T-5181-73
Northrop Corporation (Plaintiff)
v.
The Queen and Canadian Commercial Corpora
tion (Defendants)
Trial Division, Thurlow A.C.J. Ottawa, July 13
and 14, 1976.
Crown—Damages--Settlement of action reached Plaintiff
applying with consent for judgment awarding it $1,888,131
damages and dismissing in all other respects its claim and that
of defendants without costs—Whether Court can grant such
judgment in light of Federal Court Act, s. 57(3).
In an action by plaintiff to enforce its rights under a licence
agreement and certain contracts with the Queen relating to
production of certain aircraft and for damages arising from
defendants' sale of aircraft to Venezuela in breach of the
agreement, settlement was reached, and plaintiff applied with
consent for judgment awarding it $1,888,131 in respect of its
damage claim in connection with the sale to Venezuela and
dismissing in all other respects its claim and that of defendants
(a counterclaim alleging various contractual breaches), without
costs.
Held, the motion is dismissed. If this were an ordinary action
between private persons, the Court would not hesitate to grant
the request. That is a situation in which there is no limitation
on a private person to commit his own resources. Here, in light
of section 57(3) of the Federal Court Act, the result of such a
judgment is to authorize payment from the Consolidated Reve
nue Fund without an appropriation or vote by Parliament. It
has been held that the authority to pay under section 57(3) is
limited to what the Court adjudges the Crown to be liable to
pay, and that the Court should not permit the device of a
judgment by consent to take the place of an adjudication, on
proper material, of the Crown's actual liability. Here, there is
nothing before the Court upon which it can reach any conclu
sion as to whether the Crown is liable for that amount, or
whether it is, in fact, liable at all. The amount is but an item in
a broader agreement providing also for settlement of claims for
amounts allegedly due under the contract, the Crown's aban
donment of its counterclaim, and both parties' abandonment of
claims for costs. The Court should leave it to the parties to
either obtain implementation of the settlement through an
appropriate Parliamentary vote, or to take steps to establish
actual liability at trial. The Court was not satisfied that it is
common practice of the Court to enter judgments by consent
for payment of money against the Crown, and it is to be hoped
that this matter will be resolved by the Court of Appeal.
Bowler v. The Queen [1976] 2 F.C. 776 and The King v.
Hooper [1942] Ex.C.R. 193, applied. Galway v. M.N.R.
[1974] 1 F.C. 600, distinguished.
APPLICATION.
COUNSEL:
G. Lane and C. Desjardins for plaintiff.
D. Friesen for defendants.
SOLICITORS:
Osler, Hoskin & Harcourt, Toronto, for
plaintiff.
Deputy Attorney General of Canada for
defendants.
The following are the reasons for order ren
dered in English by
THURLOW A.C.J.: This is an application by the
plaintiff, with the consent and support of counsel
for the defendants, for judgment
(a) awarding to the plaintiff the sum of $1,888,-
131 in respect of the plaintiff's claim for dam
ages for the sale by the defendants to the Gov
ernment of Venezuela of certain CF-5 aircraft;
and
(b) dismissing in all other respects the claim of
the plaintiff and the claim of the defendants
herein without costs.
Most of the facts before the Court appear from
the following paragraphs of an affidavit of a Los
Angeles attorney filed in support of the
application:
2. Northrop Corporation commenced this action in December
1973 to enforce its rights under a License Agreement and
certain contracts with Her Majesty relating to production by or
for Her Majesty of Northrop's F-5A and B type aircraft as
modified under the designation of "CF-5A" (single seat) and
"CF5-D" (dual seat). Northrop sought payment of sums owing
under these contracts of approximately $8.5 million. In addi
tion Northrop sought damages of $9.1 million from the defend
ants arising out of the defendants sale to Venezuela of 20 CF-5
aircraft in breach of the License Agreement between Northrop
and Her Majesty.
3. Her Majesty counter-claimed in Northrop's action for a sum
in excess of $26 million alleging various breaches of these
contracts by Northrop.
4. Both prior to the commencement of the litigation and during
its pendency there have been extensive discussions between the
parties both directly and through counsel, with a view of a
settlement of the litigation. Commencing in February of this
year these negotiations resumed and have now culminated in a
settlement. Annexed hereto is a copy of the Minutes of Settle
ment as agreed upon by the parties.
and from the minutes of settlement appended
thereto which, after setting out the title of the
action, proceed as follows:
MINUTES OF SETTLEMENT
The parties hereto agree to a settlement of this action upon
the following terms:
1. Payment to the plaintiff by the defendants of the sum of
NINE MILLION CANADIAN DOLLARS ($9,000,000.00) payable
as follows:
(a) the defendants will consent to Judgment in the form
annexed in favour of the plaintiff for damages for the sale of
certain CF-5 aircraft to the Government of Venezuela in the
amount of ONE MILLION, EIGHT HUNDRED AND EIGHTY
EIGHT THOUSAND, ONE HUNDRED AND THIRTY ONE DOLLARS
($1,888,131.00);
(b) forthwith upon the pronouncement of the said Judgment
the defendant Her Majesty The Queen will pay to the plaintiff
the sum of SEVEN MILLION, ONE HUNDRED AND ELEVEN
THOUSAND, EIGHT HUNDRED AND SIXTY NINE DOLLARS
($7,111,869.00) less withholding tax in the amount of EIGHT
HUNDRED AND THREE THOUSAND, NINE HUNDRED AND SEV
ENTY SIX DOLLARS ($803,976.00) in full and final payment of
all sums claimed in this action to be due and payable to the
plaintiff pursuant to the License Agreement, the CF-5 Recon
figuration Agreement and the NF-5 Reconfiguration Agree
ment which are referred to in the pleadings in this action.
2. In all other respects, the claim of the plaintiff and the
counterclaim of the defendants will be dismissed without costs.
3. Forthwith upon signing these Minutes the defendant Her
Majesty The Queen will furnish to the plaintiff evidence of the
withholding tax referred to in paragraph 1 hereof.
DATED at Ottawa this 13th day of July, 1976.
The action has proceeded to the stage where
discovery of documents has been given and it was
said that the settlement has been reached on the
eve of commencement of oral examinations for
discovery which were likely to take months. It is
obvious from the file that the issues in the action
are complicated and it is not unlikely that the
remaining pre-trial procedures and the trial itself
will be long and expensive.
It is, I think, plain that if this were an ordinary
action between private persons of full age and
capacity the Court would not hesitate to grant the
judgment requested. But that is a situation in
which there is no limitation on the power of the
private person to commit his own resources. The
problem for the Court here, as I see it, is different.
It is whether this Court can on such materials as
are before it properly grant judgment as asked
against the Crown'. The answer in my opinion
turns upon subsection 57(3) of the Federal Court
Act e and the effect to be given to it. It reads:
57. (3) There shall be paid out of the Consolidated Revenue
Fund any money or costs awarded to any person against the
Crown in any proceedings in the Court.
The result of a judgment of this Court against
the Crown is thus to authorize payment of the
amount awarded from the Consolidated Revenue
Fund without an appropriation or vote for that
purpose by Parliament. On the hearing of the
motion counsel for the plaintiff freely conceded
that it was because there was no appropriation or
vote from which the $1,888,131 could be paid and
because it would involve at least a considerable
delay before such an appropriation might be made
that judgment of the Court for the amount was
being sought.
In Bowler v. The Queen' I had occasion to
consider subsection 57(3) in connection with
arrangements for the settlement of claims for com
pensation for expropriated property and I
expressed the view that the authority to pay under
that subsection is limited to what the Court
adjudges the Crown to be liable to pay and that
the Court should not permit the device of a judg
ment by consent of the parties to take the place of
an adjudication, on proper material, of the actual
liability of the Crown. In so doing I relied on the
1 0n the hearing no distinction was made between the two
defendants and it was not suggested that judgment be given
against the second defendant alone. In any case that is not what
has been consented to.
2 R.S.C. 1970, c. 10 (2nd Supp.) as amended by 1973-74, c.
17, s. 8; 1974-75-76, c. 18.
3 [1976] 2 F.C. 776.
judgment of this Court in The King v. Hooper'
which was founded on a similar provision in sec
tion 34s of the Expropriation Act io .
In the course of his reasons Thorson P. said at
page 195:
No evidence of the value of the property in question was
adduced.
The Court can, of course, make the first declaration asked
for, namely, that the lands in question are vested in His
Majesty the King for such a declaration would be in accord
ance with the provisions of section 9 of the Expropriation Act.
The Court should not, however, make any declaration as to
the sufficiency or justice of the compensation money in pro
ceedings under the Expropriation Act merely on the pleadings
of the parties and without having before it proper evidence as to
the value of the property in question upon which the court
could make an adjudication as to the value of such property
and the amount of compensation money to which the defendant
is entitled.
Section 23 of the Expropriation Act provides that the com
pensation money agreed upon or adjudged for any land or
property acquired or taken for or injuriously affected by the
construction of any public work shall stand in the stead of such
land or property. The Act contemplates that there are two ways
by which the amount of compensation money for property
expropriated in virtue of the Expropriation Act may be fixed—
namely, by agreement as between the parties or by an adjudica
tion by the Court.
Where the parties have already agreed between themselves
as to the amount of the compensation money there is no need of
coming to the Court for an adjudication as to the amount of
compensation money to which the defendant is entitled.
at page 196:
It was stated by counsel that the action was brought in order
to obtain a judgment of the Exchequer Court in favour of the
defendant since otherwise there was no provision in the govern
ment department concerned under which the defendant could
immediately be paid the amount of compensation money which
had been agreed upon, and the defendant might have to wait
until the necessary appropriation had been voted by
Parliament.
This does not appear to be a sound ground for intervention
by the Court, since the parties are not asking the Court to make
an adjudication as to the value of the property in question but
are in effect asking the Court to approve by judicial sanction an
arrangement already made between them.
' [1942] Ex. C.R. 193.
5 34. The Minister of Finance may pay to any person, out of
any unappropriated moneys forming part of the Consolidated
Revenue Fund of Canada, any sum to which, under the judg
ment of the Court, in virtue of the provisions of this Act, he is
entitled as compensation money or costs.
6 R.S.C. 1927, c. 64.
and at page 197:
Furthermore, the judgment asked for on this motion on the
pleadings is not the kind of judgment contemplated by sec. 34
of the Expropriation Act. That section does not contemplate
mere approval of a settlement made between the parties,
whether before action brought or by the pleadings.
Section 34 of the Expropriation Act contemplates a judg
ment of the Court, in virtue of the provisions of the Act, based
upon an adjudication by the Court as to the compensation
money to which the defendant is entitled. This means an
adjudication based upon proper evidence as to the value of the
property in question and does not extend to a fixation of the
compensation money at the amount agreed upon by the parties
either before action brought or by the pleadings, for the amount
of compensation money agreed upon by the parties may not
represent the value of the expropriated property as it might be
adjudged by the Court.
Counsel for the plaintiff sought to distinguish
both decisions on the basis that they both related
to expropriations for which there would have been
some prior governmental authority while here the
claim in respect of which judgment is sought is one
for damages for breach by the Crown of its con
tract and thus one in respect of which no prior
authority exists. If there is such a distinction it
does not appear to me to affect the application of
the principle that the agreement of the parties on
the amount is not a substitute for adjudication by
the Court on adequate materials of the actual
liability of the Crown.
It should also be borne in mind that Rule 605,
which continues at least in part the law and prac
tice under the former Petition of Right Act 7 ,
requires that a judgment against the Crown take
the form of "a declaration that the person in
favour of whom the judgment is given is entitled to
the relief to which the Court has decided that he is
entitled".
Counsel also relied on a statement in the judg
ment of the Court of Appeal in Galway v. M.N.R. 8
where, in discussing judgments by consent, the
Court said:
The reason for that doubt, as indicated by our Reasons of
April 22, was that, in our view, the Minister has a statutory
duty to assess the amount of tax payable on the facts as he
finds them in accordance with the law as he understands it. It
follows that he cannot assess for some amount designed to
R.S.C. 1952, c. 210, s. 10.
8 [1974] 1 F.C. 600 at pp. 602-3.
implement a compromise settlement and that, when the Trial
Division, or this Court on appeal, refers an assessment back to
the Minister for re-assessment, it must be for re-assessment on
the facts in accordance with the law and not to implement a
compromise settlement.
Is the position any different where the parties consent to a
judgment? In ordinary litigation between private persons of full
age and mentally sound, the Court has not, in normal circum
stances, any duty to question a consent by the parties to
judgment. We should have thought that the same statement
applies where the Crown, represented by its statutory legal
advisors, is one of the parties.
The language so used is undoubtedly broad but
it was used in a case concerning income tax liabili
ty where there was no question involved of a
judgment against the Crown which would result in
a payment under subsection 57(3) out of the Con
solidated Revenue Fund. Accordingly I do not
regard the statement as governing the present
situation.
Here what is sought is judgment against the
Crown for a very considerable amount for dam
ages, and, as I see it, there is no material before
the Court upon which it can reach any conclusion
as to whether the Crown is in fact liable for that
amount of damages or whether it is liable for
damages at all for breach of its contract. The
amount is, moreover, but an item in a much
broader agreement providing for the settlement as
well of claims for amounts alleged to be due under
the contract, the abandonment of a counterclaim
by the Crown, for which there was presumably
some initial basis, for amounts totalling more than
$26,000,000 and the abandonment by both parties
of their claims for costs. In attempting to combine
agreement with adjudication the situation
resembles that in the Bowler case.
In my opinion in these circumstances on the
principle of the decision in The King v. Hooper the
Court should not grant the judgment sought but
should leave it to the parties either to obtain the
implementation of the settlement reached through
an appropriate Parliamentary vote or to take steps
to establish the actual liability of the Crown for
damages by bringing the issue to trial.
In the course of argument it was said to be
common practice in the Court to grant judgments
against the Crown to implement settlements of
claims that have been arranged, particularly in
collision cases, and indeed an example of an order
for judgment in a recent tort case was cited and a
copy of the order put before the Court. I am not
satisfied that it is a common practice of the Court
to enter judgments by consent for the payment of
money against the Crown and it does not appear
that the point here in question was raised or
considered in the example cited. The point is,
however, one of considerable importance to the
practice and authority of the Court and, as there
may be some divergence of opinion on it, it is to be
hoped that this matter will go further so that the
question may be determined by the Court of
Appeal.
The plaintiff's motion will be dismissed without
costs.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.