CITATION: Tender Choice Foods Inc. v. Planet Energy (Ontario) Corp., 2015 ONSC 817
COURT FILE NO.: 09-13598
DATE: 2015-05-22
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Tender Choice Foods Inc.
L. Frapporti and P. Kennedy, for the Plaintiff
Plaintiff
- and -
Planet Energy (Ontario) Corp.
D. Murdoch and J. Wilson, for the Defendant
Defendant
HEARD: Jan. 28, 29, 30,
Feb. 2, 4, 2015
JUDGMENT
ARRELL, J.
Introduction:
[1] The Plaintiff entered into a fixed price contract for electricity for a five year term with the Defendant in the spring of 2008.
[2] The economy went into serious recession in the fall of 2008 and along with that the demand for electricity fell. As a result of this reduced demand the market price for electricity fell below the fixed price the Plaintiff was paying to the Defendant under the contract.
[3] The Plaintiff brings this action seeking damages for the increased cost it has paid to the Defendant under the five year contract compared to what it would have paid on the open market during that time period.
Facts:
[4] The Plaintiff is a family run meat processing operation with its plant and head office located in Burlington Ontario. The family has been in this business for over fifty years. The children of the founder of the business now operate it. The plant employs approximately 200 people.
[5] The Defendant is a retailer of energy, both electrical and natural gas. It markets to both commercial and residential consumers. It employs sales personnel to sell its various products.
[6] In early April 2008 Mr. Rick Nadon, an allegedly independent contractor selling the Defendant’s products, made a cold call to the controller of the Plaintiff, a Mr. Bill Prybyla, in the hope of arranging an appointment to meet with the decision makers of the Plaintiff to make a sales presentation on a fixed price electrical product.
[7] Mr. Prybyla spoke with Michael Paletta, the vice president of the Plaintiff, and they agreed to meet with Mr. Nadon, as their electrical costs were a significant expense and consistently increasing. Mr. Michael Paletta is one of the children of the founder of the company and a vice president. He has a brother Paul, who was president of the Plaintiff. It appears that Paul was not involved in this transaction or the decision to purchase the Defendant’s product. He also has a brother Angelo who is a vice president but mostly deals with the real estate arm of the family business. Mr. Prybyla has been employed in a management position with the Plaintiff since 1991.
[8] The first meeting occurred in mid-April 2008. Mr. Nadon had asked Mr. Jeff Allan, another alleged independent sales contractor of the Defendant, to attend with him on this sales presentation. Michael Paletta and Mr. Prybyla attended on behalf of the Plaintiff.
[9] I accept that Mr. Allan took the lead on behalf of the Defendant. He had with him a sales binder with numerous newspaper articles, government bulletins, political releases and energy newsletters. I find as a fact that this material was referred to by Mr. Allan and shown to the two representatives of the Plaintiff. The material clearly indicated that the trend in electricity costs for some time had been upwards and the material indicated that trend was likely to continue. Indeed Mr. Prybyla’s own evidence to me indicated he had analyzed the Plaintiff’s electrical costs over the preceding year and those costs were consistently going up.
[10] The evidence from Mr. Paletta and Mr. Prybyla, as to the gist of the presentation from Mr. Allan and Mr. Nadon, was that electrical costs were going to continue to escalate and that by buying a fixed price contract from the Defendant they would save money over the next five years because their electrical costs would be fixed and not subject to the regular increases of the spot market.
[11] The evidence of the Defendants as to the gist of the meeting was that the Plaintiffs wanted to contain their costs and have a predictable amount going forward that they could accurately budget for and would no longer have to worry about fluctuations, up or down, in their energy costs. I accept that the recollections of that meeting by Mr. Allan are more accurate. His evidence was consistent with all of the meetings. He had a good recollection of events and he was not shaken on cross examination. The evidence of the representatives of the Plaintiff had some inconsistencies between them and subsequent meetings. Their memories were less accurate and there was confusion between them as to who was doing what and who the ultimate decision maker was.
[12] The meeting concluded on the basis that if the Plaintiff was interested in the product as presented it would be in touch with the Defendant. It was explained by Mr. Allan that before a proposal could be made the Plaintiff’s electrical load profile would have to be determined from data in the possession of Burlington Hydro and the Plaintiff would have to execute a consent to allow Burlington Hydro to release that information to the Defendant. A blank consent was left with the Plaintiff. This consent was subsequently executed by a representative of the Plaintiff and forwarded to Mr. Allan who in turn obtained the load profile for the Plaintiff from Burlington Hydro.
[13] A few days later Mr. Allan sent an email to Mr. Prybyla as a follow up to the meeting and enclosed a number of attachments similar to what had been in his binder. Mr. Prybyla admits to reading these attachments.
[14] Michael Paletta decided to go forward with another meeting but wished his brother Angelo to be present.
[15] A further meeting occurred in early May. Angelo and Michael Paletta were present as was Mr. Allan. The evidence is less than clear as to whether Mr. Prybyla was present, however, I accept his recollection as the most accurate on this point when he testified that he was present.
[16] This meeting lasted somewhere between 30-60 minutes depending on the various memories. Mr. Allan had the electrical load profile for the Plaintiff. There appears to be no disagreement that it showed a very consistent use of electricity between 7:00 a.m. and 11 p.m. for the five weekdays.
[17] There also appears to be no disagreement that the average peak and mid peak use of electricity during the week was 1610 kWh. per hour. The proposal by Mr. Allan was that the Plaintiff should enter into a 5 year contract for weekdays only (peak and mid peak times) from 7:00 a.m. – 11:00 p.m. for 1610 kWh. per hour at 8.5 ¢ per kWh. The balance of the Plaintiff’s electrical consumption would be based on the spot market for off peak prices which were the lowest. These times would encompass weekends and nights. The contract represented just over 45% of the Plaintiff’s total consumption.
[18] Mr. Allan produced a draft contract of 2 pages. It was a standard form contract. His evidence is that he discussed the terms of this contract in detail. Indeed Mr. Prybyla and the Paletta brothers confirm that some terms were discussed. Angelo made notes and many of them correspond to the various terms of the contract.
[19] I accept the evidence of Mr. Allan that he discussed and explained the terms of the contract. I also accept that he answered questions of the representatives of the Plaintiff on the terms of the contract, and they confirm he did. They, however, have a very selective memory of what he told them. Michael Paletta also confirmed in the telephone call with Ian Robertson, a representative of the Defendant, at the time of signing, that the terms of the contract had been explained, that he had no questions and agreed with the contents of the agreement. I find it not credible that these three very experienced businessmen, who represented the Plaintiff, would not insist that any terms of the contract of which they had any questions would not be fully explained to their satisfaction.
[20] The representatives of the Plaintiff were unanimous in their evidence that they knew very little about electricity pricing. Mr. Allan, on the other hand confirmed he and Mr. Nadon were quite experienced in the field.
[21] The Plaintiff elected to enter into the contract, for a five year term, as presented by Mr. Allan. How, when or who made this decision is unknown based on the evidence of the representatives of the Plaintiff. At the time the contract was signed by Michael Paletta, at a subsequent meeting, he received a telephone call from Ian Robertson a representative of the Defendant. He was advised that the conversation was being recorded and acknowledged he understood and consented to it being recorded. Mr. Paletta confirmed during this conversation that Mr. Allan had explained all of the terms of the contract to him and he did not indicate that he had any questions about the terms. He also confirmed the price, the load, and the duration of the contract and that he agreed with what was in the contract.
[22] The representatives of the Plaintiff were all consistent in their evidence that not one of them read the contract; one said he read the first page; one said he “perused it”; and one said he didn’t read it at all. The representatives of the Plaintiff were also consistent in their evidence that they did absolutely no due diligence, research or background checks on the Defendant or Mr. Allan. As well they did not contact any other customers of the Defendant to elicit their experiences, even though they were told of several, including, Canadian Tire. The Plaintiff’s evidence was also consistent that they sought no advice from any professional regarding the contract, its terms, or the concept of fixed price electricity programs and whether that was a good business decision for them. There was no meeting between the three representatives of the Plaintiff to discuss the proposal, its pros and cons, or how to move forward. Indeed these three witnesses do not know who made the decision to enter into the contract. The court finds such a lack of due diligence by the Plaintiffs, who were experienced and sophisticated business people running a multimillion dollar business quite astonishing. Equally astonishing was the lack of any business procedure by the Plaintiff as to how this major decision was to be made. Especially when the Plaintiff was about to enter into a multiyear contract worth several millions of dollars.
[23] Each party called an expert on the issue of fixed price electricity contracts. Both were well qualified in their field. Mr. Todd was called by the Defence. His conclusion was that based on the information available in the spring of 2008 it would have been reasonable for a consumer seeking to hedge its exposure to varying electricity prices to hedge roughly 45% of its expected consumption. He further concluded that the Plaintiff was hedging roughly 47.6% over the term of the contract and that was reasonable given the information available at that time.
[24] The Plaintiff called Mr. Sharpe. He gave evidence as to damages on three different scenarios. He calculated that if the contract was to be rescinded the Plaintiff paid to the Defendant over the five year term of the contract $1,572,188.00 more than it would have paid on the spot market during that five year period. The second scenario was the amount of damages if the Defendant had hedged only 20.7% of the Plaintiff’s electricity needs for five years which he calculated at $1,294,401.00. The final scenario was the amount of damages payable if the contract had been terminated on February 3, 2009 when counsel wrote to the Defendant. Those damages totaled $1,192,588.00. The Defendant did not take any serious issue with the mathematics of these calculations.
[25] Mr. Sharp gave further evidence that the Plaintiff should not have hedged any amount of its electricity consumption. However, if it elected to do so the most it should have hedged was 20.7%.
[26] Mr. Todd was questioned about the opinion of Mr. Sharp and he replied that Mr. Sharp’s opinion was a perfectly legitimate option for anyone because “…the reality is that we were all in a position and still are in a position of guessing about the future. Everybody has to make their own judgment as to where prices are going, where implicit hedging is going…you cannot get a hedge for government policy.” He went on to say “…So everybody uses their own judgment about the future to decide how much hedging they need or whether they need it; and as far as I am concerned , the advice to not hedge is just as good as the advice to hedge 100% or to hedge 60% or to hedge 40%. You roll the dice, it’s like being in Vegas. You lay down your money, you roll the dice and you take the consequences.” I accept Mr. Todd’s evidence as an accurate reflection of the market in the spring of 2008 based on all the evidence heard. I also accept that it nicely summarizes what I conclude were the beliefs of the representatives of the Plaintiff. They felt this was a very good bet.
[27] The contract signed by the Plaintiff and the Defendant is a standard form. There is no evidence before me that the Plaintiff requested any changes to the contract itself. Angelo Paletta did request an amendment, which was agreed, to allow the transfer of the contract if the Plaintiff was purchased during the term of the contract. The first page is basically filling in the blanks regarding name, address, price and signatures. The second page sets out the terms and conditions which includes an acknowledgement of having read and understood the agreement; that the agreement is the entire agreement and the customer did not rely on any representations that are not in the agreement; that the customer acknowledges that the utility price for electricity may vary up or down during the term of the contract from that set in the contract. The first page of the agreement also confirms the customer had received, read and understood the agreement before signing and agreed to be bound by it.
Position of the Parties:
[28] The Plaintiff urges this court to conclude that the Defendant through Mr. Allan made promises and basically guaranteed to the Plaintiff that it would experience cost savings if it entered into this contract. I am also urged to conclude that Mr. Allan was the expert, he promised savings, while the Plaintiff was inexperienced in electricity, fixed price contracts and totally relied on his promises to its detriment. It is further argued that the Plaintiff would not have entered into this agreement except that it totally relied on the false or negligent promises made by Mr. Allan that there would be a cost savings over the life of the contract.
[29] The Defendant argues the contract is the entire agreement and the Plaintiff, being a sophisticated commercial entity, is bound by its terms. The Defendant further argues that Mr. Allan was a credible witness and his evidence should be accepted that he made no promises or guarantees that the cost of electricity would continue to rise and therefore the Plaintiffs would save money by locking in their price.
Analysis:
[30] The Plaintiff is claiming rescission of the contract on the basis of the Defendant’s negligence or negligent misrepresentations. In the alternative the Plaintiff claims for a breach of contract on the basis that the Defendant failed to accept the termination of the contract by the Plaintiff.
[31] It is trite law that a claim in negligence is grounded on the following three principles:
The Defendant owes the Plaintiff a duty of care:
The defendant breached that duty of care;
As a result of that breach the Plaintiff has sustained damages. Linden, Allen and Feldthusen, Bruce, Canadian Tort Law, 9th Ed. (Toronto: LexisNexis, 2011), page 114.
[32] Bhasin v Hrynew, 2014 SCC 71 at para. 33 and 73 makes it clear that parties to a contract must act honestly and in good faith:
In my view, it is time to take two incremental steps in order to make the common law less unsettled and piecemeal, more coherent and more just. The first step is to acknowledge that good faith contractual performance is a general organizing principle of the common law of contract which underpins and informs the various rules in which the common law, in various situations and types of relationships, recognizes obligations of good faith contractual performance. The second is to recognize, as a further manifestation of this organizing principle of good faith, that there is a common law duty which applies to all contracts to act honestly in the performance of contractual obligations.
In my view, we should. I would hold that there is a general duty of honesty in contractual performance. This means simply that parties must not lie or otherwise knowingly mislead each other about matters directly linked to the performance of the contract. This does not impose a duty of loyalty or of disclosure or require a party to forego advantages flowing from the contract; it is a simple requirement not to lie or mislead the other party about one’s contractual performance. Recognizing a duty of honest performance flowing directly from the common law organizing principle of good faith is a modest, incremental step. The requirement to act honestly is one of the most widely recognized aspects of the organizing principle of good faith: see Swan and Adamski, at § 8.135; O’Byrne, “Good Faith in Contractual Performance: Recent Developments”, at p. 78; Belobaba; Greenberg v. Meffert (1985), 1985 ONCA 1975, 50 O.R. (2d) 755 (C.A.), at p. 764; Gateway Realty, at para. 38, per Kelly J.; Shelanu Inc. v. Print Three Franchising Corp. (2003), 2003 ONCA 52151, 64 O.R. (3d) 533 (C.A.), at para. 69. For example, the duty of honesty was a key component of the good faith requirements which have been recognized in relation to termination of employment contracts: Wallace, at para. 98; Honda Canada, at para. 58.
[33] The court went on to say at para. 70 the following:
The principle of good faith must be applied in a manner that is consistent with the fundamental commitments of the common law of contract which generally places great weight on the freedom of contracting parties to pursue their individual self-interest. In commerce, a party may sometimes cause loss to another — even intentionally — in the legitimate pursuit of economic self-interest: A.I. Enterprises Ltd. v. Bram Enterprises Ltd., 2014 SCC 12, [2014] 1 S.C.R. 177, at para. 31. Doing so is not necessarily contrary to good faith and in some cases has actually been encouraged by the courts on the basis of economic efficiency: Bank of America Canada v. Mutual Trust Co., 2002 SCC 43, [2002] 2 S.C.R. 601, at para. 31. The development of the principle of good faith must be clear not to veer into a form of ad hoc judicial moralism or “palm treeˮ justice. In particular, the organizing principle of good faith should not be used as a pretext for scrutinizing the motives of contracting parties.
[34] The parties in this case were acting at arm’s length in an ordinary commercial transaction. The Plaintiff was represented by experienced people who had more than sufficient time to read the contract, seek advice on it, research the issue and the Defendant and conduct due diligence generally. They elected not to do even a minimal amount of due diligence other than to confirm their electricity prices had been going up consistently over the past year. There were no past dealings between the parties. The parties were brought together as a result of a cold call and the Plaintiff’s desire to contain its electricity costs. Mr. Allan was a salesperson trying to sell a product and the representatives of the Plaintiff were well aware that that was his purpose.
[35] I find as a fact that there is no credible evidence before me that Mr. Allan or the Defendant were acting in any way dishonestly as envisioned in Bhasin, supra. I also find that there is no evidence of bad faith on the part of Allan or the Defendant. I find that they did not lie or knowingly mislead based on all the evidence before me
[36] I do not accept the evidence of the representatives of the Plaintiffs that they were totally ignorant of a fixed price contract given their experience and sophistication. Such contracts had been in place for many years. Indeed the evidence of Angelo Paletta makes it abundantly clear that he knew exactly what he was doing when he testified that his purpose in entering into the contract was to “speculate” on electricity prices, and to hedge the Plaintiff’s exposure to rising energy prices. It is difficult to conceive that a fixed price contract for electricity is much different in theory than a variable versus fixed rate mortgage; or a variable or fixed interest rate on a loan. All of which would have been familiar to the representatives of the Plaintiff.
[37] Angelo Paletta testified that Jeff Allan promised him a “sure thing”- a bet that could not fail. I reject that Allan made such a statement because all of the witnesses confirm they discussed with Allan the possibility of prices going down during the term of the contract. As well Angelo Paletta, and the other two representatives of the Plaintiff, were well aware that if electricity prices went down during the term of the contract they would pay more than if they continued in the spot market. Angelo Paletta testified that in his mind based on his experience, his ability to assess risk, the consistently increasing electricity prices the Plaintiff was experiencing and the various documents shown to him by Allan he made his own determination as to how much he wanted to hedge or “book”. He made it clear he did not want to put all his eggs in one basket because I conclude he well knew Allan was not giving any type of guarantee on electricity prices for five years going forward.
[38] I accept that Allan likely did not emphasise that electricity prices might well go down over the term of the contract, however, that issue was canvassed. There is no evidence he was acting in bad faith or saying anything he did not believe at the time-that in all likelihood electricity prices would continue to rise. Few were forecasting the significant downturn to the economy that was to occur in the fall of 2008. Certainly, not the three representatives of the Plaintiff. I conclude they assumed the economy would continue as before which meant their electricity prices would continue to increase and it would be a wise business decision to contain those costs by locking in a long term price at rates being offered at that time. Indeed, it would have been a very wise decision had the economy not unpredictably deteriorated so drastically in the fall of 2008.
[39] As the court stated in 978011 Ontario Ltd. v. Cornell Engineering Co., 2001 CarswellOnt 1290 (Ont.C.A.) at para 48, and which I find is the case here:
In Stepps, supra,5 part of the rationale for the decision of Grange J.A., that there was a duty on the party making a change to the agreement to draw it to the attention of the other side, was that the significance of the change was not easy to detect. That is not the situation here. Nor is this a case where a party has accepted a standard form contract containing onerous and verbose provisions in small type and in circumstances where it could not reasonably be expected for the signing party to read to the contract: see Tilden Rent-A-Car Co. v. Clendenning (1978), 1978 ONCA 1446, 18 O.R. (2d) 601, 83 D.L.R. (3d) 400 (C.A.). In this case, Stevens, an experienced person in signing contracts, had the opportunity to examine the documents, and was encouraged to do so. The clause is plainly visible, clearly worded and capable of being detected as in Downtown King West Development Corp. v. Massey Ferguson Industries Ltd. (1996), 1996 ONCA 1232, 28 O.R. (3d) 327, 133 D.L.R. (4th) 550 (C.A.), leave to appeal to the S.C.C. refused (1996), 96 O.A.C. 233; Craven v. Strand Holidays (Canada) Ltd. (1982), 1982 ONCA 1859, 40 O.R. (2d) 186, 142 D.L.R. (3d) 31 (C.A.). Stevens' failure to act reasonably in the circumstances should not exonerate Cornell from the terms of the contract.
[40] In Tilden Rent-A-Car Co. v. Clendenning, 1978 ONCA 1446, 1978 CarswellOnt 125 (OCA) the court spoke to standard form contracts and concluded that in modern commercial practise, a party cannot seek to rely on the terms of a standard form contract where he knows or should know that the signature of the other party does not represent his true intention. In those circumstances, the author of the contract should take reasonable measures to ensure the onerous terms are brought to the attention of the other party. The court also stated and I find this to be the situation in the case at bar:
In ordinary commercial practice where there is frequently a sense of formality in the transaction, and where there is a full opportunity for the parties to consider the terms of the proposed contract submitted for signature, it might well be safe to assume that the party who attaches his signature to the contract intends by so doing to acknowledge his acquiescence to its terms, and that the other party entered into the contract upon that belief.
[41] In Deep v. M.D. Management, 2007 ONSC 22655, [2007] O.J. No. 2392 (S.C.J.) Brown J. stated at para.10 the law regarding negligent misrepresentation as follows:
In order to establish a claim for negligent misrepresentation a plaintiff must specifically plead (i) the existence of a duty of care based on a special relationship between the representor and the representee; (ii) that the representation in question was untrue, inaccurate or misleading; (iii) the representor must have acted negligently in making the misrepresentation; (iv) the representee must have relied, in a reasonable manner, on the negligent misrepresentation; and (v) the reliance must have been detrimental to the representee in the sense that damages resulted: The Queen v. Cognos Inc., 1993 SCC 146, [1993] 1 S.C.R. 87, at p. 110; Lana International Ltd. v. Menasco Aerospace Ltd. (1996), 1996 ONSC 7974, 28 O.R. (3d) 343 (Gen. Div.), at pp. 348 to 350.
And further at Para. 13:
To support a claim for negligent misrepresentation, a statement or representation must be a matter of ascertainable fact, as distinguished from an opinion or expectation: Hembruff v. Ontario Municipal Employees Retirement Board (2005), 2005 ONCA 39859, 78 O.R. (3d) 561 (C.A.), at para. 76. The making of statements of forecasts about the future and the omission to make the same cannot sustain an action in negligent misrepresentation: Hembruff, supra., at para. 77. Nor is a forecast an untrue statement of a material fact only because the forecast results were not achieved: Kerr v. Danier Leather Inc. 2004 ONSC 8186, [2004] O.J. No. 1916 (S.C.J.), at para. 77; reversed on other grounds (2005), 2005 ONCA 46630, 77 O.R. (3d) 321 (C.A.). As to opinions, the mere expression of an opinion honestly held is not fraudulent even if the opinion is erroneous: Thomas v. Whitehorse (1979), 1979 NBCA 2794, 95 D.L.R. (3d) 762 (N.B.S.C., App.Div.), at p. 767.
However, representations as to the future may form the basis for a claim of negligent misrepresentation if they import by implication misstatements of existing facts: Datile Financial Corp. v. Royal Trust Corp. of Canada (1991), 1991 ONSC 7310, 5 O.R. (3d) 358 (Div. Ct.), at p. 379; varied on other grounds (1992), 1992 ONCA 7661, 11 O.R. (3d) 224 (C.A.).
[42] I conclude that at best any views expressed by Allan were mere opinion or expectation, honestly held, that the price of electricity would likely continue to increase as that was the prevailing opinion at the time. There is no evidence before me that those views were in any way a misstatement of an existing fact, or not honestly held by Allan, being that electricity costs were in fact going to go down. The Plaintiff’s own expert does not go that far.
[43] The Plaintiff must persuade me, as well, that it relied on the misrepresentations as was stated in Deep, supra. at para. 20:
Actual reliance is a necessary element of a claim for negligent misrepresentation and its absence will mean that a plaintiff cannot succeed: Hercules Management Ltd. v. Ernst & Young, 1997 SCC 345, [1997] 2 S.C.R. 165, at p. 184.
[44] Should I be wrong in concluding that there was no negligent misrepresentation by Allan I have also concluded that the representatives of the Plaintiff’s did not rely on any statements made by him. As stated earlier Angelo Paletta made up his own mind on this proposal. Granted he says he reviewed the material presented by Mr. Allan, although there is no evidence by him as to the extent of his review. Mr. Prybyla confirms reading what Mr. Allan sent him, however, that is not evidence that they relied on it or what Mr. Allan may have said and that they did not make up their own minds as testified to by Angelo Paletta. Indeed the evidence of the three representatives is extremely confusing and inconsistent on how they came to the conclusion to sign the contract. In fact none of the three representatives claimed the decision to accept the agreement as theirs so it is difficult to understand how or who relied on anything said by Mr. Allan.
[45] I conclude that the representatives of both parties at the various meetings spoke of the possibility of electrical prices going down in the future and it was understood that if that occurred the Plaintiff would in fact pay more for their electricity than if they remained in the spot market. The Plaintiff now says that they were promised that the price of electricity would not go down. I do not accept that proposition based on the evidence I heard. As well, the fact is that there is no such promise in the contract and indeed it speaks to the possible variation in price up or down. The Plaintiff failed to negotiate any changes to the contract to protect itself in the event prices might go down. Indeed there is no evidence before me it even attempted such negotiations. The Plaintiff in my view was confident that prices would continue to rise in the future as they had in the past and that it was making a good business decision to fix its electrical costs for the next five years.
[46] The contract is clear that the disclaimer indicates that the customer is not relying on representations that were made outside the contract and has read, understood, and agrees to be bound by the contract. The agreement also states that the market price for electricity “will vary during the Term…and may be greater or less than…” the fixed price under the contract. The evidence is clear, and I have found as a fact, that the three representatives of the Plaintiff knew before signing that the market price for electricity would vary and if the price went down they would pay more under the terms of the contract. Michael Paletta confirmed, in the telephone call with the Defendant when signing, that the terms of the contract had been explained to him and he understood those terms. The court finds it not credible for him now to be saying he did not know what he was signing.
[47] The Plaintiff claims that the Defendant breached the contract by refusing to accept the termination of the contract and to inform the default electricity provider that the contract was at an end. I disagree.
[48] On February 3, 2009 counsel for the Plaintiff wrote to Mr. Allan at Planet that “…our client has resolved to terminate its relationship with Planet Energy (Ontario) Corp. Would you please confirm your receipt of acceptance of termination, failing which, Tender Choice reserves the right to take further steps.” Mr. Allan had left the Defendant by that time, however, the letter was received by Planet but not responded to. The Plaintiff did nothing further other than Mr. Prybyla wrote Burlington Hydro, the default provider, advising that the contract had been terminated to which he was told nothing could be done until they were advised of this new status by Planet. It then commenced this action on August 5, 2009 seeking damages, for among other things, a breach of contract. It did nothing further to move to enforce the provisions it now says should apply.
[49] Rescission is defined in the case of Guarantee Co. of North America v. Gordon Capital, 1999 SCC 664, [1999] 3 S.C.R. 423 at para. 39 as follows:
A fundamental confusion seems to exist over the meaning of the terms “rescission” and “repudiation”. This confusion is not a new one, as it has plagued common law jurisdictions for years. Rescission is a remedy available to the representee, inter alia, when the other party has made a false or misleading representation. A useful definition of rescission comes from Lord Atkinson in Abram Steamship Co. v. Westville Shipping Co., [1923] A.C. 773 (H.L.), at p. 781:
Where one party to a contract expresses by word or act in an unequivocal manner that by reason of fraud or essential error of a material kind inducing him to enter into the contract he has resolved to rescind it, and refuses to be bound by it, the expression of his election, if justified by the facts, terminates the contract, puts the parties in status quo ante and restores things, as between them, to the position in which they stood before the contract was entered into.
See similarly G. H. L. Fridman, The Law of Contract in Canada (3rd ed. 1994), at p. 807.
[50] I have found as a fact that the Defendant did not make any false or misleading representations. On that basis alone the claim for rescission must fail. The court must also consider whether the parties can be restored to their pre-contractual position. That would appear to be impossible because the evidence shows that the Defendant, as a result of the Plaintiff agreeing to a five year fixed price contract, went to the market and purchased that supply of electricity at a fixed price in the marketplace in order to hedge its own exposure to price variations.
[51] The claim also fails because there was no offer by the Plaintiff to pay the liquidated damages the Defendant would have been entitled to under the terms of the contract. As such the Plaintiff, in my view, never attempted to terminate the contract in accordance with its terms.
[52] The Defendant further argues that the claim for breach of contract for its alleged failure to accept termination of the contract fails as statute barred. The Defendant argues that that claim is new and was added by way of amendment in 2012, well past the two year limitation period when the Plaintiff would have known about the claim and indeed well past the date the claim was commenced. The Plaintiff argues that the amendment is merely pleading an alternate ground for relief arising out of the same facts and therefore does not constitute pleading a new cause of action as is argued by the Defendant.
[53] The Courts have defined a cause of action as a factual situation the existence of which entitles one party to obtain from the court a remedy against another party. When a proposed amendment relates to material facts that were not substantially pleaded in the original claim or are essential to support the claim being advanced, the amendment will be ruled as raising a new cause of action. Ascent Inc. v Fox 40 International Inc [2009] O.J. No. 2964 at para. 3. Bank of Nova Scotia v PCL Constructors Inc. [2009] O.J. No. 4347 at paras 12-20.
[54] On the other hand, it has long been recognized that the mere pleading of an alternative ground for relief arising from the same facts does not constitute the raising of a new cause of action. MacGregor v Royal and Sun Alliance Insurance Co. of Canada, [2009] O.J. No. 1564 at para 46; aff’d 2010 ONSC 3558 (Div. Ct.)
[55] In essence the proposed amendment must rely on facts which have been substantially pleaded in the initial Statement of Claim. Bank of Montreal v Morris [2013] O.J. No. 3090 at para. 46. Timbers Estate v Bank of Nova Scotia 2011 ONSC 3639 at paras 10-14.
[56] I accept that the Defendant had notice by way of counsel’s letter in February of 2009 that it wanted to terminate the contract. However, the letter made it clear it was reserving “…the right to take further steps.” Those further steps were to issue a claim in August of 2009 where it did not claim a breach of contract for the Defendants failure to accept termination of the contract. Nor did it mention the letter of February of 2009. The evidence would indicate that the issue was first raised between counsel by way of correspondence dated April 16, 2012. It was not until after the amendment that further discoveries of Mr. Paletta occurred in March 2013 that the letter of February 2009 was first produced to defence counsel. The original claim makes no allegations about the termination of the contract.
[57] I conclude that the amended claim for breach of contract for the alleged failure of the Defendant to accept the Plaintiff’s desire to terminate the contract is a new cause of action which facts were not sufficiently pleaded in the original claim to bring it within the criteria as set out in MacGregor, supra and Bank of Montreal, supra. and is therefore statute barred.
DAMAGES:
[58] If I am wrong in my view that the defendant did not fail to accept termination of the contract by the Plaintiff then I find that the most appropriate calculation of damages, that best mitigates the loss of the Plaintiff, was the measure as of the date it unsuccessfully attempted to terminate the contract, being February 9, 2009. That amount was calculated by Mr. Sharp to be $1,192,588.00. There is no evidence before me as to the amount of liquidated damages, pursuant to the contract, the Defendant might be entitled to if the contract was to end before its full term. I therefore conclude that damages would be as calculated by Mr. Sharp at $1,192,588.00 on that scenario.
[59] If it is found that I am wrong in concluding that there has been no negligence or negligent misrepresentation by the Defendant justifying rescission of the contract then I would accept the calculation of damages expressed by Mr. Sharpe on total rescission of the contract being $1,572,188.00 as fair and reasonable under that scenario.
CONCLUSION:
[60] The Plaintiff’s claim is dismissed.
[61] If the parties are unable to agree on costs they may submit written submissions of no more than 4-5 pages double spaced in addition to any relevant offers and draft bills of costs on or before June 15, 2015. The parties may make brief written reply to those submissions on or before June 29, 2015.
Arrell, J.
Released: May 22, 2015
CITATION: Tender Choice Foods Inc. v. Planet Energy (Ontario) Corp., 2015 ONSC 817
COURT FILE NO.: 09-13598
DATE: 2015-05-22
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Tender Choice Foods Inc.
Plaintiff
- and –
Planet Energy (Ontario) Corp.
Respondent
JUDGMENT
HAS (vt)
Released: May 22, 2015