Queen v. Cognos Inc.

Queen v. Cognos Inc.
Collection
Supreme Court Judgments
Date
1993-01-21
Report
[1993] 1 SCR 87
Case number
22004
Judges
La Forest, Gérard V.; L'Heureux-Dubé, Claire; Sopinka, John; Gonthier, Charles Doherty; McLachlin, Beverley; Stevenson, William; Iacobucci, Frank
On appeal from
Ontario
Subjects
Torts
Notes
SCC Case Information: 22004
Decision Content
Queen v. Cognos Inc., [1993] 1 S.C.R. 87
Douglas J. Queen Appellant
v.
Cognos Incorporated Respondent
Indexed as: Queen v. Cognos Inc.
File No.: 22004.
1992: January 29; 1993: January 21.
Present: La Forest, L'Heureux‑Dubé, Sopinka, Gonthier, McLachlin, Stevenson* and Iacobucci JJ.
on appeal from the court of appeal for ontario
Torts ‑‑ Negligence ‑‑ Negligent misrepresentation ‑‑ Duty of care ‑‑ Employer's representative allegedly making negligent misrepresentations to prospective employee during hiring interview ‑‑ Whether employer or representative owed prospective employee a duty of care ‑‑ If so, whether duty of care breached ‑‑ Effect of subsequent employment agreement allowing termination without cause and reassignment.
Cognos is an Ottawa‑based computer software company. The manager of product development for a particular line of accounting software, with the full knowledge of the company's senior management, advertised for an accountant to help with the development of the product. Appellant, a chartered accountant, applied and was interviewed for the position. He was living in Calgary with his wife and children at the time, where he occupied a relatively well paid and secure managerial position. He was actively seeking employment outside Calgary, because he wanted more challenging opportunities. During the job interview the manager told the appellant that the project in question was a major one which would be developed over a period of two years with enhancements and maintenance thereafter, and that the position being interviewed for would be needed throughout this period. It was represented that the staff required to develop the product modules would double. At no point during the interview was the appellant made aware of the fact that there was no guaranteed funding for the project as described to him, or that the position being applied for was subject to budgetary approval. Appellant was offered the job of manager, financial standards, and accepted immediately. He signed a written employment contract which permitted Cognos to terminate his employment at any time "without cause" upon one month's notice, or payment of one month's salary in lieu of notice, and to reassign him to another position within the company without reduction in salary, upon one month's notice. Appellant commenced employment in April 1983. In September he was advised that there would be a reassignment of personnel involved with the project owing to diminished research and development funding. The first notice of termination of employment he received was rescinded, but in July 1984 he received a second notice effective October 25, 1984. He worked until that day and was paid until November 15. The trial judge upheld the appellant's action against Cognos and awarded him damages for negligent misrepresentation. The Court of Appeal reversed the judgment and dismissed the action. The issues raised by this appeal are (1) whether Cognos or its representative owed the appellant a duty of care with respect to the representations made about Cognos and the nature and existence of the employment opportunity being offered; (2) whether Cognos or its representative breached this duty of care; and (3) what is the effect of the fact that the appellant signed an employment agreement after the negligent misrepresentations containing a termination "without cause" and a reassignment provision.
Held: The appeal should be allowed.
Per La Forest, L'Heureux-Dubé and Gonthier JJ.: Subject to what was said in Checo, issued concurrently, the reasons of Iacobucci and McLachlin JJ. were agreed with. This is not a case of concurrency. The tort here was independent of the contract and the liability was not limited by an exclusion clause in the contract.
Per Sopinka and Iacobucci JJ.: The tort of negligent misrepresentation is an established principle of Canadian tort law. There are five general requirements for a successful claim: (1) there must be a duty of care based on a "special relationship" between the representor and the representee; (2) the representation in question must be untrue, inaccurate, or misleading; (3) the representor must have acted negligently in making the misrepresentation; (4) the representee must have relied, in a reasonable manner, on the negligent misrepresentation; and (5) the reliance must have been detrimental to the representee in the sense that damages resulted.
An action in tort for negligent misrepresentation may lie even though the relevant parties to the action are in a contractual relationship. The fact that the alleged negligent misrepresentations are made in a pre‑contractual setting, such as during negotiations or in the course of an employment hiring interview, and the fact that a contract is subsequently entered into by the parties do not, in themselves, bar an action in tort for damages caused by the misrepresentations. Depending on the circumstances, however, the subsequent contract may play a very important role in determining whether or not, and to what extent, a claim for negligent misrepresentation will succeed. Such a contract can have the effect of negating the action in tort and of confining the plaintiff to whatever remedies are available under the law of contract. Moreover, even if the tort claim is not barred altogether by the contract, the duty or liability of the defendant with respect to negligent misrepresentations may be limited or excluded by a term of the subsequent contract so as to diminish or extinguish the plaintiff's remedy in tort. Equally, however, there are cases where the subsequent contract will have no effect whatsoever on the plaintiff's claim for damages in tort.
The first and foremost question should be whether there is a specific contractual duty created by an express term of the contract which is co‑extensive with the common law duty of care which the representee alleges the representor has breached. If the pre‑contractual representation relied on by the plaintiff became an express term of the subsequent contract then absent any overriding considerations arising from the context in which the transaction occurred, the plaintiff cannot bring a concurrent action in tort for negligent misrepresentation and is confined to whatever remedies are available under the law of contract. Here, there is no concurrency. The employment agreement signed by the appellant does not contain any express contractual obligation co‑extensive with the duty of care Cognos is alleged to have breached. The appellant's claim was not that the manager negligently misrepresented the amount of time he would be working on the project in question or the conditions under which his employment could be terminated. Rather, the appellant argued that the manager negligently misrepresented the nature and existence of the employment opportunity being offered. It is the existence, or reality, of the job being interviewed for, not the extent of the appellant's involvement therein, which is at the heart of this tort action, and the employment agreement contains no express provisions dealing with Cognos's obligations with respect to the nature and existence of the project.
There existed a "special relationship" between the parties, and Cognos and its representative, the manager, accordingly owed a duty of care toward the appellant to exercise reasonable care and diligence in making representations as to the employer and the employment opportunity being offered. The misrepresentations by the manager during the interview were made negligently, and the duty of care was therefore breached. It is not sufficient that the manager was truthful during the interview and that he believed in what he was representing. The applicable standard of care should be the one used in every negligence case, namely the universally accepted "reasonable person". The standard of care required by a person making representations is an objective one: it is a duty to exercise such reasonable care as the circumstances require to ensure that representations made are accurate and not misleading. The trial judge did not depart from the applicable standard of care in rendering his decision. He found that, "in all the circumstances", the misrepresentations made by the respondent's representative were negligently made. The trial judge did not impose a duty to make full disclosure on the respondent and its representative. He simply imposed a duty of care, the respect of which required, among other things and in the circumstances of this case, that the appellant be given highly relevant information about the nature and existence of the employment opportunity for which he had applied.
The specific employment agreement signed by the appellant is, in the circumstances of this case, irrelevant to his action for negligent misrepresentation. The common law duty of care invoked by the appellant is "independent" of the employment agreement, and neither Cognos's duty of care nor its liability is affected by the terms of the agreement. In particular, the agreement does not contain any valid disclaimer of responsibility for the representations made during the interview.
Per McLachlin J.: The fact that the parties in this case entered into a contract which contained a specific term governing termination does not preclude the appellant's action in tort for negligent misrepresentation as to the employment. The pre‑contractual representation was different in scope and effect from the contractual obligation. The representation at issue in this case concerned the risk of termination coming about, and was not that Cognos would not have the discretion to terminate or transfer the appellant on one month's notice. The appellant relied on that representation in deciding to enter into the contract. It turned out to have been negligently made and false. It follows that the appellant is entitled to damages for the loss suffered as a result of that representation.
The trial judge held that the respondent had a duty not to hold out to applicants that the project was secure when it knew that funding was not approved and knew or should have known that the final approval was not a rubber stamp process and the secure funding was not a foregone conclusion. This is the appropriate standard and the duty of care with respect to representations made in a pre‑employment situation is the same as that which applies generally.
Cases Cited
By La Forest J.
Referred to: BG Checo International Ltd. v. British Columbia Hydro and Power Authority, [1993] 1 S.C.R. 000.
By Iacobucci J.
Distinguished: BG Checo International Ltd. v. British Columbia Hydro and Power Authority, [1993] 1 S.C.R. 000, rev'g in part (1990), 44 B.C.L.R. (2d) 145; referred to: Hedley Byrne & Co. v. Heller & Partners Ltd., [1964] A.C. 465; Burrows v. Burke (1984), 49 O.R. (2d) 76; Carman Construction Ltd. v. Canadian Pacific Railway Co., [1982] 1 S.C.R. 958, aff'g (1981), 33 O.R. (2d) 472 (Ont. C.A.); Welbridge Holdings Ltd. v. Metropolitan Corporation of Greater Winnipeg, [1971] S.C.R. 957; J. Nunes Diamonds Ltd. v. Dominion Electric Protection Co., [1972] S.C.R. 769; Rivtow Marine Ltd. v. Washington Iron Works, [1974] S.C.R. 1189; Hodgins v. Hydro‑Electric Commission of the Township of Nepean, [1976] 2 S.C.R. 501; The Pas (Town of) v. Porky Packers Ltd., [1977] 1 S.C.R. 51; Haig v. Bamford, [1977] 1 S.C.R. 466; V.K. Mason Construction Ltd. v. Bank of Nova Scotia, [1985] 1 S.C.R. 271; Rainbow Industrial Caterers Ltd. v. Canadian National Railway Co., [1991] 3 S.C.R. 3; Steer v. Aerovox Inc. (1984), 65 N.S.R. (2d) 91; H.B. Nickerson & Sons Ltd. v. Wooldridge (1980), 115 D.L.R. (3d) 97; Williams v. School District No. 63 (Saanich) (1986), 11 C.C.E.L. 233 (B.C.S.C.), aff'd on other grounds (1987), 17 C.C.E.L. 257 (B.C.C.A.); Grenier v. Timmins Board of Education (1984), 26 A.C.W.S. (2d) 285; Pettit v. Prince George & District Credit Union (1991), 35 C.C.E.L. 140; Roy v. B.N.P.P. Regional Police Commission (1986), 15 C.C.E.L. 167; Esso Petroleum Co. v. Mardon, [1976] 2 All E.R. 5; Sodd Corporation Inc. v. Tessis (1977), 17 O.R. (2d) 158; Kingu v. Walmar Ventures Ltd. (1986), 38 C.C.L.T. 51; Central Trust Co. v. Rafuse, [1986] 2 S.C.R. 147; Caparo Industries plc v. Dickman, [1990] 1 All E.R. 568; Mutual Life and Citizens' Assurance Co. v. Evatt, [1971] A.C. 793; Howard Marine and Dredging Co. v. A. Ogden & Sons (Excavations) Ltd., [1978] Q.B. 574; Shaddock & Associates Pty. Ltd. v. Parramatta City Council (1981), 150 C.L.R. 225; Blair v. Canada Trust Co. (1986), 38 C.C.L.T. 300; Nelson Lumber Co. v. Koch (1980), 13 C.C.L.T. 201; Fine's Flowers Ltd. v. General Accident Assurance Co. (1974), 5 O.R. (2d) 137 (H.C.), aff'd (1977), 17 O.R. (2d) 529 (C.A.); Hendrick v. De Marsh (1984), 45 O.R. (2d) 463 (H.C.), aff'd on other grounds (1986), 54 O.R. (2d) 185 (C.A.); W. B. Anderson & Sons, Ltd. v. Rhodes (Liverpool), Ltd., [1967] 2 All E.R. 850; Hayward v. Mellick (1984), 45 O.R. (2d) 110; Datile Financial Corp. v. Royal Trust Corp. of Canada (1991), 5 O.R. (3d) 358; Foster Advertising Ltd. v. Keenberg (1987), 38 C.C.L.T. 309; Andronyk v. Williams (1985), 35 C.C.L.T. 38; Minister Administering the Environmental Planning and Assessment Act, 1979 v. San Sebastian Pty. Ltd., [1983] 2 N.S.W.L.R. 268 (C.A.), aff'd on other grounds (1986), 68 A.L.R. 161 (H.C.); Banque Financière de la Cité SA v. Westgate Insurance Co., [1989] 2 All E.R. 952, aff'd on other grounds [1990] 2 All E.R. 947 (H.L.); Doherty v. Allen (1988), 55 D.L.R. (4th) 746.
By McLachlin J.
Referred to: BG Checo International Ltd. v. British Columbia Hydro and Power Authority, [1993] 1 S.C.R. 000.
Authors Cited
Fleming, John G. The Law of Torts, 7th ed. Sydney: Law Book, 1987.
22Klar, Lewis N. Tort Law. Toronto: Thomson Professional Publishing Canada, 1991.
Linden, Allen M. Canadian Tort Law, 4th ed. Toronto: Butterworths, 1988.
APPEAL from a judgment of the Ontario Court of Appeal (1990), 74 O.R. (2d) 176, 38 O.A.C. 180, 69 D.L.R. (4th) 288, 30 C.C.E.L. 1, 90 CCLC ¶14, 024, setting aside a judgment of White J. (1987), 63 O.R. (2d) 389, 18 C.C.E.L. 146, allowing the appellant's action for damages for negligent misrepresentation. Appeal allowed.
Peter J. Bishop and Tom Brooker, for the appellant.
Charles T. Hackland and Mark Josselyn, for the respondent.
//La Forest J.//
The judgment of La Forest, L'Heureux‑Dubé and Gonthier JJ. was delivered by
La Forest J. ‑‑ Subject to what I have had to say in BG Checo International Ltd. v. British Columbia Hydro and Power Authority, [1993] 1 S.C.R. 000, issued concurrently, I agree with Justices Iacobucci and McLachlin, and would dispose of the appeal in the manner proposed by them. Though Iacobucci J. repeats the essence of his analysis in Checo, the present case is not one of concurrency at all. It is sufficient for me to say that the tort here was independent of the contract and the liability was not limited by an exclusion clause in the contract.
//Iacobucci J.//
The reasons of Sopinka and Iacobucci JJ. were delivered by
Iacobucci J. ‑‑ This appeal involves the application of the tort of negligent misrepresentation to a pre‑employment representation made by an employer to a prospective employee in the course of a hiring interview. Specifically, this Court is being asked to determine in what circumstances a representation made during a hiring interview becomes, in law, a "negligent misrepresentation". A subsidiary question deals with the effect of a subsequent employment agreement signed by the plaintiff, and its provisions allowing termination "without cause" and reassignment, on a claim for damages for negligent misrepresentation.
I. Facts
The trial judge conducted an extensive and thorough review of the facts in the course of his reasons for judgment. None of his findings of fact has been challenged in a direct manner by the respondent or altered by the Court of Appeal. As the facts are particularly important in the case at bar, I will review in some detail the trial judge's most relevant findings.
The respondent, Cognos Incorporated (previously named Quasar Corporation and hereinafter referred to as "Cognos" or "respondent"), is an Ottawa‑based company which carries on the business of designing, developing and marketing computer programmes and software. In December of 1982, the respondent's President (Mr. Mike Potter) instructed Mr. Sean Johnston, the recently appointed Manager of Product Development for a product line of accounting software known as "Multiview", that Cognos intended to develop Multiview to an equal standing with its main product line called "Power House". Mr. Johnston had also received instructions from the Vice‑President of Research and Development of Cognos (Mr. Bob Minns), at the time of accepting the position of Manager of Product Development, that the respondent wished to see Multiview expand beyond the general ledger module (the software involved consists of various "modules") then developed and in circulation, and the accounts payable module then under development. In particular, he was told that the respondent wished to see the development of three additional modules, namely, accounts receivable, cash flow, and fixed assets. Mr. Johnston was instructed by Cognos's senior management to take charge and to do whatever was necessary to make Multiview a marketable and profitable product.
A meeting was held on December 21, 1982, during which Mr. Johnston and several senior executives of Cognos reviewed plans for the development of the Multiview line of products according to the mandate that had just been given. Criticisms were voiced by Mr. Johnston about the development of Multiview currently under way. He filed a project schedule covering a period of time up to 1985 and contemplating the development of modules such as accounts payable, accounts receivable, and cash flow.
Mr. Johnston indicated that there was a need on the research and development team of Multiview for an accountant to assist in the writing and maintenance of the software. Mr. Johnston proceeded, with the full knowledge of the respondent's senior management, to advertise for (and later hire) an accountant to help with the development of Multiview. An advertisement was placed in The Globe and Mail in mid‑January, 1983, and many responses were received. In February of that year, a short list of six chartered accountants were interviewed by Mr. Johnston and two other executives of Cognos. The appellant, Douglas J. Queen, was one of the persons interviewed.
At the time of his interview, the appellant had been qualified as a chartered accountant for some eight and a half years. Since May of 1975, he had been living in Calgary with his wife and children and had occupied positions with three different employers, whereby he gained experience in working with computer accounting systems. For the three and a half years prior to the interview, the appellant had been the Regional Controller for a Calgary‑based corporation named Genstar Development Corporation, occupying a relatively well paying and secure managerial position. In the fall of 1982, the appellant was actively seeking employment outside Calgary and was interested in the high‑tech industry in the Ottawa area. In the words of the trial judge, the appellant wanted more challenging opportunities than were available for him in Calgary; he wanted a senior financial position that would make use of his expertise in management information computer systems.
On February 14, 1983, the appellant was interviewed for approximately an hour and a half. During this interview, Mr. Johnston made a number of representations (as he had to the other five candidates) about the Multiview project and about the successful candidate's role in its development. These representations are fully canvassed at pp. 396‑98 of the reported reasons of the trial judge: (1987), 63 O.R. (2d) 389.
In sum, Mr. Johnston told the appellant that Multiview was a major project which would be developed over a period of two years (the "primary development period") with enhancements and maintenance thereafter, and that the position being interviewed for would be needed throughout this period. It was made clear that Cognos was committed to the development of additional modules of Multiview beyond general ledger (then developed), accounts payable (development under way), and accounts receivable (planned, but not yet under development). Those additional modules were cash flow, fixed assets, inventory, and order entry. Moreover, it was represented that the staff required to develop the Multiview modules would double, from 16 to 32, by August, 1983 (the appellant's evidence), or by the end of the two‑year primary development period (Mr. Johnston's evidence). Throughout the interview, it was understood that the successful candidate would play an important role as a chartered accountant in the Multiview project, advising on accounting standards throughout the life of the project. In addition, the trial judge found, based on his assessment of all the evidence, that it was implicitly represented that there was a reasonable plan in existence for the additional modules and that Cognos had made a financial commitment for such development in the way of budgetary provisions.
At the time of this interview, Mr. Johnston's knowledge as to the respondent's commitment to the development of Multiview was based on conversations and meetings with senior executives of Cognos. He was aware, however, that the funding needed for the full development of Multiview in accordance with his mandate had not yet been approved by the respondent's corporate management team. While this body had met in early February to discuss and formulate strategies and plans for the development of Multiview, it had not yet given any financial commitment commensurate with the mandate given to Mr. Johnston. Mr. Johnston was also aware that this body had the ultimate responsibility of deciding whether to allocate corporate funds for the research and development of Multiview. At no point during the interview was the appellant made aware of the fact that there was no guaranteed funding for the Multiview project as described to him, or that the position being applied for was subject, in any respect, to budgetary approval.
The appellant was offered the job of Manager, Financial Standards, by telephone early in the month of March, 1983. He accepted immediately and Mr. Johnston mailed to him a written contract of employment. It is undisputed that, prior to signing, the appellant read and understood the employment agreement. He knew that its purpose was to define the rights and obligations of the parties. One clause in the contract (clause 14) permitted the respondent to terminate at any time the appellant's employment "without cause" upon one month's notice, or payment of one month's salary in lieu of notice. Another clause (clause 13) enabled the respondent to reassign the appellant to another position within Cognos without reduction in salary and upon one month's notice. Much importance was given to these provisions by the Court of Appeal as well as by the respondent in argument before this Court.
For convenience, I shall reproduce clauses 13 and 14 of the employment agreement:
TRANSFER
13.Quasar Systems reserves the right to reassign you to another position with the Company without reduction of your salary or benefits and upon one month's notice to you. Should such reassignment require your permanent relocation to another city, the Company will reimburse you for your expenses in accordance with the then current relocation policy.
TERMINATION NOTICE ‑‑ ONE MONTH
14.This Agreement may be terminated at any time and without cause by Quasar Systems Ltd. or by you. In the event of termination, Quasar Systems Ltd. will give you one month's notice of termination plus any additional notice that may be required by any applicable legislation. Similarly, you shall give Quasar Systems Ltd. one month's notice if you voluntarily terminate this Agreement. Quasar Systems Ltd. may pay you one month's salary in lieu of the aforesaid notice in which event this Agreement and your employment will be terminated on the date such payment in lieu of notice is made.
The trial judge specifically accepted the appellant's evidence that he signed the contract of employment based on the representations made to him during the interview, and that were it not for those representations he would not have signed it. In order to accept employment with Cognos, the appellant was required to give up a relatively well paying and secure, albeit not as challenging, position in Calgary and to move himself and his family more than halfway across the country.
The appellant commenced employment with Cognos on April 11, 1983. Two weeks later, on April 25, 1983, the corporate management team of the respondent considered for the very first time the project cost estimates for the Multiview project. This body rejected Mr. Johnston's funding proposal which was in excess of $1,000,000. It decided to commit research and development funds to the Power House project in priority to Multiview. This decision was based on a number of market considerations, including the continuing low sales of the then developed Multiview module (general ledger) and the continuing high sales of the various Power House modules. The corporate management team allotted a budget of only $200,000 to Multiview, thus making the development of additional modules beyond accounts receivable quite unrealistic. Further meetings of the management team took place in the following months at which time additional funding curtailment of the Multiview project occurred. On September 9, 1983, barely five months after his arrival in Ottawa, the appellant and others were advised that there would be a reassignment of personnel involved with Multiview owing to diminished research and development funding. The appellant was informed that, unless a position was available for him in the finance and administration department of the respondent, he would most likely be laid off.
On October 28, 1983, the appellant was given his first written notice of termination of employment effective March 21, 1984. The appellant negotiated an amendment to his employment agreement in order to eliminate his obligation to repay $7,500 of moving expenses, otherwise repayable in the event that his position was terminated within the first year of employment. This notice was rescinded in November, 1983, and the appellant was assigned to quality control of one of the aspects of the Power House project. On May 1, 1984, after having been informed earlier in March that he would no longer be needed with quality control, the appellant secured the position of Manager of Finance in the finance department of the respondent. He performed various tasks while in this function. On July 31, 1984, he received his second written notice of termination effective October 25, 1984. He worked until that day and was paid until November 15, 1984. The trial judge found that the appellant was not dismissed as a result of an unsatisfactory assessment of his job performance.
On March 25, 1985, the appellant commenced an action against the respondent seeking damages for negligent and fraudulent misrepresentation. He apparently discontinued his claim for fraudulent misrepresentation at some point after filing the statement of claim, and proceeded only in negligence. From the beginning, the appellant's cause of action has been founded wholly and solely in tort. At no time did he argue breach of contract, breach of collateral warranty or any other contractual cause of action against the respondent. He did not dispute the fact that some of the terms of his employment contract appeared to be inconsistent with the representations made by Mr. Johnston. However, it was his understanding from the interview that the Multiview project was a reality and that its existence was not contingent on the happening of some future event. He testified that were it not for the representations made during the interview as to the nature and existence of the employment opportunity, he would not have left his secure position in Calgary.
In a judgment rendered on December 31, 1987, White J. of the Ontario High Court of Justice upheld the appellant's claim and awarded him $67,224 in damages: (1987), 63 O.R. (2d) 389, 18 C.C.E.L. 146. On May 1, 1990, an appeal by the respondent to the Court of Appeal for Ontario was allowed; the trial judgment was set aside and replaced by a judgment dismissing the action with costs: (1990), 74 O.R. (2d) 176, 38 O.A.C. 180, 69 D.L.R. (4th) 288, 30 C.C.E.L. 1, 90 CLLC ¶14, 024. The appellant was granted leave to appeal to this Court on January 17, 1991, [1991] 1 S.C.R. xii.
II. Judgments in the Courts Below
A. Ontario High Court of Justice (1987), 63 O.R. (2d) 389
The trial judge found, in all the circumstances, that there existed a "special relationship" between the respondent (via Mr. Johnston) and the appellant, within the meaning of Hedley Byrne & Co. v. Heller & Partners Ltd., [1964] A.C. 465 (H.L.), so as to give rise to a duty of care with respect to the representations made during the hiring interview. The fact that this case involved pre‑contractual or pre‑employment negotiations did not alter this conclusion. Based on his assessment of all the evidence adduced at trial, White J. also found that certain representations made to the appellant during the interview were inaccurate or misleading (i.e., they were misrepresentations), and that these misrepresentations were made in a negligent manner (i.e., they were negligent misrepresentations). Some of his comments in this respect warrant repeating (at pp. 415‑16):
I find that misrepresentations were made to the [appellant] by Sean Johnston in the hiring interview. The effect of these misrepresentations was that the [appellant] would have a position in the research and development of the product "Multiview"; that that position would be a significant one and would involve his expertise as an accountant; that he would perform the responsible role of seeing to proper accounting standards being implemented into the product; that beyond the three modules immediately in contemplation were a minimum of four other modules; and that the project of "Multiview", in connection with which [the appellant] would be hired would last a minimum of two years. I find further that Mr. Johnston implicitly represented that management had made a firm budgetary commitment to the development of four other modules in addition to those then presently under development.
I find further, in all the circumstances, that Sean Johnston made those misrepresentations negligently. Based upon his expertise in the field of computer development, he was aware, according to his evidence, that until there is a feasibility study in which cost estimates have been submitted to and have been considered and approved by senior management, one could not say that the [respondent] had made a firm commitment to the project as Mr. Johnston envisaged it and as he described it to [the appellant] in the interview.
Other circumstances which the trial judge took into consideration in concluding that the misrepresentations were negligently made include the following: (1) Mr. Johnston knew, or ought to have known, that the truth of his representations depended on the approval by the corporate management team of the cost estimates he had prepared for the research and development of the Multiview project; (2) it is reasonable to infer that Mr. Johnston, at the time of the interview, contemplated that the budgetary needs for the Multiview project would be substantial and that approval was at best speculative; (3) Mr. Johnston must have been aware of the continued poor sales performance of the Multiview product line; (4) Mr. Johnston did not disclose to the appellant that senior management had not yet given the financial commitment required to make the plans for the Multiview project a probable reality; (5) Mr. Johnston's expertise in the computer development field should have made him aware that, notwithstanding his conversations with senior management and the meeting of December 21, 1982, there was still a considerable risk that senior management would not give budgetary approval to his plans; (6) Mr. Johnston knew that the appellant was relying on the information he was providing during the interview; (7) Mr. Johnston knew that the appellant had a secure, responsible, and well‑paying employment as a chartered accountant in Calgary and that coming to Ottawa would involve moving himself and his family across the country; and (8) Mr. Johnston was aware that the appellant was relying on the position with Cognos to enhance his career significantly as an accountant.
The trial judge also found that, even if Mr. Johnston felt justified in making the representations that he did (based on his conversations with senior management and the meeting of December 21, 1982), and assuming that this deprived his misrepresentations of their negligent quality, then such misrepresentations, while not negligently made by Mr. Johnston, were negligently made by the senior management of the respondent "through Mr. Johnston as an innocent instrument of the [respondent] company" (p. 418).
White J. further found that the appellant had relied upon the negligent misrepresentations, to his detriment, and that he had sustained substantial damages (at p. 419):
The misrepresentations induced [the appellant] to quit his job as controller of the Calgary Division of Genstar Development Corporation and to accept employment with the [respondent]. Those representations induced him to sign the contract of employment. But for those representations he would have remained working for the Genstar Development Corporation for some further period of time and would not have become an employee of the [respondent].
Finally, the trial judge addressed a number of arguments raised by the respondent in defence. First, he rejected the proposition that the representations were truthful and that Mr. Johnston was simply giving an opinion as to future events. In his view, the representations were untruthful: "What was untruthful in the representations was the implied assurance in those representations that Mr. Johnston had made a sufficient study of the relevant facts, including the decision of senior management to make a financial commitment to the development of `Multiview' beyond the accounts receivable module, to be able to make the unqualified representations that he made" (pp. 417‑18). All Mr. Johnston had to say, in the trial judge's opinion, was that the feasibility study of the project had not yet been completed. Second, senior management of the respondent made no attempt to disclaim expressly any representations made to the appellant during the interview. Third, the trial judge rejected the defence put forward that the appellant, by his conduct subsequent to learning the situation of Multiview, had affirmed his contract of employment. In this respect, White J. distinguished the decision relied on by the respondent (Burrows v. Burke (1984), 49 O.R. (2d) 76 (C.A.)), and held that the appellant's conduct was not one of affirming the contract of employment but of a person in a difficult situation attempting to "minimize his damages" (p. 420). In any event, his conduct "did not amount to an explicit waiver of his right to claim damages in tort arising out of negligent misrepresentations made to him inducing the contract" (p. 421). In his view, whether the contract is affirmed or not, the cause of action in tort is preserved as it is external to the contract. And fourth, the trial judge rejected the respondent's defence of business necessity on the basis that there was no evidence of any such necessity which would exonerate the respondent from the negligent misrepresentations in issue.
Thus, White J. allowed the appellant's claim for negligent misrepresentation. He assessed the damages payable to the appellant at $67,224. This amount represented what was necessary, according to White J., "to put the [appellant] in the same position as he would have been if the negligent misrepresentation had not been made" (p. 414). It consists of $50,000 for loss of income, $252 for costs of obtaining a new employment, $11,972 for the loss on the purchase and sale of his home in the Ottawa area, and $5,000 in general damages for emotional stress.
B. Ontario Court of Appeal (1990), 74 O.R. (2d) 176
Finlayson J.A. (Griffiths and Arbour JJ.A. concurring) held that the trial judge made two errors in allowing the appellant's claim to succeed. Finlayson J.A. accepted that there was a "special relationship" between the appellant and the respondent so as to give rise to a duty of care of the sort described in Hedley Byrne, supra, and subsequent cases. However, he was of the view that, in the circumstances of the present case, White J. had erred in the manner in which he dealt with the issues of contractual disclaimer and of negligence.
With respect to disclaimer, Finlayson J.A. felt the trial judge had erred in requiring an express disavowal of any representations that may have been made during the pre‑contractual negotiations in order for a disclaimer argument to succeed, as it had in Hedley Byrne, supra, and in Carman Construction Ltd. v. Canadian Pacific Railway Co., [1982] 1 S.C.R. 958. In Finlayson J.A.'s opinion, something less than an express disclaimer could suffice (at p. 183): "it is a sufficient disclaimer if the contract contains terms which contradict or are inconsistent with the representations relied upon." He noted that the contract of employment, which the appellant read and understood, contained provisions relating to the possibility of reassignment and, more importantly, to the termination of employment on one month's notice. He found that such provisions were sufficient to constitute a valid disclaimer (at pp. 183 and 185):
In the case on appeal, the [appellant] stated that he would not have given up his secure position in Calgary for a move to Ottawa that was without permanence, and yet he signed a contract which provided him with no assurances respecting his place of employment or its tenure. To rely on Hedley Byrne, the negligent misrepresentation must have amounted to a warranty of job security and yet the contract of employment was surely a disclaimer of just that. No representations as to job security, whether based on performance or on job availability, could have survived the one‑month termination notice "without cause" contained in the contract.
. . .
The pre‑employment discussions in this case merged in the contract of employment. There is no separate tort, even accepting the trial judge's findings of innocent misrepresentation, because the terms of the contract amounted to a disclaimer within the meaning of Hedley Byrne. The references to the Multiview project did not amount to warranties or representations that were independent of the contract of employment and they cannot survive the written agreement.
According to Finlayson J.A., this disclaimer was fatal to the appellant's claim as it had the effect of negating any assumption of duty of care on the part of the respondent; a conclusion similar to the one reached in Hedley Byrne and Carman Construction, supra.
In any event, Finlayson J.A. was of the view that the trial judge had erred in his finding of negligent misrepresentation because he imposed a