Court File and Parties

CITATION: Diesel Freight Forwarders Ltd. v. AYS Holdings Inc., 2017 ONSC 7769

COURT FILE NO.: CV-16-559843

DATE: 20171013

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Diesel Freight Forwarders Ltd.

AND:

AYS Holdings Inc. and Pardeep Sidhu

BEFORE: Glustein J.

COUNSEL: T. Rudinskas & J.A. De Bousquet, for the Plaintiff

R. Gorrin, for the Defendants

HEARD: October 12, 2017

Endorsement[^1]

I. Background and Issue Before the Court

[1] The defendant Pardeep Sidhu (“Sidhu”) brings a motion for summary judgment against the plaintiff Diesel Freight Forwarders Ltd. (“DFF”). The defendant AYS Holdings Inc. (“AYS”) does not seek such relief and is not a party to the motion.

[2] The action arises out of losses allegedly incurred by DFF as owner-operators of two trucks for AYS. The claim against Sidhu and AYS is based on alleged negligent misrepresentations by Sidhu to Mr. Navesh Persaud (“Persaud”), the sole director of DFF.

[3] Persaud states in his affidavit evidence that he was a co-worker of Sidhu at Air Canada and that over the course of numerous meetings with Sidhu between February and May 2015, Sidhu made the following representations:

a) Sidhu was the fleet manager for AYS for Eastern Canada;

b) Working as a owner-operator for AYS, Persaud could expect to earn between $10,000 and $14,000 per truck per month after deduction of fuel, insurance, administrative fees and dispatch fees;

c) If Persaud became an operator, he could expect his trucks to travel approximately 20,000 to 24,000 miles per month; and

d) AYS would negotiate contracts for Persaud that would yield a return of approximately $1.90 per mile.

[4] Persaud’s evidence is that he decided to become an owner-operator for AYS and incorporated DFF for that purpose. Persaud’s evidence is that DFF lost $158,005.09 in 2016 and 2017.

[5] Persaud alleges that Sidhu’s representations were untrue, inaccurate or misleading, and that both Sidhu and AYS are liable for negligent misrepresentation under the analysis in Queen v. Cognos Inc., 1993 146 (SCC), [1993] 1 S.C.R. 87 (“Cognos”).

[6] Sidhu denies all of the above alleged representations. He states that he never represented any role or authority with respect to AYS, and that any statements he made about the operator business were limited to his personal results over his six-month period with AYS.

[7] At the hearing, Sidhu conceded that there was a genuine issue regarding trial as to whether the representations were made. Sidhu acknowledged that there was no direct documentary evidence with respect to the alleged representations, and there were some documents such as e-mails and business cards which raised a genuine issue as to Sidhu’s representations. By way of example, Persaud’s allegation that Sidhu advised he was a fleet manager was consistent with Sidhu’s subsequent business cards and emails. Further, a letter from AYS that “we anticipate gross earnings paid to [DFF] to be in the range of $14,000 per truck [sic] month after fuel, insurance, dispatch and admin fee deductions” was consistent with Persaud’s allegation that Sidhu represented gross earnings of $14,000 per month.

[8] Consequently, at the hearing, Sidhu did not seek summary judgment on the basis that there was no genuine issue requiring trial with respect to the representations. Rather, he submitted that even if Sidhu made the representations as alleged, there could be no genuine issue of liability under the Cognos test. Consequently, in these reasons I address only whether there is a genuine issue of liability under the Cognos test, assuming Sidhu made the representations alleged.

II. The Applicable Law of Summary Judgment

[9] On a motion for summary judgment, “great care must be taken by the motion judge to ensure that decontextualized affidavit and transcript evidence does not become the means by which substantive unfairness enters, in a way that would not likely occur in a full trial before the trial judge sees and hears it all” (Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450 (“Baywood Homes”) at par. 44). While the Supreme Court of Canada in Hryniak v. Mauldin, 2014 SCC 7 (“Hryniak”) encouraged the use of summary judgment, the Court noted that the process must “give the judge confidence that she can find the necessary facts and apply the relevant legal principles so as to resolve the dispute “(Hryniak, at par. 51) and must be a process that “(1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result “(Hryniak, at par. 49).

[10] In Hryniak, the court directed motions judges to “consider the consequences of the motion in the context of the litigation as a whole. For example, if some of the claims against some of the parties will proceed to trial in any event, it may not be in the interests of justice to use the new fact finding powers to grant summary judgment against a single defendant. Such partial summary judgment may run the risk of duplicative proceedings or inconsistent findings of fact and therefore the use of the powers may not be in the interest of justice” (Hryniak, par. 60).

III. The Applicable Law of Negligent Misrepresentation

[11] The parties agree that Cognos sets out the applicable law on negligent misrepresentation. The Court in Cognos held that to establish a claim for negligent misrepresentation, five elements must be satisfied (Cognos, at par. 34)

a) There must be a “special relationship” between the person making the representation and the party alleging misrepresentation;

b) The representation(s) must be untrue, inaccurate or misleading;

c) The person making the representation must have been negligent;

d) The party alleging misrepresentation must have relied on the misrepresentation; and

e) The reliance on the misrepresentation must have caused the party alleging misrepresentation to suffer a loss.

[12] Sidhu submits that DFF cannot establish ay of the above factors on the evidence before the court. DFF submits that there is a genuine issue requiring trial as to whether the Cognos requirements are met. I now review each of the Cognos factors.

IV. Application of the evidence to the Cognos test – Is there a genuine issue requiring trial

a) “Special relationship” between Sidhu and Persaud

[13] A special relationship is not limited to professionals providing advice. The Court should not adapt a restrictive approach, but rather consider whether “the surrounding circumstances provide sufficient indicia of a duty of care, notwithstanding the representer’s profession” (Cognos, at par. 177-118). The court will distinguish between “serious statements made in the context of business or professional relationships and […] those made on informed or social occasions” (John Bosworth Ltd. v. Professional Syndicated Developments Ltd., 1979 1732 (Ont. HCJ) at par. 32).

[14] On the evidence before the court, there is a genuine issue requiring trial as to whather there was a special relationship between Sidhu and Persaud. Sidhu characterizes the relationship as casual, based on social discussions over coffee at the workplace. Persaud’s evidence is that regardless of the setting of the discussions, the representations were made by Sidhu as a person with special knowledge of AYS operations as the fleet manager, over the course of many meetings. Sidhu’s transcript evidence was the he understood that the purpose of the discussions was so that Persaud could obtain information necessary for him to make an informed decision about becoming an owner/operator for AYS.

[15] The credibility of the evidence of both Sidhu and Persaud will need to be tested at trial. On the above evidence, I cannot find with “confidence” that there was no special relationship under the Cognos test.

b) Representations were untrue, inaccurate or misleading

[16] Sidhu submits that Persaud led no evidence that the representations were untrue, inaccurate or misleading and that Persaud only relied on his financial results. I do not agree with that characterization of the evidence before the court on this Cognos factor.

[17] First, for the purposes of the hearing, Sidhu accepted the representations alleged by Persaud, in other words, that (i) Persaud would expect between $10,000 to $14,000 per month, per truck after deductions for fuel, insurance, administrative fees and dispatch fees, (ii) Persaud could expect his trucks to travel 20,000 to 24,000 miles per month; and (iii) Persaud would yield approximately $1.90 per mile.

[18] Sidhu submits that such statements, even if made, would be “in futuro” representations and could not be actionable. However, in Datile Financial Corp v. Royal Trust Corp of Canada (1991) 7310 (Gen. Div.) (“Datile”), relied upon by Sidhu, Holllingworth J. held that “representations as to future occurrences do not form a ground for legal relief as negligent misrepresentation unless they import by implication a misstatement of an existing fact (Datile, cited at p. 379 of 1991 7310 (ON SC), 5 O.R. (3d) 358) [Emphasis added]

[19] On the evidence in this case, there is a genuine issue requiring trial that the alleged representations were untrue, inaccurate or misleading as a misstatement of existing fact. On Sidhu’s own evidence, many drivers operating trucks for AYS did not earn between $10,000 to $14,000 per month after the deductions at issue. Even Sidhu did not attain those results throughout 2014, although he did for some months in 2015. Sidhu’s evidence was that his results were strong because of him employing several of drivers. However, the representation of $10,000 to $14,000 income alleged by Persaud does not set out that caveat. Consequently, there is evidence that could establish the inaccuracy or misleading nature of the representation, depending on the court’s assessment of the credibility of the parties and what they understood were the bases of the income representation.

[20] Similarly, with request to the alleged representation that Persaud would obtain 20,000 to 24,000 miles per month, counsel for Sidhu acknowledged that he could not find any record for any operator, including himself, that reflected those miles in any month. Even if Sidhu could have located a few such records, there are numerous records of operators who did not receive anywhere near those miles. While Sidhu again explains this evidence on the basis that he had several drivers, Persaud states that the representation did not contain that caveat. Consequently, there is evidence that could establish the inaccuracy or misleading nature of the mileage representation, depending on the court’s assessment of the credibility of the parties and what they understood were the bases of the miles representation.

[21] Similarly, with respect to the $1.90 per mile representation, Sidhu stated on cross-examination that he only received that payment for one route, and that he earned $1.70 per mile on an average basis until May 2015. Sidhu claims that he told Persaud that the $1.90 per mile would be reduced by a 10% dispatch fee. Persaud states that no such caveat was set out. Consequently, there is evidence that could establish the inaccuracy or misleading nature of the $1.90 per mile representation too, depending on the court’s assessment of the credibility of the parties and what they understood were the bases of the representation.

[22] On the above evidence, I cannot find with “confidence” that the representations were not untrue, inaccurate, or misleading.

c) Negligence in making the representation

[23] If Sidhu represented that he was fleet manager and then made representations to Persaud without any of Sidhu’s alleged qualifications or caveats, than there is a genuine issue requiring trial that Sidhu was negligent in making the representations.

[24] The court will need to hear from Sidhu and Persaud as to the context in which the statements were made. The court will have to determine whether Sidhu represented that he was fleet manager, and the scope of his knowledge of AYS operations, particularly in light of Sidhu’s evidence that AYS was owned by his good friends and relatives and that he had ambition to become fleet manager for Eastern Canada and a owner of AYS.

[25] On the basis of the above evidence, a court could find that Sidhu knew or ought to have known that the precise representations he allegedly made were untrue, inaccurate or misleading and as such was negligent. Again, the court will need to assess Sidhu’s credibility and review the extent to which Sidhu met or failed to meet the standard of care of a person in the context of the facts of the case, i.e. a duty to exercise reasonable care as the circumstances require to ensure that representations made are accurate and not misleading (Cognos, pp. 28-32).

[26] On the above evidence, I cannot find with “confidence” that Sidhu was not negligent.

d) Reasonable reliance of Persaud

[27] On Persaud’s evidence, the purpose of his numerous meetings and communications with Sidhu was to receive information about becoming a owner-operator for AYS. Persaud’s evidence was that Sidhu represented himself as fleet manager and someone who personally operated a truck. Persaud’s evidence is that Sidhu understood Persaud was seeking this information in this context.

[28] Sidhu’s evidence is that the conversations were nothing more than casual chat over coffee about how Sidhu was faring as an operator for AYS, and that Persaud understood that Sidhu’s results were obtained under Sidhu’s operations.

[29] Again, the credibility of the parties on this evidence is paramount to determination of whether Persaud relied on any representations and if so, whether such reliance was reasonable. The court’s determination of the context of the representations and their scope will require credibility findings.

[30] On the above evidence, I cannot find with “confidence” that Persaud did not reasonably rely on the representations (if made).

e) Detriment to Persaud in relying on the representations

[31] Persaud filed financial statements that showed DFF lost $158,005.29 as a result of its business an an operator for AYS. Sidhu filed evidence that showed almost $59,000 in repair bills for DFF’s trucks, alleging that losses were incurred as a result of maintenance of trucks and other factors not related to the representations.

[32] The extent to which DFF lost money as a result of its own business decisions will be an issue for a trial judge to assess. However, there is a genuine issue requiring trial as to whether the damages claimed are all, or in part, due to the representations. A court will need to assess the credibility of the parties to determine the context in which Persaud made business decisions (including his truck privileges) and the extent to which losses were incurred solely because the business results arose because of AYS (and whether the representations were inaccurate or misleading).

[33] The conflicting evidence before the court does not permit the court to find with “confidence” that DFF’s damages were not caused by the representations.

f) Conclusion on Cognos factors

[34] For the above reason, I cannot find with “confidence” that Persaud will not be able to establish the Cognos factors. This case presents the very situation raised in Baywood Homes i.e. the court needs to ensure, by a trial, “that decontextualized affidavit and transcript evidence does not become the means by which substantive unfairness enters, in a way that would not likely occur in a full trial where the trial judge sees and hears it all”.

V. A note on the appropriateness of summary judgment

[35] I have reviewed at length why summary judgment is not appropriate under the process to be considered by the court under Hryniak and Baywood Homes, Persaud submits further that summary judgment is not appropriate as the action would have to proceed in any event against AYS, with the court in that trial called upon to make dispositive findings of fact with respect to the alleged representations and Sidhu’s role with AYS. I do not address this issue given my conclusions above.

VI. Persaud’s request for substantial indemnity costs

[36] Persaud relies on cases where the court found (i) it would be “apprarent to the Defendants’ counsel in bringing the summary judgment motion” that it would fail (Bell Express Vu Limited Partnership v. Pieckenhagen, 2013 ONSC 195 at par. 28); (ii) the summary judgment motion was “audacious” and “poorly executed” (One-Way Drywall Inc. v. Lomax Management Inc., 2016 ONSC 2425 at paras. 6, 9); and (iii) the summary judgment was “doomed to fail” (Morgan v. Morgan, 2017 ONSC 838 at par. 13).

[37] None of these factors apply in the present case.

[38] While I did not find in favour of the defendant’s position, the motion sought a review of the evidence under the Cognos test, which was not poorly executed, audacious, or doomed to fail. The motion was based on the settled law in Cognos and Hryniak. While I did not accept that Sidhu could overcome the credibility issues I discuss above, an order of substantial indemnity costs would unfairly penalize a personal defendant who sought to be out of an action between DFF and AYS on a reasonable, albeit unsuccessful, basis. Consequently, I fix costs on a partial indemnity scale.

VII. Order and Costs

[39] For the above reasons, I dismiss the motion. I fix partial indemnity costs at $16,000 inclusive of taxes and disbursements, which I find an unsuccessful party would reasonably expect to pay given the significant importance of the motion, the multiple affidavits filed, the cross-examinations and the thorough factums and briefs of authorities. I order Sidhu to pay costs of $16,000 to DFF within 30 days of this order.

Glustein J.

Date: October 13, 2017

[^1]: Editorial note: transcribed from handwritten endorsement released October 13, 2017