Judgments

[1996] 2 F.C. 563

A-65-95

Norman Spinks (Appellant)

v.

Her Majesty the Queen (Respondent)

Indexed as: Spinks v. Canada (C.A.)

Court of Appeal, Strayer, Linden and McDonald JJ.A.—Ottawa, January 9 and March 21, 1996.

Public Service — Pensions — Appeal from dismissal of action against employer for provision of erroneous advice — Remedies available under Public Service Superannuation Act, s. 42(10), Public Service Superannuation Regulations, s. 17(1) to contributor receiving erroneous advice concerning counting of service — Appellant employed by Australian government prior to joining Atomic Energy Canada Ltd. — Nothing in sign-on interview, pension administration screening form, pension benefits booklet, suggesting could buy back Australian service — Where party advising, failure to divulge material information as misleading as positive misstatement, especially where information of specialized nature, easily available to advisor, but not to party advised — Advisor’s duty to advise competently, accurately, fully — “Advice” contemplating responsible “counselling”, requiring material information concerning pension options be divulged — Appellant received erroneous advice because of which failed to elect — Minister should exercise discretion in appellant’s favour under Regs., s. 17.

Crown — Torts — Appeal from dismissal of action against employer for negligent misrepresentation — Appellant not electing to buy back employment service with foreign government as nothing in sign-on interview, pension administration screening form, pension benefits booklet suggesting could do so — Appellant not contributorily negligent — No reason to believe staffing officer would not provide correct information — Employer-employee relationship entitling appellant to reasonably rely on information received — No damages yet as statutory relief still available — If Minister fails to exercise discretion in appellant’s favour within reasonable time, tort action will succeed.

Practice — Limitation of actions — Tort action may only be brought within six years of date damage discovered or reasonably ought to have been discovered — Appellant alleging employer negligently misrepresenting right to buy back employment service with foreign government — Running of limitation period not begun as no damages yet, statutory remedy still being available.

This was an appeal from dismissal of the appellant’s action against his employer. The appellant had worked for the Australian federal government for 20 years before commencing work for Atomic Energy of Canada Ltd. (AECL) in 1972. On his first day of work at AECL he attended a routine sign-on interview, the purpose of which was to inform new employees of matters pertaining to their employment, including the AECL pension plan and the options employees might have with regard to it. The appellant was given a form on which he could provide a summary of prior employment to facilitate an “election” to count prior employment service elsewhere as pensionable service under the Canadian federal government plan. None of the types of prior employment referred to in the instructions appeared to include employment with a foreign government. The appellant did not complete the employment summary and did not request an assessment of whether his prior employment was elective. The Trial Judge found that the appellant had entered the meeting believing that he could not buy back his Australian service, and he left the meeting with a clear understanding that such was in fact the case. A booklet given to him at the interview also made no clear reference to employment abroad as pensionable employment.

Public Service Superannuation Act, subsection 42(10) and Public Service Superannuation Regulations, section 17 provide remedies for contributors who, relying on erroneous advice as to the counting of service, fail to elect under the Act within the prescribed time.

The issues were whether the appellant received erroneous advice, and whether the Crown was tortiously liable for negligent misrepresentation.

Held, the appeal should be allowed.

Where one party is advising another, the failure to divulge material information may be just as misleading as a positive misstatement, especially where, as here, the information is of a specialized nature, which is easily available to the advisor but not to the party being advised. In such a context, the duty of an advisor is to advise competently, accurately, and fully. The word “advice” contemplates responsible “counselling” and requires that material information concerning pension options be divulged. It may be necessary for staffing officers to brief themselves on the background of new employees. The minimum standard of conduct was not met herein. It would have been attractive to, and affordable for, the appellant to have bought back his Australian service in 1972. The appellant was not told about his pension options. The appellant thus received “erroneous advice” because of which he failed to elect under the Act. The Minister should reconsider his decision in accordance with the law as expressed herein and exercise his discretion pursuant to section 17 as to whether the appellant should be allowed to buy back his Australian service at the 1972 cost plus interest.

There are five general requirements that must be met before liability will be imposed for negligent misrepresentation. (1) There must have been a duty of care owed to the claimant. To find a duty of care, there must have been a special relationship between the parties. Foreseeable reliance is sufficient to create a special relationship in most cases. The appellant was in a position of complete reliance upon his employer for the pension information he needed. He was a new employee. He needed information about his pension rights before he could choose his options wisely. The appellant did not have that information and his employer did. The appellant had only to demonstrate that the staffing officer could reasonably have foreseen economic loss to appellant. The risk of economic loss would have been reasonably foreseeable to anyone. The reasonable foresight of reliance, the employment relationship, the personnel management manual, the existence of sign-on interview, the superannuation booklet, and the instructions on the pension screening form suggested that a duty of care existed in the circumstances and that an employee could reasonably rely upon the employer for accurate and full information.

(2) The representation must be untrue, inaccurate or misleading. A person may be “misled” by a failure to divulge as much as by advice that is inaccurate or untrue. The AECL staffing officer failed to disclose an important piece of information, and this failure misled the appellant. The pension administration screening form, by specifically referring to other forms of employment, but not including employment with a foreign government, could only suggest that such was not eligible prior employment. In addition, the booklet given to the appellant disclosed nothing about the possibility that his Australian service might be bought back. The information given to the appellant by his employer therefore constituted a misleading misrepresentation.

(3) The defendant must have acted negligently in making the misrepresentation. The standard of care is that of the reasonable person. Where an advising person possesses or can easily obtain important and relevant information, and where this advising person fails to divulge this information in circumstances where economic loss is reasonably expected, the standard of care is breached. Information concerning pension election options is not reasonably available to the average employee. And where the employee is of a special class with regard to such elections, the information becomes less accessible still. The failure to inform breached the standard of care in the circumstances. The duty is one of reasonable disclosure, and what is reasonable varies with the circumstances. It was within the competence of the respondent to state clearly the situation concerning the pension options of the appellant, but that was not done. That failure was therefore negligent.

(4) The plaintiff must reasonably have relied upon the representation. The appellant relied on his employer for the pension information uniquely in its possession, and upon the pension administration process set up by the employer to inform him of his options, and to exercise a reasonable degree of care in doing so. This reliance was reasonable. The appellant was not responsible for finding out if he could buy back his Australian pension. An employee cannot be expected to know that employment in another country could be counted towards a Canadian pension. The material contained no hint of that and suggested the opposite. Few, if any employees so situated would even know the questions to be asked in order to elicit information relevant to their circumstances.

(5) Damage must have ensued. No damage has yet materialized. The Minister is still in a position to provide a remedy under the statutory provisions.

The appellant was not contributorily negligent. The information in question was of a specialized nature. Nothing in the screening form, the interview or the pension booklet given to the appellant suggested that the appellant’s prior service in Australia could be accommodated under the Canadian scheme. The appellant was not irresponsible about looking after his own interests. There was no reason for concern that the staffing officer would not provide correct information. There was a special relationship, that of employer-employee, between the parties, which would enable the plaintiff to reasonably rely on the information received. The appellant did not bear the burden of clarification. He had every reason to rely on his employer, who should have informed him of those rights.

A tort action may only be brought within six years of the date that the damage was discovered or reasonably ought to have been discovered. The limitation period has not begun to run because no damage has yet occurred, as everything can be remedied by the Minister’s exercise of discretion in appellant’s favour.

STATUTES AND REGULATIONS JUDICIALLY CONSIDERED

Public Service Superannuation Act, R.S.C., 1985, c. P-36, s. 42(10).

Public Service Superannuation Regulations, C.R.C., c. 1358, s. 17(1).

CASES JUDICIALLY CONSIDERED

APPLIED:

Hedley Byrne & Co., Ltd. v. Heller & Partners Ltd., [1963] 2 All E.R. 575 (H.L.); Donoghue v. Stevenson, [1932] A.C. 562 (H.L.); Fletcher v. Manitoba Public Insurance Co., [1990] 3 S.C.R. 191; (1990), 71 Man. R. (2d) 81; 74 D.L.R. (4th) 636; 5 C.C.L.T. (2d) 1; [1990] I.L.R. 1-2672; 116 N.R. 1; 44 O.A.C. 81; Queen v. Cognos Inc., [1993] 1 S.C.R. 87; (1993), 99 D.L.R. (4th) 626; 45 C.C.E.L. 153; 14 C.C.L.T. (2d) 113; 93 CLLC 14,019; 147 N.R. 169; 60 O.A.C. 1; Rothwell v. R. (1985), 10 C.C.E.L. 276; 2 F.T.R. 6 (F.C.T.D.); Campbell v. Teachers’ Retirement Fund (Alta.) (1993), 147 A.R. 185; 110 D.L.R. (4th) 400; 15 Alta. L.R. (3d) 305 (Q.B.); Lehune v. Kelowna (City), [1993] B.C.J. No. 2451 (S.C.); affd (1994), 98 B.C.L.R. (2d) 135; 49 B.C.A.C. 313; 5 C.C.P.B. 111; 80 W.A.C. 313 (C.A.).

REFERRED TO:

Just v. British Columbia, [1989] 2 S.C.R. 1228; (1989), 64 D.L.R. (4th) 689; [1990] 1 W.W.R. 385; 41 B.C.L.R. (2d) 350; 41 Admin. L.R. 161; 1 C.C.L.T. (2d) 1; 18 M.V.R. (2d) 1; 103 N.R. 1; Couture v. The Queen, [1972] F.C. 1137 (T.D.); affd (1974), 2 N.R. 494 (F.C.A.); Ministry of Housing and Local Government v. Sharp, [1970] 1 All ER 1009 (C.A.); Windsor Motors Ltd. v. District of Powell River (1969), 4 D.L.R. (3d) 155; 68 W.W.R. 173 (B.C.C.A.); Gadutsis et al. v. Milne et al., [1973] 2 O.R. 503; 34 D.L.R. (3d) 455 (H.C.); Stein et al. v. “Kathy K” et al. (The Ship), [1976] 2 S.C.R. 802; (1975), 62 D.L.R. (3d) 1; 6 N.R. 359; Merban Capital Corp. v. Minister of National Revenue, [1989] 2 C.T.C. 246; (1989), 89 DTC 5404; 100 N.R. 383 (F.C.A.); Swiss Bank Corp. v. Air Canada, [1988] 1 F.C. 71 (1987), 44 D.L.R. (4th) 680; 83 N.R. 224 (C.A.); affg [1982] 1 F.C. 756 (1981), 129 D.L.R. (3d) 85 (T.D.); 392980 Ontario Ltd. v. City of Welland et al. (1984), 45 O.R. (2d) 165; 6 D.L.R. (4th) 151; 24 M.P.L.R. 171 (H.C.); Sirois and Therrien v. New Brunswick Teachers Federation (N.B.T.F.) and L’Association des Enseignants Francophones du Nouveau-Brunswick (A.E.F.N.B.) (1984), 56 N.B.R. (2d) 50; 8 D.L.R. (4th) 279; 146 A.P.R. 50; 28 C.C.L.T. 280 (Q.B.).

AUTHORS CITED

Weinrib, Ernest Joseph. The Idea of Private Law, Cambridge, Mass.: Harvard University Press, 1995.

APPEAL from dismissal of action against employer for “erroneous advice” concerning the counting of prior employment with a foreign government towards pensionable service with the Canadian government within Public Service Superannuation Act , subsection 42(10), and Public Service Superannuation Regulations, subsection 17(1) or for negligent misrepresentation (Spinks v. R. (1995), 7 C.C.P.B. 63; 90 F.T.R. 129 (F.C.T.D.)). Appeal allowed.

COUNSEL:

Dougald E. Brown for appellant.

Geoffrey S. Lester for respondent.

SOLICITORS:

Nelligan, Power, Ottawa, for appellant.

Deputy Attorney General of Canada, for respondent.

The following are the reasons for judgment rendered in English by

Linden J.A.: Two main issues are raised in this appeal. The first concerns whether Atomic Energy of Canada Ltd. (AECL) gave “erroneous advice” as per subsection 42(10) of the Public Service Superannuation Act[1] and subsection 17(1) of the Public Service Superannuation Regulations.[2] The second is whether AECL is liable in tort for negligent misrepresentation as a result of certain conduct that occurred during the appellant’s employment sign-on interview.

FACTS

The appellant, Norman Spinks, worked for about 20 years as a nuclear engineer for the Australian Atomic Energy Commission (AAEC), a division of the Australian federal government. In 1967, he came to Canada as one of several AAEC employees seconded to AECL. He spent about two years here on secondment, and then returned to Australia in 1970.

Soon after his return, the Australian government shelved its plans for a nuclear power program, whereupon Mr. Spinks applied to AECL for permanent employment. He was hired, and emigrated to Canada in 1972. At the time, Mr. Spinks was 38 years old, married, and had four children. He has worked for AECL since that time and continues to do so to this day.

Upon arriving on his first day of work at AECL on May 29, 1972, the appellant attended a sign-on interview. The interview was a routine procedure, the purpose of which was to inform new employees about matters pertaining to their employment, including the AECL pension plan and the options employees might have with regard to it. To facilitate this latter, the appellant was presented a pension administration screening form. The form is uncomplicated, and one page in length. At the top are printed the following instructions:

A.   THE EMPLOYING AGENCY MUST COMPLETE PART I AND FORWARD FORM TO EMPLOYEE

B.   THE EMPLOYEE SHALL COMPLETE PART II AND RETURN IMMEDIATELY TO HIS PERSONNEL OFFICER

C.   THE PERSONNEL OFFICER SHALL ENSURE THAT ALL INFORMATION IS COMPLETE AND ACCURATE AND SHALL FORWARD WITH REQUIRED DOCUMENTATION TO THE SUPERANNUATION BRANCH.

Part I contains provisions for basic personal and employment information and was completed by a personnel officer according to instruction A. Part II, “to be completed by employee,” sought marital and family information, and more importantly, a summary of prior employment. Most of the required marital and family information was supplied on the form by AECL, but the employment summary section was handed to the appellant in blank condition, as contemplated.

The employment summary section was designed to facilitate pension elections. This was a process where an employee was able to “elect” to count prior employment service elsewhere as pensionable service under the Canadian federal government plan. An employment summary supplied by the employee was meant to give the employer the information it required to assess whether a given term of prior employment was elective. This assessment would be carried out if requested by an employee.

Heading the section was an instruction which reads:

EMPLOYMENT SUMMARY—INCLUDE IN CHRONOLOGICAL ORDER (1) ALL FORMER PERIODS OF EMPLOYMENT WITH FEDERAL GOVERNMENT; (2) EMPLOYMENT WITH ANY PROVINCIAL OR MUNICIPAL GOVERNMENT OR PRIVATE BUSINESS FOR WHICH THERE WAS A PENSION PLAN; (3) R.C.M.P. AND MILITARY SERVICE. IN EACH CATEGORY SPECIFY TYPE OF BENEFIT RECEIVED ON TERMINATION WHETHER IMMEDIATE ANNUITY, DEFERRED ANNUITY, RETURN OF CONTRIBUTIONS, GRATUITY, ETC.

It will be noted that none of the types of prior employment referred to would on its face appear to include employment with the government of another country. On the questionnaire several lines were made available on which to list and describe periods of former employment. To the left of the lines was a column where any of the prior employment periods listed could be checked. Checkmarks in this column, in conjunction with two boxes at the bottom of the section, would signal to the employer whether the employee wanted an election inquiry for any of the checked periods of employment. The instructions pertaining to the two boxes read respectively: “I am interested in knowing the cost of electing for the service checked in the left hand column above,” and “I am not interested in knowing the cost of electing for the service(s) indicated above.”

According to the evidence accepted by the Trial Judge [(1995), 7 C.C.P.B. 63], the appellant was given this partially completed screening form during the sign-on interview. He took the form, filled in certain of the missing pieces of information (the maiden name of his wife and her birth date, and the name of his fourth child and his birth date), signed it, and handed it back to the personnel officer. However, he did not complete any aspect of the employment summary section. No prior employment was listed, and no checkmarks were placed in the left hand column. The boxes pertaining to election inquiries were likewise left empty.

The Trial Judge made the following findings of fact as to the appellant’s state of mind during the sign-on interview [at page 67]:

Mr. Spinks recalls that a meeting took place on May 29, 1972, at which time the screening form was presented to him, but he does not recall what was said at the meeting. He testified that he entered the meeting believing he could not buy back his Australian service and he left the meeting with a clear understanding that he could not buy back his Australian service. I am satisfied that Mr. Spinks was concerned about the amount of his future pension since he would be unable to work long enough with AECL to obtain the maximum pension available. It would have been attractive and affordable for him to buy back his Australian service in 1972. I found Mr. Spinks to be forthright, honest and credible. It certainly is very plausible that he would not recall the details of a meeting 22 years ago. AECL was unable to determine which of its employees participated in the meeting.

Also at the interview, the appellant was given a booklet entitled “Your Superannuation Plan: An Explanation of the Public Service Superannuation Act.” The booklet stated that its purpose is to “acquaint” new employees with the Public Service pension. Under the subtitle “Obtaining Maximum Benefits,” the booklet briefly explained the notion of elective service:

Each continuing year of employment in the Public Service for which you make ordinary contributions is, of course, a year of pensionable service. In addition, if, prior to becoming a contributor under the Act, you had one or more periods of full-time employment, either in the Public Service or with some other employer, you may wish to obtain pension credit for that service, and it may well be possible for you to do so.

Such periods of prior service, if they are recognized under the Act, are considered to be “elective”. As the name implies, they are periods of service for which you may make a special election, in order to count them as periods of pensionable service.

Five types of elective service were then listed and described. Two of these are of interest here:

1. Prior Public Service

You may elect to count virtually any prior service in the Public Service during which you were not a contributor, or for which contributions were made and later refunded. The only kinds of prior public service which cannot be counted are certain kinds of part-time service, and, unless you were a contributor, periods of less than ninety days.

…

4. Employment Outside the Public Service

If you were previously employed with an employer who had a pension plan approved by the Minister, you may be eligible to count any part of that employment during which you were subject to the pension plan. Your eligibility to count this “pensionable employment” will depend upon whether or not it was “immediately prior”, as defined in the Act. If the employment terminated more than six months before you entered the Public Service, special consideration would be required to determine whether or not the service could be considered “immediately prior”.

Again there is no clear reference here to employment abroad as pensionable employment. The Trial Judge accepted the appellant’s testimony that he read this booklet in its entirety. On the basis of this evidence, the appellant believed he could not buy back his Australian service, and, hence, did not do so.

Fourteen years later, in 1986, the appellant, who was by now a long-standing employee of AECL, was on a coffee break with a fellow employee. This employee had come from England some years earlier, and, to the appellant’s surprise told him that he had purchased back certain of his years of service in England. The appellant, shocked by the discovery that he may have all the while been wrong about his pension options, inquired into the cost of buying back his Australian service. He was told that the buy back would cost $201,697.48. Due to the large amount involved, the appellant did not take any further action at that time.

In 1989, the appellant again raised the election issue with AECL, claiming he was misled about his pension options when he first arrived in Canada. The Superannuation Branch responded by stating it was not possible to provide him with the opportunity to purchase prior service at prior salary rates. The appellant then took the matter directly to the President of AECL, who likewise denied his request for relief. In a memo of February 4, 1991, the President stated:

… the Superannuation Act would allow for a buy back of this service at this time using your 1972 salary only if you had been given “erroneous advice” at the time you were hired … “erroneous advice” does not include the absence of advice.

The appellant then brought this action on the two alternative bases described at the outset.

ANALYSIS

I.          ERRONEOUS ADVICE

The appellant argues he was given “erroneous advice” according to the relevant provisions of the Public Service Superannuation Act and Regulations. Subsection 42(10) of the Public Service Superannuation Act reads as follows:

42. …

(10) The Governor in Council may make regulations prescribing, in the case of a contributor who in the opinion of the Minister was one of a class of persons who, pursuant to erroneous advice received by one or more persons of that class, from a person in the Public Service whose ordinary duties included the giving of advice respecting the counting of service under this Act or the Superannuation Act, that a period of service of such a person before the time he became a contributor thereunder could not be counted by him under that Act, failed to elect under that Act within the time prescribed therefor to pay for that service, the circumstances under which and the manner and time in which the contributor may elect to pay for that service, and the circumstances under which and the terms and conditions (including conditions respecting interest) on which any election made by him under paragraph 6(1)(b) to pay for that service as a period of service described in clause 6(1)(b)(iii)(K), shall be deemed to have been made by him under this Act or the Superannuation Act, as the case may be, within the time prescribed therefor by that Act.

Subsection 17(1) of the Public Service Superannuation Regulations, passed pursuant to this subsection, reads:

17. (l) The provisions of this section apply only to a contributor who in the opinion of the Minister was one of a class of persons who, pursuant to erroneous advice received by one or more persons of that class, from a person in the Public Service whose ordinary duties included the giving of advice as to the counting of service under the Act or the Superannuation Act, that a period of service of such a person before the time he became a contributor thereunder could not be counted by him under the said Act, failed to elect under the said Act within the time prescribed therein to pay for that service.

To avail oneself of the remedy offered by these provisions, therefore, a contributor must “in the opinion of the Minister” be one of a class of persons who received erroneous advice concerning the “counting of service.” That person, furthermore, must have failed to elect under the Act within the proper period of time because of the erroneous advice that was given to him.

The primary question raised by these provisions concerns the meaning of the phrase “erroneous advice” and whether the appellant was given erroneous advice in the circumstances of his sign-on. The Trial Judge agreed with the Minister and held that “erroneous advice” contemplates a positive misstatement, and that no such misstatement was made to the appellant. He stated [at page 70]:

… Insufficient advice is not erroneous advice. While there may be some circumstances where erroneous advice would include insufficient advice, here the defendant provided information to the plaintiff to put him on notice that he should make enquiries about his previous service with the Australian government. It is insufficient, despite the arguments of counsel for the plaintiff, to have simply left an impression with the plaintiff about his ability to elect credits for his Australian service, in order for there to be erroneous advice. There must be a positive misstatement or an inference of a positive misstatement. Mr. Spinks made no such allegation in his testimony. I am unable to draw any inferences of a positive misstatement by an AECL employee from the facts of the meeting described by Mr. Spinks.

With respect, this was an error of law. The phrase “erroneous advice” should not be so narrowly construed, especially in remedial legislation such as this. It seems to me that where one party is advising another, the failure to divulge material information may be just as misleading as a positive misstatement. Missing information can be just as harmful as mistaken information. Both types of advice are equally erroneous. This is especially the case where, as here, the information in question is of a specialized nature, which is easily available to the advisor but not easily obtainable by the party being advised. In such a context, the duty of an advisor is to advise competently, accurately, and fully.

It should be noted that department officials are specifically charged with the duty to advise new employees about their pension rights. To begin with, the personnel management manual gives very clear instructions on the administration of the Public Service pension, and specifically charges each government department with the responsibility of:

… providing a counselling service to employees on all superannuation matters, with particular reference to elections, contributions required during extended periods of leave without pay, benefit entitlements and options, significant amendments to the Act, Regulations, Reciprocal Agreements, etc.

Furthermore, AECL officers were specifically trained in pension administration matters, and the sign-on interview was specifically set up for, among other things, advising new employees of their pension options. In my view, the word “advice” as used in the legislation, contemplates responsible “counselling” that requires that material information concerning pension options be divulged to those whom such information may reasonably affect. This is not an onerous duty for personnel officers to discharge. It simply means telling employees what their pension options are. It may require asking new employees a few questions. It may be necessary to brief oneself on the backgrounds of prospective interviewees. One may have to consult material that is reasonably accessible to the interviewers.

This minimum standard of conduct was not met in the present circumstances. Accepting the Trial Judge’s findings of fact, one can come to no other reasonable conclusion. The Trial Judge found that it would have been attractive to and affordable for the appellant to buy back his Australian service in 1972. The Judge also found that the appellant entered the sign-on interview with a sense that he could not buy back his Australian service. The Judge also found that the appellant left the interview with that impression confirmed. The correct information was available to the personnel officer on a list of authorized pensions. The only reasonable inference I can draw from these facts, an inference the Trial Judge failed to draw, was that the staffing officer failed to tell the appellant that his status as a prior employee of the Australian Public Service could be accommodated under the pension election system. In short, the appellant was simply not told about his pension options, which was one of the key reasons for the interview. It can be said that to omit is to err. He was, thus, erroneously advised. He received “erroneous advice”. And because of that advice, the appellant failed to elect under the Act within the proper period of time.

The Minister should, therefore, reconsider his decision according to the correct view of the law as expressed in these reasons and should forthwith exercise his discretion pursuant to subsection 17(1) concerning whether or not the appellant should be allowed to buy back his Australian service at the original 1972 figure, plus the usual interest that would be charged in cases such as this where the Minister favourably exercises his discretion under the Regulations.

II.         NEGLIGENT MISREPRESENTATION

The second issue raised in the alternative is whether the Crown is tortiously liable for negligent misrepresentation. Tort liability for negligent misrepresentations was first established in the landmark case of Hedley Byrne & Co., Ltd. v. Heller & Partners Ltd.[3] Prior to that, liability for misrepresentation was limited to circumstances involving a contractual or fiduciary relation between the parties, or to situations where fraud could be proved. Hedley Byrne changed all this, however, and espoused the proposition that economic loss resulting from careless words can lead to tort damages, without any need for contractual, fiduciary or fraudulent circumstances.

The case, however, left certain questions unanswered. One question left open was whether the duty it espoused was based on the Donoghue v. Stevenson [[1932] A.C. 562 (H.L.)] neighbour principle, or whether it was grounded on something else.

Canadian courts have indicated that the duty to take care concerning what one says is very similar to the neighbour principle, but with a few additional limitations. This view is reflected in the recent case of the Supreme Court of Canada, Fletcher v. Manitoba Public Insurance Co.,[4] where Wilson J. stated:

English and Canadian courts have applied Lord Atkin’s “neighbour principle” to many types of relationships, including those involving the communication of information. There is now ample authority for the proposition that reasonable reliance by a person on information provided by someone else can ground a duty of care at common law that binds the provider of information.[5]

In harmony with this view is the case of Queen v. Cognos Inc.,[6] where Iacobucci J. definitively summed up the Canadian jurisprudence on negligent misrepresentation. In the case, he outlined five general requirements that must from now on be met before liability will be imposed for negligent misrepresentation:

… (1) there must be a duty of care based on a “special relationship” between the representor and the representee; (2) the representation in question must be untrue, inaccurate, or misleading; (3) the representor must have acted negligently in making said representation; (4) the representee must have relied, in a reasonable manner, on said negligent misrepresentation; and (5) the reliance must have been detrimental to the representee in the sense that damages resulted.[7]

I will review each of these requirements in turn.

Before addressing them, however, I wish to note that this case does not raise the issue of whether the impugned activity was of a policy or operational nature.[8] We are dealing with the manner in which certain government practices, set out in department manuals, were implemented. The practices were of an operational nature and are subject to judicial evaluation. Furthermore, there have been numerous cases deciding that negligent advice given by a government agency may yield tort liability.[9] It should also be mentioned that this Court will interfere with factual findings only where there has been a palpable and overriding error, such as where evidence has been ignored or badly misconstrued.[10] The Court may also draw its own inferences from undisputed facts where credibility is not in issue.[11]

A.        THE ELEMENTS OF TORT LIABILITY FOR NEGLIGENT MISREPRESENTATION

1.         Duty of Care

The Court must first find that a duty of care to the claimant arose in the circumstances. To find a duty, there must have been a “special relationship” between the parties. Though the elements of this special relationship have been debated over the years, the law is pretty much settled that foreseeable reliance is sufficient to create a special relationship in most cases.[12] The recognition that reliance is a key factor in assessing whether a duty of care exists is a welcome development. It is now unnecessary, as counsel for the respondent suggested, to revert to rigid contract-like notions of assumption of responsibility, undertaking or intention to be bound, that so confused this area of the law prior to Cognos.

A duty of care clearly was owed to the appellant in the present circumstances. Mr. Spinks was in a position of complete reliance upon his employer for the pension information he needed. He was a new employee. He needed information about his pension rights before he could choose his options wisely. The employer realized or should have realized this. He did not have that information and his employer did. In these circumstances, he relied on his employer, this reliance was reasonable, his employer foresaw or should have foreseen this, and, therefore a duty of care arose.

The Trial Judge came to a different conclusion on this matter, and stated [at page 72]:

Mr. Spinks has to demonstrate that the staffing officer of AECL who signed him on at the meeting had knowledge of the risk of economic loss, and the staffing officer knew that Mr. Spinks was relying on him for advice. It is only then that a duty to enquire and advise could arise. There is no evidence that the staffing officer had knowledge of the risk of economic loss and accordingly the duty to advise did not arise. Mr. Spinks did not rely on the response of the staffing officer of AECL until he was informed in 1989 that there was a responsibility on the staffing officer to counsel. There is also no evidence to show voluntary assumption of responsibilities by the staffing officer. Southey J. in 392980 Ontario Ltd. v. Welland (City) (1984), 45 O.R. (2d) 165 (H.C.) at p. 172 states that there does not have to be a request of a representor for the Hedley Byrne principle to apply. However, in the circumstances of this case where the government booklet specifically instructs the employee to make an enquiry to the employee’s personnel office, in my view, 392980 Ontario Ltd., supra, can be distinguished. There is a responsibility on the part of the staffing officer to provide counselling where advice is demanded.

These conclusions, with respect, are incorrect in law. The appellant did not have to demonstrate “knowledge of the risk of economic loss,” only reasonable foresight of economic loss by the staffing officer in these circumstances. The risk of economic loss was reasonably foreseeable to all. Neither, since Cognos, did the appellant have to demonstrate any “voluntary assumption of responsibilities” by the staffing officer. Furthermore, the staffing officer bore a greater responsibility than simply to advise if requested.[13] He bore the responsibility to advise competently and to take care in providing that advice, whether or not there was a request for advice.

There are several additional factors which support the existence of a duty here. To begin with, the appellant was an employee of the respondent. He required from the respondent certain information needed by him as a new employee. Several cases, of which Cognos[14] is one, have decided that, in such circumstances, the employer owes a duty to take care in providing that information. In Cognos, the appellant was interviewed for an employment opportunity. In the interview, the appellant was told that certain projects would be the core of his responsibility if he were to gain the position, and that these projects would last for a projected two years or more. The appellant was chosen for the position. He accepted the company’s employment offer, and moved his family across the country. Soon after beginning the new employment, however, he was alarmed to learn that, contrary to the impression given him at the interview, funding had not been approved for the projects for which he was hired. The funding, in fact, was never approved. Difficulties ensued, the appellant lost the job, and the appellant sued for damages. The Supreme Court of Canada found the company liable for damages for negligent misrepresentation to its employee.

The Cognos case suggests that an employment relationship gives rise to a special relationship on which liability may be found. This applies to contexts where the employer conveys information to the employee. Information received by an employee from an employer may have a strong impact on decisions an employee will make, and the courts now require that an employer take care in such contexts. The fact that the employer is a government body does not make a difference. The key question is whether the employee reasonably relied on the employer for the information in question, and whether that could be reasonably foreseen. In any case, whether the employer is private or public, the employer has a duty to take care. This requirement is sensible.

Another consideration for holding that a duty was owed is that the obligation was undertaken as department policy. The personnel management manual, which was written for the administration of the Public Service pension, clearly states that government departments are charged with the responsibility of “providing a counselling service to employees on all superannuation matters, with particular reference to elections.” So too, the existence of the sign-on interview procedure also supports the conclusion that a duty to convey information carefully existed. One purpose of the procedure was to inform employees of pension options they might have. This was one of the precise functions for which the staffing officer was provided. Anyone could foretell that if poor advice was given, negative financial consequences could follow. I note further that the information relevant to the appellant’s circumstances was uniquely in the possession of the staffing officer, and not readily available to the employee. The superannuation booklet that was distributed also suggests that a duty of care existed.[15] Similarly, the instructions on the screening form, one of which specifically instructs that “THE PERSONNEL OFFICER SHALL ENSURE THAT ALL INFORMATION IS COMPLETE AND ACCURATE,” point to a duty of care.

Each of these factors—the reasonable foresight of reliance, the employment relationship, the personnel management manual, the existence of the sign-on interview, the superannuation booklet, and the instructions on the pension screening form—suggest that a duty of care existed in the circumstances and that an employee could reasonably rely upon the employer for accurate and full information.

2.         Untrue, Inaccurate or Misleading Representation

The second requirement is that the representation must be untrue, inaccurate or misleading. The Trial Judge found that no misleading representation was made to the appellant. He stated [at page 73]:

[I]n my view, there was no misleading representation made by AECL or its staffing officer. The most that can be said about the meeting and the screening form is that they reinforced the impression in Mr. Spinks’ own mind that an election could not be made in respect of service in the Australian public service.

These conclusions, with respect, were wrong in law. A person may be “misled” by a failure to divulge as much as by advice that is inaccurate or untrue. In the same way that absent information can be “erroneous”, as discussed above, missing information can be misleading. In Fletcher, Wilson J. found a public insurer liable for having inadequately advised the plaintiff about the insurance options available. She stated:

The insurer’s duty is to provide sufficient timely, clear and accurate information to its customers about the various options so that they can make informed choices about what level of risk beyond that required by law they want to insure themselves against.[16]

Wilson J. then found that the insurer’s communication was “insufficiently clear” to discharge its duty of care.[17] She stated:

I conclude therefore that MPIC failed in its duty to the appellants. MPIC’s acts or omissions deprived Mr. Fletcher of the relevant information initially and, given that he was subsequently misled by the renewal form and flyer, he was never in a position to make an informed choice about this optional coverage.[18]

Consequently, the duty may be breached not only by positive misstatements but also by omissions, for they may be just as misleading.

This view was echoed in Cognos, where one issue concerned whether an “implied” representation could give rise to tort damages. The representation which was said to be “implied” was that project funding had been secured. About this specific matter the employer was silent. In other words, the case turned on whether an omission to convey an important piece of information—project funding—could yield liability. Iacobucci J. decided it could and stated:

In my opinion, a flexible approach to this issue is preferable. It is arbitrary and premature to declare as a general rule that nothing less than express or direct representations can succeed under the Hedley Byrne doctrine. Undoubtedly, there will be cases such as the present one where the surrounding circumstances are such that it makes little difference, if any, how one characterizes the manner in which the representation is made, and where it would be unjust to deny recovery simply because the representation relied on is said to be implied rather than express. It is unnecessary for me to set out in detail the circumstances in which so-called implied representations can be enough to sustain an action in tort for negligent misrepresentation. I prefer leaving this task to trial judges dealing with specific factual situations.[19]

In the present circumstances, it could be said that it was implied that there was no right of buy-back. The Trial Judge found that the appellant entered and left the sign-on interview with an impression that he could not buy back his Australian service. The only reasonable factual inference one can draw from these findings is that the appellant was not told of his options, or he would have exercised his right to buy back his Australian service. The AECL staffing officer failed to disclose an important piece of information, and this failure misled the appellant. The advice was therefore misleading and misrepresented the options available to the appellant. The pension administration screening form, by specifically referring in the “employment summary” part to other forms of employment but not including employment with the government of another country, could only suggest to him that such was not eligible prior employment. In addition, the booklet given to the appellant disclosed nothing about the possibility that his Australian service might be bought back, something that was possible since 1955. The information given to the appellant by his employer, therefore, constituted a misleading misrepresentation.

3.         Standard of Care

The third requirement simply states that the defendant must have acted negligently in making the misrepresentation. The defendant, in other words, must have breached the standard of care required in this context—that of the reasonable person. The standard of care applicable to these cases was discussed by Iacobucci J. in Cognos. He stated:

The applicable standard of care should be the one used in every negligence case, namely the universally accepted, albeit hypothetical, “reasonable person”. The standard of care required by a person making representations is an objective one.[20]

In the present context, the defendant employer should have perceived and appreciated the risks of improperly informing the plaintiff about his pension election options. The employer, in fact, was perhaps the only party who could appreciate these risks. To begin with, information concerning pension election options is not of a type reasonably within the grasp of the average employee. And where the employee is of a special class with regard to such elections, the information naturally becomes less accessible still.

The appellant’s unique needs should have been recognized by his employer and by the staffing officer. The pension administration form was partially completed by the employer, who knew of the appellant’s previous work experience. The appellant still speaks with an Australian accent and surely did in 1972. The staffing officer should have known of the need to inform the appellant of his rights as a former employee of the Australian government. This data was available to him on the list authorized by the Minister. The failure to inform breached the standard of care in the circumstances. It fell below the standard which would have been exercised by a reasonable person.

I might emphasize that the standard of care here is that which is reasonably expected of a staffing officer in the circumstances. I am not suggesting that the failure to divulge every bit of irrelevant and arcane information will breach the standard of care. An advisor’s responsibility is not one of complete or perfect disclosure. Trivia need not be mentioned. The duty rather, is one of reasonable disclosure, and what is reasonable varies according to circumstances. The mere failure to divulge is but one factor among others to be considered in deciding whether there has been negligence. This point of view was affirmed in Cognos, where Iacobucci J. stated:

There are many reported cases in which a failure to divulge highly relevant information is a pertinent consideration in determining whether a misrepresentation was negligently made.[21]

Thus, where an advising person possesses or can easily obtain important and relevant information, and where this advising person fails to divulge this information in circumstances where economic loss is reasonably expected, the standard of care will have been breached. One of the key questions, here, is whether the supplier of information should have known that the information given or withheld was misleading. Mr. Justice Strayer (as he then was), explained in Rothwell v. R.,[22] concerning whether it was within the competence of the defendant and its officers in that case to state the situation clearly:

This representation was clearly negligent because it was easily within the competence of the defendant and his officers to state the situation clearly. It was also foreseeable that a contributor would be confused by the information provided to him. While the defendant contends that the onus was on the plaintiff to ask for clarification, it appears to me that the meaning which the plaintiff attributed to these communications was one which appeared sufficiently clear that it was not unreasonable for him to assume he understood them.[23]

I am of the opinion that, in this case, it was well within the competence of the respondent, with little effort and thought, to state clearly the situation concerning the pension options of the appellant. That was not done. That failure was, therefore, negligent.

4.         Reasonable Reliance

The fourth requirement is that the plaintiff must reasonably have relied upon the representation. This is merely the universal requirement of proof of causation in all negligence cases, for without a causal nexus, there is no valid basis for imposing liability.[24] In dealing with this issue, the Trial Judge concluded that the evidence did not support the conclusion that the plaintiff relied upon the defendant. He stated [at page 75]:

I also note that Mr. Spinks did not testify that he was relying on the advice of the staffing officer at the meeting in 1972 and he only learned of the right to counsel in 1989 so he cannot say retroactively that he relied on the personnel officer.

With respect, the Trial Judge has misconstrued the evidence of the appellant’s situation. Looking at the evidence as a whole, one cannot avoid the conclusion that the appellant clearly relied on his employer for the pension information uniquely in its possession. He also relied upon the pension administration process set up by the employer to inform him of his options, and to exercise a reasonable degree of care in doing so. It must have been obvious to anyone that the new employee was at the mercy of the employer with regard to information about pension rights. No other conclusion could be drawn in these circumstances. This reliance, in my view, was reasonable.

I do not agree with the contention that the appellant in these circumstances bore the responsibility to find out if he could buy back his Australian pension. The appellant was in a unique situation, and this very uniqueness fuels the respondent’s duty to inform the appellant of its ramifications. An employee, in my mind, cannot be expected to know that employment in another country could be counted towards a Canadian pension. The material given to him contained no hint of that. Indeed, it suggested the opposite. Few, if any employees so situated would even know to ask the proper questions to elicit the information relevant to their circumstances. To suggest otherwise would be to impute a highly specialized knowledge on immigrant employees, and to effectively relieve staffing officers of their responsibility to inform these new employees.

5.         Resulting Damage

The final requirement is that damage must have ensued. There can be no liability for negligence unless the plaintiff has suffered some loss as a result. In the present case, because of the unusual situation, no damage has yet materialized. The Minister is still in a position to provide a remedy under the statutory provisions above. If the Minister exercises his discretion to declare the appellant one of the class of persons to whom erroneous advice was given, and gives the appellant the right to buy back his pension at the original price, no damage will have occurred, and this tort action will fail. However, if the Minister does not exercise this right in a reasonable time, the damage will occur and this tort action will succeed.

B.        CONTRIBUTORY NEGLIGENCE

Counsel for the respondent argued that, should there be tort liability for negligent misstatement, this Court should also find that the appellant was contributorily negligent. While it is now established that contributory negligence is available in cases like the present as a partial defence to liability,[25] I do not believe that this is a case where the defence can apply. The information in question in this case was of a very specialized nature. Nothing in the screening form, in the interview or in the pension booklet given to the appellant suggested that the appellant’s prior service in Australia could in any way be accommodated under the Canadian scheme. He understandably relied totally on the employer to inform him of this. He was at the employer’s mercy. He had no reason to second guess the employer. I am not convinced, therefore, in these circumstances, that the appellant was irresponsible about looking after his own interests, nor that he was contributorily negligent. I find support for my view in three cases cited to the Court.[26] In Campbell, supra, the plaintiff was held not contributorily negligent for having relied upon the advising party, for he had “no reason for concern that the Fund’s employee would or might not provide accurate information.” Similarly, here, there was no “reason for concern” that the staffing officer would not provide correct information. In Lehune, supra, the Trial Judge found the plaintiff contributorily negligent but this was reversed on appeal because of the “special realtionship” between the parties. Here too there was a special relation, that of employer-employee, which would enable the plaintiff to reasonably rely on the information received. In Rothwell, supra, Strayer J. found the defendant employer liable for having negligently misrepresented certain pension requirements as stipulated in the same Act as is in issue here. In deciding the matter, Strayer J. stated that the representation misled the plaintiff, and that the plaintiff bore no responsibility to clarify the situation. He said [at page 282]:

While the defendant contends that the onus was on the plaintiff to ask for clarification, it appears to me that the meaning which the plaintiff attributed to these communications was one which appeared sufficiently clear that it was not unreasonable for him to assume he understood them.

While the facts of Rothwell are not identical to those in the present case, Strayer J.’s words are applicable here. The appellant, in my view, did not bear the burden of clarification. He was totally unaware of his pension entitlements. He had every reason to rely on his employer, who should have informed him of those rights. The appellant was not contributorily negligent.

C.        STATUTE OF LIMITATIONS

One further argument raised by counsel for the respondent concerns the statute of limitations. A tort action, arising out of the action on the case, may only be brought within six years of the date that the damage was discovered or reasonably ought to have been discovered. As I have indicated above, no definitive damage has yet occurred in this case, as everything can still be remedied by the Minister’s exercise of discretion. If the Minister does not choose to exercise his discretion favourably within a reasonable time, damage will occur and the limitation period would then begin to run.

D.        ASSESSMENT OF DAMAGES

In the event that the Minister fails to exercise his discretion, and the tort action succeeds, damages would be computable according to the principles set out by the Trial Judge [at page 76]:

I must determine the amount of Australian service that the plaintiff would have bought back in 1972. Mr. Spinks testified that he was sure he would have bought at least 13 years since that amount would have been tax deductible and would have been affordable based on his income at that time. Thus, the damages would be calculated on the difference between the cost of 13 years service as of April 30, 1986 less the cost of 13 years service if it had been purchased in 1972. If 13 years of service had been purchased in 1972, the plaintiff would have earned his maximum pension after working 22 years with AECL which period would have terminated May 31, 1994. Accordingly, the plaintiff should be entitled to compensation for the seven months he has paid since that time towards his superannuation. However, there should also be a deduction from the damages award for the benefit the plaintiff incurred by having the use of the funds from 1972 to 1986. Under PSSA subs. 7(2) the interest rate is 4%. Since it is impossible to trace the funds, the defendant should be given credit for interest of 4% on $125 per month, being the amount of additional income by which the plaintiff benefited by not having to purchase his Australian service in 1972.

III.        DISPOSITION

The appeal on the statutory argument will be allowed and the matter will be sent back to the Minister to exercise his discretion pursuant to subsection 17(1) of the Regulations and to make a fresh determination not inconsistent with these reasons. If the Minister exercises his discretion in favour of the appellant, no damages will have been suffered by the appellant and the appeal on the tort argument will be dismissed.

If the Minister fails to make a positive determination within sixty days of the date of this judgment, he will be assumed to have declined to do so and loss will then be suffered by the appellant. In that case, the appeal on the negligent misrepresentation issue will be allowed, the tort action will succeed, and damages will be awarded according to the formula set out by the Trial Judge in his reasons dated January 16, 1995. Costs of this appeal will follow the event.

Strayer J.A.: I agree.

McDonald J.A.: I agree.

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