred, reduced the award of $525,000 to $150,000. The Appellate Division proceeded on the footing that the appellant had contracts of sale in hand for the sulphur that it was purchasing from the respondent, which contracts would result in a profit to the appellant of $6 per ton and that therefore the appellant was limited to $6 per ton on the second 25,000 tons.
Moir J.A. stated as follows:
The respondent did not commit itself to the purchase of sulphur unless and until a purchaser from it had been lined up at a fixed sale price. The respondent [now appellant] then worked out its total handling costs through known loaders, haulers and stevedoring companies. If this would result in a profit they agreed to buy and sell at approximately the same time. With a known purchase price of $8.50 per ton (including the broker’s fees) they had a laid down cost f.o.b. Quebec City of $44.50 per ton approximately. The proposed sale was at $50.50 per ton, that is, the price the respondent [now appellant] said it would not confirm until the purchase was certain. The estimated profit was $6.00 per ton on the balance of 25,000 tons, that is, $150,000.00. That would ordinarily be the damages within the contemplation of the parties. I would therefore assess the aspect of the claim at that sum.
The evidence does not appear to support the conclusion that, so far as the second 25,000 tons is concerned, the appellant had made any firm commitments for their sale. The appellant’s commitments, at the time the contract of purchase was made, were met by procuring sulphur from other sources and the additional cost to the appellant comprises the damages awarded in respect of the first 25,000 tons. With respect to the second 25,000 tons, other deals were being contemplated but the price for their sale had not been determined.
The effect of the judgment of the Appellate Division is to limit the appellant’s claims for loss of profits to resale prices as they existed in September 1974, but the deliveries under the contract
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were to be made over a five-month period. The trial judge found:
It had been anticipated by the parties that the plaintiff would start taking delivery of the defendant’s sulphur very shortly after the contract was concluded and that it would be taking such delivery at the rate of approximately 10,000 tons per month. In order to take delivery the plaintiff was required to crush the sulphur and then to load it aboard railway cars, there being a railway siding in the immediate vicinity of the defendant’s sulphur. The plaintiff then planned to transport the sulphur by rail to the seaport at Quebec City where it would be loaded aboard a vessel or vessels and then sold by it, F.O.B. vessel, to prospective purchasers. The defendant was aware of all of this with the possible exception of the intention to sell the sulphur, F.O.B. vessel.
He also found:
It is abundantly clear from the evidence before me that the plaintiff did suffer a very substantial loss of profit with respect to the sulphur now being dealt with. The cost to the plaintiff of the defendant’s sulphur on board vessel at Quebec City and thus ready for resale, F.O.B. vessel, would be approximately $44.50 per ton. Evidence was called on behalf of the plaintiff which was uncontested by the defendant, and which I accept, to the effect that during the period from August 1974 to early in the year 1975, there was a shortage of sulphur for sale and an abundance of buyers with the result that prices were rising steadily. The selling of sulphur, F.O.B. vessel, at Quebec City during this period were approximately as follows:
Early August 1974
$52 to $55 per ton
End of September 1974
$58 to $62 per ton
End of 1974 and early 1975
$70 to $73 per ton
Both of the parties to the contract were experienced traders. It was known to both that the appellant wished to purchase the sulphur for purposes of resale and that the appellant would seek to obtain the best price which it could. The Appellate Division relies on the evidence that because the appellant, at the time the contract was made, was contemplating possible potential profits of $6 per ton, its loss, because of the breach of contract, should be restricted to that amount. Had the appellant made firm commitments at that time at prices resulting in a $6 per ton profit, the situation would be different. But no such commitments had
[Page 20]
been made. That being so, the respondent cannot complain if the appellant’s loss of profits are determined on the basis adopted by the trial judge.
I would allow the appeal, set aside the judgment of the Appellate Division and restore the judgment at trial, with costs to the appellant in this Court and in the Courts below.
Appeal allowed with costs.
Solicitors for the plaintiff, appellant: Code, Hunter, Calgary.
Solicitors for the defendant, respondent: McLaws & Co., Calgary.
Footnotes
- 1978 ALTASCAD 411, [1979] 2 W.W.R. 209.
- [1964] 2 Q.B. 480.
