Judgments

Decision Information

R. v. CAE Industries Ltd.

Collection Judgments
Date 1985-07-03
Report citation [1986] 1 F.C. 129
File numbers A-1757-83
Subjects Crown
Practice

Decision Content

A-1757-83
The Queen (Appellant) (Defendant) v.
CAE Industries Ltd. and CAE Aircraft Ltd. (Respondents) (Plaintiffs)
Court of Appeal, Pratte, Urie and Stone JJ.- Winnipeg, February 18, 19, 20, 21 and 22; Ottawa, July 3, 1985.
Crown - Contracts - Appeal from trial judgment holding letter signed by Ministers of Crown providing assurances constituting contract - Letter stating Department of Defence Production guaranteeing no more than 40,000 to 50,000 direct labour man-hours per year, but Government of Canada to employ "best efforts" to secure additional work - Partial performance indicating intention to contract - Contract not so incomplete as to be unenforceable - Nothing necessary left unsettled - Fact individual service contracts required for aircraft repair and overhaul not detracting from "set aside" and "best efforts" commitments - Upon acceptance "assur- ances" becoming binding commitments - Construction of "set aside" and "best efforts" - Verreault (J. E.) & Fils Ltée v. Attorney General (Quebec), 0977] 1 S.C.R. 41 explained Minister of Crown having authority to bind Crown in contract unless restricted by statute - Subject-matter of contract within general responsibilities of ministers - Cabinet author izing signing of letter - No statutory restrictions on Minis ters' authority to bind Crown - Regulations not barring performance as indicated by partial performance of contract and flexibility in Regulations - Evidence supporting Trial Judge's finding of breach of contract - No error in assessing damages for loss of profits - Trial Judge erred in accepting evidence of respondent's valuator - Factual bases supporting assumptions too tenuous and speculative - Trial Judge acting within authority under s. 40 of Federal Court Act in varying post-judgment interest - Defence Production Act, R.S.C. 1952, c. 62, ss. I, 3, 9, 15, 17 (as am. by S.C. 1967-68, c. 27, s. I) - Aeronautics Act, R.S.C. 1952, c. 2, ss. 2, 3 - Depart ment of Trade and Commerce Act, R.S.C. 1952, c. 78, ss. 2, 3, 5 - Government Contracts Regulations, SOR/64-390, ss. 2(1)(c)(iii), 6, 14 (as am. by SOR/68-89, s. 1) - Financial Administration Act, R.S.C. 1952, c. 116, s. 39 - Interest Act, R.S.C. 1970, c. 1-18, s. 13 - Federal Court Act, R.S.C. 1970 (2nd Supp.), c. 10, s. 40 - Department of Supply and Services Act, R.S.C. 1970, c. S-18, s. 3 - Government Organization Act, 1969, S.C. 1968-69, c. 28, s. 103 - Department of Transport Act, R.S.C. 1952, c. 79, s. 3 - Crown Liability Act, R.S.C. 1970, c. C-38.
Practice — Costs — Appeal from Trial Judge's refusal to increase party and party costs beyond Tariff B — Trial Judge properly exercising discretion — Appeal dismissed — Federal Court Rules, C.R.C., c. 663, R. 344, Tariff B.
Practice — Parties — Whether respondents parties to con tract in litigation — Equitable assignment — Substitute accepted by both sides — Respondents having sufficient inter est to support causes of action.
This is an appeal from the trial judgment in favour of the respondents in a breach of contract action.
A government official approached CAE Industries Ltd. (CAE) to take over the Air Canada Winnipeg facilities through its subsidiary Northwest Industries Ltd. (Northwest). North- west's interest in taking over the facilities was conditional upon the government agreeing to provide a minimum quantity of work (300,000 productive hours annually). It was made clear that such a request could not be reconciled with existing governmental policy of competitive tendering. However, a letter dated March 26, 1969, signed by the Ministers of Transport, Trade and Commerce and Defence Production was sent to the President of CAE. It set out the terms of the alleged contract. The letter provided, inter alia, the following assurances: 1) the Government of Canada agreed with the objective that employ ment levels should be maintained; 2) it also agreed that 700,000 man-hours of direct labour per annum was a realistic target for the operation of a viable enterprise; 3) the Depart ment of Defence Production could guarantee no more than 40,000 to 50,000 direct labour man-hours per year, but the Government of Canada would employ its best efforts to secure the additional work required to meet the target level of 700,000 direct labour man-hours. Relying upon these assurances, CAE decided that its subsidiary would purchase the Winnipeg base. Agreements were entered into in September, 1969. Everything went well until 1971 when the workload started to diminish. When the appellants failed to comply with the commitments in the March 26 letter, the respondents sued for breach of contract.
The appellant argues that: 1) the Crown did not intend to enter into a contract; 2) the document is so vague or incomplete as to be unenforceable; 3) if it is not too vague, it cannot be enforced because it does not bind the appellant; 4) if it binds the appellant, the contract was not breached; and 5) the Trial Judge erred in quantifying damages. On cross-appeal the respondents submit that the quantum of damages should have been higher.
A preliminary issue of the identity of the parties was raised. The negotiations until early 1969 contemplated Northwest as the purchaser and operator of the base. The appellant argues that it was Northwest that became the other party to the contract and that neither of the respondents is a party. The respondents argue that they are the proper parties as the March 26 letter was addressed to CAE Industries Ltd., and that CAE
Aircraft Ltd. became buyer and operator of the Winnipeg base at the behest of its parent and with the full knowledge of the government. They submit that any interests which may have been held by Northwest became vested in CAE Aircraft Ltd. by way of equitable assignment.
Held (Pratte J. dissenting), the appeal should be dismissed.
Per Stone J.: It does not matter whether the deal was struck with the parent company or with a subsidiary. The CAE group of companies was seen as having the desired qualifications to purchase and operate the base. The contract, if any, was made with CAE Industries Ltd., but CAE Aircraft Ltd. was accepted by both sides as a suitable substitute. The Trial Judge correctly held that the evidence supports the vesting in CAE Aircraft Ltd. of any interest in the contract which Northwest may have acquired. He was also correct in holding that the respondents had a sufficient interest to support the causes of action alleged.
A contract can only come into existence if an intention to contract is present. But an intention to contract may be gath ered from the circumstances. In a case of this kind, a heavy onus of proof lies on the party asserting that no legal effect is intended. That burden had not been discharged. The govern ment itself took the initiative to find a buyer in the private sector and approached the respondent in that regard. The parties treated the document as a binding contract to the extent that it was partly performed. There was an intention to enter into a contract.
The contract is not so incomplete as to be unenforceable. It does not leave anything unsettled that was necessary to be settled between the parties. The fact that individual service contracts would be required for individual items of aircraft repair and overhaul work did not detract from the central commitment to "set aside" repair and overhaul work and to employ "best efforts" to secure other like work. What were described as "assurances" were, upon acceptance, intended to be and did become binding commitments. The Trial Judge correctly found that "set-aside" work was a "guarantee with no strings attached" and that the appellant was bound to carry out this aspect of the agreement even if it was necessary "to take work away from others." In the agreement, the government promised to employ its "best efforts" to secure additional work. That term, construed in the light of the contract, the parties and its purpose, created a broad obligation to secure work up to the limit mentioned in the agreement. This did not mean that it required the government to disregard existing contractual obli gations or to neglect the public interest.
The Trial Judge held that the contract was binding on the Crown as it was signed by three ministers who either had actual authority to bind the Crown under a number of federal stat utes, or ostensible authority under the principle in Verreault (J. E.) & Fils Ltée v. Attorney General (Quebec), [1977] 1 S.C.R. 41. The appellant argued that the Crown could only be bound in contract if authority is found under a statute or an order in council. It is argued that statutory powers of "management" or "direction" do not extend to authorize the signing of this kind of contract.
The cases preceding Verreault support the broad proposition that where a statute regulates the power to make contracts, a contract is not binding upon the Crown unless the requirements of the statute are fulfilled. By its decision in Verreault, the Supreme Court of Canada meant to depart from conventional legal wisdom in holding that by the general rules of mandate, including those of apparent mandate, a minister as head of a government department has authority to bind the Crown in contract unless that authority is restricted by or pursuant to statute. The subject-matter of this contract fell within the general responsibilities of the ministers from whose depart ments the work with which it is concerned would emanate. Although the letter was signed by only three Ministers, Cabinet had authorized those Ministers to sign it. The intention was that the government intended to be bound.
The authority of the Ministers to sign the letter was not restricted by the Aeronautics Act, the Department of Trade and Commerce Act, nor the Defence Production Act. Para graph 17(1)(d) of the latter provides that the Minister could not contract except in accordance with such regulations under the Financial Administration Act as apply to the contract. This restriction is irrelevant as the regulations made under that Act apply only to a "service contract".
The Government Contract Regulations do not bar implemen tation of the intention of the parties to create a legal commit ment. Performance of the work was subject to those Regula tions. The Regulations, as they pertain to "service contracts", contain a degree of flexibility that would have enabled the government through its ministers and, if necessary, the Trea sury Board to direct the work referred to in the contract without the necessity for tenders or regard to monetary limits. The appellant is bound by the contract.
The finding of the Trial Judge, that the "set-aside" and "best efforts" commitments had not been entirely met and that the contract had been breached, was supported by the evidence.
The Trial Judge assessed damages for loss of profits at $1,900,000 and for loss of capital at $2,400,000. The appellant argues that the claim for loss of capital is not recoverable as being too remote and uncertain. The appellant also asserts that the awards were excessive. The Trial Judge did not err in principle in awarding damages for loss of profits, nor in reduc ing the quantum. As to the claim for loss of capital, the Trial Judge accepted the valuation evidence of the respondents' witness. The Trial Judge may have erred in accepting the quality of the proof tendered supporting certain underlying assumptions made by the witness. The factual bases supporting the valuator's assumptions were too tenuous and speculative to make his opinion reliable as evidence. The appeal should suc ceed on this point and the damages reduced accordingly.
The appellant attacks the rates at which interest was allowed. The Trial Judge relied upon Domestic Converters Corporation v. Arctic Steamship Line, [1984] 1 F.C. 211;
(1983), 46 N.R. 195 (C.A.) in varying the post-judgment interest rate from the 5% provided for in section 3 of the Interest Act. That case settled the issue of the Court's power under section 40 of the Federal Court Act and the Court was not prepared to review it.
The Trial Judge refused to increase the party-and-party costs beyond those provided in Tariff B. By Rule 344, the Tariff governs. The Trial Judge properly addressed the issue in exer cising his discretion.
Per Urie J.: Where there is substantial compliance with the terms of a contract for a period of time, only if the evidence is clear and unmistakable should the conclusion be made that the parties neither intended to contract nor in fact entered into a contract. The evidence is clear and unmistakable that the parties intended to, and did, enter a binding contract.
Per Pratte J. (dissenting): The circumstances do not disclose an intention to enter into a purely political arrangement, rather than a contract, as submitted by the appellant.
It is surprising, in view of the importance of the matter, that the parties did not formalize the agreement. The letter was not written to make an offer, but to give assurances. Some of the assurances, while disclosing an identity of views and purposes, have clearly no contractual connotation.
The Trial Division's interpretation of a guarantee of at least 40,000 man-hours of "set-aside" work is incorrect. The letter stated that "the Department of Defence Production can guar antee no more than 40,000 to 50,000 manhours". It was a mere approximation of the maximum number of hours of work that the Department could guarantee, not a precise minimum number of hours that the Department offered to guarantee.
The "best efforts" undertaking lacked the certainty required of a contractual promise, as it was qualified by the govern ment's paramount duty to act in the public interest. The government could not intend to bind itself to do things injurious to that interest.
The respondents submit that at examination for discovery it was admitted that each Minister had statutory authority to bind the Crown in relation to his own department. But that is a question of law which could not be the subject of an admission. What was really admitted was that Cabinet authorized the three Ministers to sign and send the letter. An order in council is sufficient, in the absence of statutory provisions to the contrary, to confer authority to bind the Crown. The executive power is vested in the Queen who acts on the advice of her Ministers and expresses herself in the form of orders in council. A Cabinet decision is not a decision of the Queen who is not a party to it. A simple authorization of the Cabinet cannot be assimilated to an order in council. The Ministers were not authorized by statute to enter into the contract. The Defence Production Act authorized the Minister to enter into contracts for the maintenance and service of defence supplies (including aircraft). The Aeronautics Act imposed on the Minister of Transport the duty "to control and manage" all civilian aircraft "necessary for the conduct of any of Her Majesty's services".
The contract here was neither a contract for the maintenance of government aircraft nor a contract whereby the Minister of Transport exercised his power of control and management over civilian aircraft used by the Government. It was a contract which provided that contracts for the maintenance of aircraft would be negotiated with CAE companies. That contract, which could have no immediate effect on the maintenance and servicing of aircraft, was allegedly entered into for the sole purpose of preventing the closure of the Winnipeg Air Canada base. The Department of Trade and Commerce Act did not describe the sphere of governmental business that was assigned to that Department.
The Verreault decision does not help the respondents. It stands for the proposition that, in the absence of statutory provisions to the contrary, a minister, to have authority to contract on behalf of the Crown, need not be expressly author ized by statute or order in council provided that the contract be directly related to that part of the government business assigned to his department. The contract in question was not directly related to the sphere of activity of any of the three departments concerned. Under the Government Contracts Regulations a minister, before entering into a service contract was required to call tenders. Although the alleged contract was not a service contract, it contemplated that service contracts would be entered into and its performance required that those service contracts be awarded without regard to the require ments of the Regulations. In the absence of an express statu tory provision to the contrary, the power of a minister to enter into a contract on behalf of the Crown is subject to the limitations imposed by statute and regulations. The three Min isters did not have the authority to enter into a contract which would violate the Government Contracts Regulations.
The submission that if the Court were to find no valid enforceable agreement, it should find that the appellant was liable to the respondents on the basis of negligent misstate ments contained in the March 26 letter is untenable. The letter did not contain any misstatements that could be the source of a liability in tort. Had a tort been committed, there was no evidence that the respondents suffered damages as a conse quence thereof.
CASES JUDICIALLY CONSIDERED APPLIED:
Attorney-General for British Columbia v. Esquimalt and Nanaimo Railway Company, [1950] A.C. 87 (P.C.); Lindsey v. Heron & Co. (1921), 64 D.L.R. 92 (Ont. C.A.); Kelly v. Watson (1921), 61 S.C.R. 482; Hillas and Co. Limited v. Arcos Limited (1932), 147 L.T. 503 (H.L.); Marquest Industries Ltd. v. Willows Poultry Farms Ltd. (1969), 66 W.W.R. 477 (B.C.C.A.); May and Butcher, Ltd. v. R., [1929] All E.R. Rep. 679 (H.L.); Murphy v. McSorley, [1929] S.C.R. 542; Sheffield Dis trict Railway Company v. Great Central Railway Com pany (1911), 27 T.L.R. 451 (Rail and Canal Corn.); Verreault (J. E.) & Fils Ltée v. Attorney General (Quebec), [1977] 1 S.C.R. 41; Town Investments Ltd. v. Department of the Environment, [1978] A.C. 359 (H.L.); British Westinghouse Electric and Manufacturing Com-
papy v. Underground Electric Railways Company of London, [1912] A.C. 673 (H.L.); Penvidic Contracting Co. Ltd. v. International Nickel Co. of Canada Ltd., [1976] 1 S.C.R. 267; Wood v. Grand Valley Railway Co. et al. (1915), 51 S.C.R. 283; Domestic Converters Cor poration v. Arctic Steamship Line, [1984] 1 F.C. 211; (1983), 46 N.R. 195 (C.A.).
DISTINGUISHED:
Joy Oil v. The King, [1951] S.C.R. 624; 3 D.L.R. 582; Meates v Attorney-General, [1979] 1 NZLR 415 (S.C.).
CONSIDERED:
The King v. McCarthy (1919), 18 Ex.C.R. 410; The Quebec Skating Club v. The Queen (1893), 3 Ex.C.R. 387; Wood v. The Queen (1877), 7 S.C.R. 634; Drew, Aileen M. v. The Queen, [1956-1960] Ex.C.R. 339; Walsh Advertising Co. Ltd. v. The Queen, [1962] Ex.C.R. 115; Jacques-Cartier Bank v. The Queen (1895), 25 S.C.R. 84; The King v. Vancouver Lumber Co. (1914), 41 D.L.R. 617 Ex. Ct.; R. v. Transworld Shipping Ltd., [1976] 1 F.C. 159 (C.A.); Mackay v. Attorney-General for British Columbia, [1922] 1 A.C. 457 (P.C.); Livingston vs The King (1919), 19 Ex.C.R. 321; State of New South Wales v. Bardolph (1933- 1934), 52 C.L.R. 455 (Aust. H.C.); Cudgen Rutile (No. 2) Pty. Ltd. v. Chalk, [1975] A.C. 520 (P.C.); Hadley v. Baxendale (1854), 9 Ex. 341; 156 E.R. 145; Victoria Laundry (Windsor), Ld. v. Newman Industries Ld., Coulson & Co., Ld. (Third Parties), [1949] 2 K.B. 528 (C.A.); Czarnikow (C.) Ltd. v. Koufos, [1969] 1 A.C. 350 (H.L.); Freedhoff v. Pomalift Industries Ltd. et al., [1971] 2 O.R. 773 (C.A.); Midway Mfg. Co. v. Bern- stein, [1983] 1 F.C. 510 (T.D.).
REFERRED TO:
Brandt's (William) Sons & Co. v. Dunlop Rubber Com pany, [1905] A.C. 454 (H.L.); Rose and Frank Co. v. Crompton and Brothers, [1923] 2 K.B. 261 (C.A.); Edwards v. Skyways Ltd., [1964] 1 W.L.R. 349 (Q.B.); Bahamas Oil Refining Co. v. Kristiansands Tankrederei AIS and Others and Shell International Marine Ltd. (The "Polyduke"), [1978] 1 Lloyd's Rep. 211 (Q.B.); Province of Quebec v. Province of Ontario (1909), 42 S.C.R. 161; Attorney-General for Ceylon v. A. D. Silva, [1953] A.C. 461 (P.C.); Guerin et al. v. The Queen et al., [1984] 2 S.C.R. 335; (1985), 55 N.R. 161; Nance v. British Columbia Electric Ry. Co. Ld., [1951] A.C. 601 (P.C.); Flint v. Lovell, [1935] 1 K.B. 354 (C.A.); South Australia and A.-G. (S.A.) v. Commonwealth (1962), 35 A.L.J.R. 460 (H.C.); Australian Woollen Mills Pty. Ltd. v. The Commonwealth (1954), 92 C.L.R. 424 (Aust. H.C.), affd. [1955] 3 All E.R. 711 (P.C.); Milne v. Attorney-General for Tasmania (1956), 95 C.L.R. 460 (Aust. H.C.); Papua and New Guinea Administration v. Leahy (1961), 34 A.L.J.R. 472 (H.C.); Terrell v. Mabie Todd & Coy Ld. (1952), 69 R.P.C. 234 (Q.B.); Randall v. Peerless Motor Car Co., 99 N.E. 221 (S.C. Mass. 1912)—Chaplin v. Hicks, [1911] 2 K.B. 786 (C.A.).
COUNSEL:
E. A. Bowie, Q.C. and B. Mcisaac for appel lant (defendant).
Marc M. Monnin, L. N. Mercury and D. G. Hill for respondents (plaintiffs).
SOLICITORS:
Deputy Attorney General of Canada for appellant (defendant).
Aikins, McAuley & Thorvaldson, Winnipeg, for respondents (plaintiffs).
The following are the reasons for judgment rendered in English by
PRATTE J. (dissenting): This is an appeal from a judgment of Collier J. of the Trial Division [[1983] 2 F.C. 616] in an action for breach of contract brought by the respondents against the Crown. That judgment was in favour of the respondents. Collier J. found that they had entered into a contract with the Crown and that the Crown had breached that contract; as a result, he award ed the respondents damages in the sum of $4,300,000 and costs.
There is also a cross-appeal from the same decision. The respondents contend that the Trial Judge should have been more generous in his assessment of the damages and that he erred in failing to exercise his discretion to award the respondents costs over and above the applicable tariff.
The series of events which culminated in these proceedings are well summarized by Collier J. [at page 621]:
In its early years the operations of Air Canada (formerly T.C.A.) were centralized in Winnipeg. In 1949 an operating and maintenance base was begun in Montreal. In 1959, a large, modern overhaul base was completed in that City.
In 1962 Air Canada expressed an intention to close its Winnipeg base. This brought strenuous protest. The loss of up to 1,000 highly skilled jobs in the Winnipeg area was the likely result of any close-down. At that time the main overhaul and maintenance work at Air Canada's Winnipeg base was its Viscount fleet.
The Prime Minister of the day, in late 1963 and early 1964, stated government policy was to keep the Winnipeg base, in some manner, open. A Royal Commission was established to review the whole matter. The Commission made a number of recommendations. But subsequent negotiations, to work out an acceptable plan to keep the Winnipeg base open, floundered.
In early October, 1967, Air Canada announced its Viscount fleet would, by 1970, drop to such an extent that the Winnipeg base would be closed. This announcement led to meetings between the federal Minister of Transport and the Province of Manitoba. Three results of this meeting were (see Ex. P. 150-151):
(1) The Minister of Transport reaffirmed the Prime Minis ter's earlier commitment but pointed out that this did not necessarily mean direct operation by Air Canada although it would require substantial support by Air Canada.
(2) Air Canada was asked to review its aircraft overhaul requirements in the light of changes in circumstances subse quent to the completion of the Royal Commission Report.
(3) An inter-governmental working party was established to study the various proposed solutions to the problem.
Later in 1967, an official of the Department of Industry approached a Mr. Reekie, who was the President and Chief Executive Officer of the respondent CAE Industries Ltd. (CAE), in order to know whether its subsidiary, Northwest Indus tries Ltd. (Northwest), would be interested in taking over and operating the Air Canada Win- nipeg facilities. Northwest was in the business of repairing and overhauling aircraft in Edmonton. Mr. Reekie expressed interest; there followed lengthy negotiations with federal officials and Air Canada.
From the outset, Northwest's interest in taking over the Air Canada Winnipeg facilities was linked to a request that the government should agree to provide the company a minimum quantity of work for several years to come. On the other hand, very early in the negotiations, officials of the federal government made clear that such a request could not be reconciled with the existing govern mental policy of competitive tendering.'
' The Government Contracts Regulations (SOR/64-390, as amended by SOR/68-89, s. 1) imposed on the various depart ments the obligation to call tenders before entering into service contracts.
In January, 1969, Northwest submitted "a pro posal to Air Canada for the purchase and con tinued operation of the present Air Canada Main tenance Base at Winnipeg International Airport." That document contained the following statement:
We must repeat again that unless and until firm commit ments totalling 300,000 productive hours per annum until 1976 are made we will be unwilling to take over and operate the Winnipeg Maintenance Base. It is a condition of our proposal, therefore, that commitments be made by Air Canada and/or the Canadian Government to provide 300,000 hours of produc tive work annually until 1976 over and above that work gener ated by Northwest Industries Limited. Without such a commit ment we cannot undertake to maintain employment on existing levels, nor can we be confident of our ability to develop a lasting and healthy industry for the Province of Manitoba.
On February 28, 1969, Mr. Reekie, the Presi dent of CAE, wrote a Mr. E. L. Hewson, Director of Transportation Policy and Research in the Department of Transport, to set out CAE's requests:
We understand that the Canadian Government has been advised by Air Canada that Northwest Industries Limited is their preferred choice as the contractor to take over and operate the Air Canada maintenance base in Winnipeg, based upon an assessment and evaluation of proposals submitted by interested parties in January of this year. We understand further that the Government of Canada now wishes to negotiate with the preferred contractor with a view to satisfying its demands on the Canadian Government, which were spelled out in a general way in the proposal referred to above.
To further the resolution of this problem we wish to elaborate on, and to clarify, the commitments requested by us from the Government of Canada, which in conjunction with the commit ments required from Air Canada, and the contributions to be made by Northwest Industries should enable us to achieve the aims of all interested parties. These aims can be briefly stated as the development of a sustaining aircraft industry in Manito- ba on a long term basis, and the maintenance of employment at existing levels.
Our requirements have been spelled out consistently over a period of nearly two years. They are calculated to be the minimums needed to maintain employment levels for a period of time sufficient, in our view, to enable other sources of work to be developed. We are well aware of the problems for both Air Canada and the Government of Canada in making work and other commitments, however, it must be recognized that without the necessary support from Air Canada and the Gov ernment of Canada, there is no likelihood that the desired employment levels will be maintained.
Indications to date are that the guarantee of 300,000 man hours per year until 1976, which we requested from Air Canada and/or the Government of Canada will not be provided. Air Canada has offered work guarantees of 150,000 man hours per year until 1976, and the Government of Canada has offered
some 50,000 man hours per year until 1976, for a combined total of 200,000 man hours per year. This is some 100,000 man hours per year short of the total requested, equivalent to the work of approximately 50 productive people. These commit ments are in addition to the Viscount overhaul work presently performed at the base.
Government policy has been expressed by the ex-Prime Minis ter of Canada, the Right Honourable Lester B. Pearson, and the Minister of Transport, the Honourable Paul Hellyer, who have stated that employment levels would be maintained, and that a viable aircraft industry would continue in the place of the Air Canada maintenance facility in Winnipeg. It is difficult in our view to equate these statements with the reluctance to commit from the resources of the Government of Canada for the work of fifty persons. We are well aware that existing contracting procedures and policies in the Department of Defence Production and the Department of Industry, do not provide for a solution such as we are suggesting, but if the assurances given to the employees at the Air Canada base, to the Government of Manitoba and to the citizens of that Prov ince are to be meaningful, then these policies and practices must be amended.
To assist in the resolution of this problem, therefore, we would like to suggest the following:
1. A letter be addressed to Northwest Industries Limited, stating that it is the government's aim to maintain present employment levels and to assist in the development of a viable and continuing aircraft industry in Winnipeg.
2. This letter would agree on the validity of our need for 300,000 man hours of committed work to accomplish the desired ends.
3. The letter would state the number of man hours and the work programs which can presently be committed, based on current information.
4. The letter would agree that the Government of Canada would use its best efforts to provide additional work, for the required period of time, between that offered and the amount stipulated in our proposal.
5. The letter would agree that any work provided to the Winnipeg facility would not come from contracts or air craft programs presently handled by Northwest Industries in Edmonton.
6. The letter would state that government policy would be to encourage and support only one aircraft repair and over haul contractor in the Winnipeg area, and that future aircraft repair and overhaul programs would not be avail able to any other in the area.
7. The government would agree to assign existing land leases to Northwest Industries as per our proposal to Air Canada.
It is our desire to ensure that this venture in the Winnipeg area continues on a sustaining basis. We ask that this letter be signed by those Ministers of the Crown and their Deputies whose responsibility it would be to ensure that the work com mitments are met as stipulated.
On March 20, 1969, the Cabinet approved a reply to Mr. Reekie's letter. That reply was in the form of a letter addressed to Mr. Reekie, signed by the Honourable Paul Hellyer, Minister of Trans port, the Honourable J.-L. Pépin, Minister of Trade and Commerce, and the Honourable D. C. Jamieson, Minister of Defence Production. That letter was dated March 26, 1969. It deserves to be quoted in full since, according to the respondents, it states the terms of the contract concluded by the parties:
THE MINISTER OF TRANSPORT
OTTAWA, March 26, 1969
Mr. C. D. Reekie,
President,
CAE Industries Ltd.,
P.O. Box 6166,
Montreal 3, P.Q.
Dear Mr. Reekie:
On February 28, 1969, you wrote to Mr. E.L. Hewson of the Department of Transport asking for certain assurances in con nection with the proposed purchase of Air Canada's Winnipeg Maintenance Base by Northwest Industries Ltd., a subsidiary of CAE Industries Ltd. On the basis of an agreement having been signed by your firm and by Air Canada, the undersigned have been authorized to provide the following assurances in this matter:
(a) The Government of Canada agrees with the objective that present employment levels should be maintained and that every possible effort should be made to assist in the development of a viable and continuing aerospace industry in Winnipeg.
(b) It also agrees that 700,000 manhours of direct labour per annum is a realistic target for the operation of a viable enterprise in these facilities and that current estimates of future workload suggest a potential gap between actual and minimum levels in the years 1971 to 1976 unless new repair and overhaul work or aerospace manufacturing contracts can be obtained.
(c) The Department of Defence Production can guarantee no more than 40,000 to 50,000 direct labour manhours per year in the period 1971-1976 as "set-aside" repair and overhaul work, but the Government of Canada will employ its best efforts to secure the additional work required from other government departments and crown corporations to meet the target level of 700,000 direct labour manhours.
(d) In fulfilling the commitment set out in (c) above, the Government of Canada agrees that any additional work allocated to the Winnipeg Maintenance Base will not be taken from government contract work presently carried out by Northwest Industries in Edmonton.
(e) It further agrees that the existing Air Canada lease from the Department of Transport will be assigned to NWI
under present financial terms and conditions for a period
of ten years.
Yours sincerely,
Paul T. Hellyer
Concurred in by:
Hon. J. L. Pépin,
Minister of Trade and Commerce
Hon. D. C. Jamieson,
Minister of Defence Production
Relying on the assurances contained in that letter, CAE decided that its subsidiary would pur chase and operate the Air Canada Winnipeg facili ties. On april 2, 1969, Northwest entered into a preliminary agreement with Air Canada. Shortly afterwards, however, CAE decided that the acqui sition, instead of being made by Northwest, would be made by a new wholly-owned subsidiary of CAE named CAE Aircraft Ltd. (Aircraft). Early in September, that new subsidiary entered into the necessary agreements with Air Canada, took over the Air Canada base and began to carry on busi ness. At first everything went well, but, in 1971, the workload started to diminish. The respondents asked the appellant to comply with the commit ments contained in paragraph (c) of the March 26 letter and provide Aircraft with work. Their demands were not satisfied. As a consequence, they sued for breach of contract.
The first question to be resolved is whether the Trial Judge was right in holding that the letter of March 26, 1969, resulted in a legally enforceable contract under which:
(a) the Department of Defence Production was under an obligation to provide to the respondents at least 40,000 labour man-hours per year in the period 1971-1976 as "set-aside" repair and over haul work, 2 and
(b) the Government of Canada was obliged to use its best efforts to secure from other govern ment departments and Crown corporations the additional work required to meet during those years the annual target level of 700,000 direct labour man-hours.
z It is common ground that the phrase "set-aside work" referred to work "put into certain suppliers" without competition.
The respondents' position is that the March 26 letter contained an offer made to CAE by the three Ministers acting on behalf of the Crown. They say that this offer was impliedly accepted when Aircraft acquired the Air Canada Winnipeg facilities.
Counsel for the appellant do not deny that the respondents and the three Ministers acting on behalf of the Cabinet entered into an agreement; they do not contest either that, under that agree ment, the government might have been under a moral or political obligation to provide work to Aircraft. Their position is that this agreement was not a contract and did not impose any legally enforceable obligation on the appellant.
In support of their position, counsel for the appellant say that an examination of the circum stances in which the March 26 letter was sent shows that the parties intended to enter into a purely political arrangement rather than a con tract; they also say that the terms of the letter of March 26 show that its authors never intended to enter into a legally binding contract; finally, their last argument is that, in any event, the agreement entered into by the three Ministers and the respondents could not bind Her Majesty since the three Ministers were not authorized to contract on Her behalf.
There may exist political agreements which, like social or domestic agreements, do not give rise to any legal obligations (see: Attorney-General for British Columbia v. Esquimalt and Nanaimo Railway Company, [1950] A.C. 87 (P.C.); Meates y Attorney-General, [1979] 1 NZLR 415 (S.C.); South Australia and A.-G. (S.A.) v. Common wealth (1962), 35 A.L.J.R. 460 (H.C.); Australi- an Woollen Mills Pty. Ltd. v. The Commonwealth (1954), 92 C.L.R. 424 (Aust. H.C.), affd. [1955] 3 All E.R. 711 (P.C.); Milne v. Attorney-General for Tasmania (1956), 95 C.L.R. 460 (Aust. H.C.); Papua and New Guinea Administration v. Leahy (1961), 34 A.L.J.R. 472 (H.C.)). However, if I look merely at the circumstances in which the March 26 letter was written, I cannot say with any assurance that they disclose an intention to enter into a political arrangement rather than a con tract. It was obviously the policy of the govern-
ment of the time to try and prevent the closure of the Air Canada Winnipeg base. However, it does not follow that any agreement entered into by the government to achieve that political objective was a purely political agreement.
It is, therefore, necessary to examine the terms of the March 26 letter in order to determine whether they disclose an intention to enter into a legally binding contract.
A few preliminary observations may be made. The first one, which is far from conclusive, is that, if the parties intended to enter into a contract, it is a little surprising, in view of the importance of the matter, that they did not choose to formalize their agreement. The second observation, which is per haps a little more pertinent, is that, on its face, the March 26 letter does not appear to have been written to make an offer but, rather, to give some "assurances". That is not the kind of language normally found in an offer to enter into an impor tant contract. Thirdly, some of the assurances contained in the letter, namely those found in paragraphs (a) and (b), while disclosing an identi ty of views and purposes between the parties, have clearly no contractual connotation.
The important part of the March 26 letter is paragraph (c) which, according to the respondents, expressed two contractual promises which the appellant allegedly failed to fulfil. The first of these two promises was found in the first part of the paragraph:
(c) The Department of Defence Production can guarantee no more than 40,000 to 50,000 direct labour manhours per year in the period 1971-1976 as "set-aside" repair and overhaul work ....
The second promise was contained in the last part of the same paragraph (c):
but the Government of Canada will employ its best efforts to secure the additional work required from other government departments and crown corporations to meet the target level of 700,000 direct labour manhours.
Let us consider separately each one of these two commitments:
1. The guarantee of "set-aside" work
The Court of first instance interpreted the first part of paragraph (c) as a guarantee of at least 40,000 man-hours of "set-aside" work. That inter pretation is, in my opinion, incorrect. In that part of paragraph (c), the authors of the letter of March 26 did not give Mr. Reekie the assurance that the Department of Defence Production guar anteed or offered to guarantee his company a minimum of 40,000 man-hours of "set-aside" work; they simply assured him that "the Depart ment of Defence Production can guarantee no more than 40,000 to 50,000 manhours". In other words, they gave a mere approximation of the maximum number of hours of "set-aside" work that the Department could guarantee; this, in my view, cannot be interpreted as specifying the pre cise minimum number of hours that the Depart ment offered to guarantee.
For that reason, I am of opinion that the first part of paragraph (c) did not express the firm intention of guaranteeing a precise number of man-hours of "set-aside" work; it did not, there fore, contain an offer that the respondents could accept so as to create the contractual guarantee on which they rely.
2. The "best effort" undertaking
In the last part of paragraph (c) of their letter of March 26 to Mr. Reekie, the three Ministers gave him the assurance that:
the Government of Canada will employ its best efforts to secure the additional work required from other government depart ments and crown corporations to meet the target level of 700,000 direct labour manhours.
The problem, as I see it, is to determine whether this undertaking was sufficiently precise to mani fest an intention to enter into a contract. Indeed, in order for a contract to exist, its terms must be reasonably certain.'
That problem did not create any difficulty to the Trial Judge. He did not see any difference between this case and others where the courts have recog nized the validity of a contractual undertaking by
'See: Fridman, The Law of Contract in Canada, Carswell, 1976, pp. 33 & foll.
a person to use his best efforts or endeavours to achieve a specified result. 4
However, the meaning of a "best efforts" com mitment is not necessarily always the same. It may vary with the circumstances. In my opinion, the commitment contained in the last part of para graph (c) cannot be assimilated to a similar com mitment given by an individual in an ordinary commercial transaction.
The commitment here in question was given for the purpose of ensuring that governmental con tracts would be awarded to the CAE companies in preference to others. That commitment, however, was given in the name of the Government of Canada whose first duty it was to act in the public interest as it saw it. I cannot conceive that the government, by promising to use its best efforts to achieve a certain result, could wish to oblige itself to do things which it considered injurious to the public interest. More precisely, by promising to employ its best efforts to give work to the CAE companies, the government, in my opinion, could not mean to oblige itself to give work to those companies if the circumstances were such that, in its judgment, the public interest required that that work be given to others. The "best efforts" under taking contained in the last part of paragraph (c) must therefore be read as subject to that very important subjective qualification. When so read, it lacks, in my view, the certainty that is required of a contractual promise.
I am therefore of opinion that, as was argued by counsel for the appellant, the terms of paragraph (c) of the March 26 letter did not disclose an intention to assume contractual obligations.
I am confirmed in that conclusion when I con sider the appellant's contention that the three Min isters had no authority to bind the Crown to the kind of contract alleged by the respondents. I am indeed of the view that this contention is well founded.
The learned Judge referred to: Sheffield District Railway Company v. Great Central Railway Company (1911), 27 T.L.R. 451 (Rail and Canal Corn.); Terrell v. Mabie Todd & Coy. Ld. (1952), 69 R.P.C. 234 (Q.B.); Randall v. Peerless Motor Car Co., 99 N.E. 221 (S.C. Mass. 1912).
The Trial Judge was of a different opinion. Counsel for the respondents put forward many arguments in support of his view. He said:
(1) that the Crown had admitted that the three Ministers had the necessary authority;
(2) that the Cabinet had authorized the Minis ters to send the letter of March 26;
(3) that, as was decided by the Trial Judge, the necessary authority was confered on the Ministers by the Defence Production Act [R.S.C. 1952, c. 62], the Department of Trade and Commerce Act [R.S.C. 1952, c. 78] and the Aeronautics Act [R.S.C. 1952, c. 2];
(4) that, pursuant to the decision of the Supreme Court of Canada in the Verreault case, the three Ministers could bind the Crown even if there was no statute or order in council which conferred on them that authority; and
(5) that the Crown, in the circumstances, was estopped from relying on the lack of authority.
I see no merit in the argument that this problem was settled by an admission. The admission in question, which was made by a representative of the appellant during an examination for discovery, was to the effect that each Minister had the necessary authority under the statute governing his department. That is a question of law which could not be the subject of an admission.
What was really admitted during discovery was that the Cabinet, on March 20, 1969, had author ized the three Ministers to sign and send the letter. It is on this admission that the respondents base their argument that this authorization by the Cabinet was sufficient to confer on the three Min isters the authority to bind the Crown. That argu ment, in my opinion, should be rejected. An order in council is sufficient, in the absence of statutory provisions to the contrary, to confer authority to bind the Crown; the reason for this is that, under our system of government, the executive power is vested in the Queen who acts on the advice of her Ministers and expresses herself in the form of orders in council. A decision of the Cabinet, how ever important as it may be, is not a decision of the
Queen who is not a party to it. For that reason, a simple authorization of the Cabinet cannot be assimilated to an order in council.
I cannot see any merit, either, in the contention, which found favour with the Trial Judge, that the three then Ministers had been conferred the neces sary authority by the Defence Production Act,' the Aeronautics Act 6 and the Department of Trade and Commerce Act. 7
True, sections 15 and 17 of the Defence Produc tion Act authorized the Minister of Defence Pro duction to enter into contracts, on behalf of Her Majesty, for the maintenance and service of defence supplies (including aircraft) and sections 2 and 3 of the Aeronautics Act imposed on the Minister of Transport the duty "to control and manage" all civilian aircraft "necessary for the conduct of any of Her Majesty's services". How ever, the contract that was allegedly entered into on behalf of Her Majesty in this case was neither a contract for the maintenance of government air craft nor a contract whereby the Minister of Transport exercised his power of control and man agement over civilian aircraft used by the Govern ment. It was a contract which provided that con tracts for the maintenance of aircraft would be negotiated with CAE companies; that contract, which could have no immediate effect on the maintenance and servicing of aircraft, was alleged ly entered into for the sole purpose of preventing the closure of the Winnipeg Air Canada base by inducing the CAE companies to acquire and oper ate it; it was not, in my opinion, a contract that the Minister of Defence Production and the Minister of Transport were authorized to enter into by the Defence Production Act and the Aeronautics Act.
As to the Minister of Trade and Commerce, who also signed the March 26 letter, I do not see how the Department of Trade and Commerce Act 8 could be interpreted so as to authorize him to enter into a contract of the sort that was alleged by the respondents. That statute did not contain any description of the sphere of governmental business
5 R.S.C. 1952, c. 62, as amended.
6 R.S.C. 1952, c. 2. R.S.C. 1952, c. 78. 8 R.S.C. 1952, c. 78.
that was assigned to the Department of Trade and Commerce. It merely created a department called "the Department of Trade and Commerce", pro vided that the Minister of Trade and Commerce should have "the management and direction" of that Department and described in the following manner the duties and powers of the Minister:
5. The duties and powers of the Minister of Trade and Commerce extend to the execution of laws enacted by the Parliament of Canada, and of orders of the Governor in Council, relating to such matters connected with trade and commerce generally as are not by law assigned to any other department of the Government of Canada, as well as to the direction of all public bodies, officers and servants employed in the execution of such laws and orders.
It is common ground that there was no statute or order in council contemplating the conclusion of a contract such as the one here in question. It fol lows, in my view, that the Minister of Trade and Commerce did not have the statutory authority to bind the Crown to the kind of contract alleged by the respondents.
As I understand it, the decision of the Supreme Court of Canada in Verreault 9 does not help the respondents. It stands for the proposition that, in the absence of statutory provisions to the contrary, a minister, in order to have the authority to enter into a contract on behalf of the Crown, need not be expressly authorized by statute or order in council provided that the contract in question be directly related to that part of the government business that is assigned to his department. In the instant case, the contract that was alleged by the respond ents was not, as I have already said, directly related to the sphere of activity of any of the three departments concerned.
Moreover, even if the connection between that contract and the sphere of business assigned to these departments were considered to be sufficient to support the application of the Verreault princi ple, I would still hold that it does not apply. Under the Government Contracts Regulations, 10 a minis ter, before entering into a service contract, was normally required to call tenders. Obviously, the contract that was alleged by the respondents was
9 Verreault (J. E.) & Fils Ltée v. Attorney General (Quebec), [1977] 1 S.C.R. 41.
10 SOR/64-390, ss. 14 and following, as amended by SOR/ 68-89, s. 1.
not itself a service contract. However, it contem plated that service contracts would be entered into in the future and its performance required that those service contracts be awarded without regard to the requirements of the Government Contracts Regulations. In the absence of an express statu tory provision to the contrary, the power of a minister to enter into a contract on behalf of the Crown is subject to the limitations imposed on that power by statute and regulations; for that reason, the three Ministers did not have the authority to enter into a contract which could not be executed without violating the Government Contracts Regulations.
Finally, I would reject the respondents' argu ment based on estoppel. In so far as I know, a person cannot, by his own representations, make himself the agent of another.
I am therefore of opinion that the respondents' action for breach of contract should not have succeeded. This, however, does not dispose of the appeal since the respondents' action was framed both in contract and in negligence. The Trial Judge, having found that the appellant was liable in contract, did not find it necessary to deal with this second aspect of the case. However, we cannot ignore it since counsel for the respondents argued that if the Court were to find no valid enforceable agreement, it should nevertheless find that the appellant was liable to the respondents on the basis of negligent misstatements contained in the letter of March 26, 1969. That contention is untenable. The letter did not contain any misstatements that could be the source of a liability in tort. Moreover, even if the three Ministers had, when they signed and sent the letter, committed a tort that could be the source of Crown liability under the Crown Liability Act," there is no evidence that the respondents suffered damages as a consequence of that tort. Indeed, if the letter of March 26, 1969, had not been sent, it is likely that no CAE com pany would have purchased the Air Canada Win- nipeg base; however, the record does not show that the respondents' present situation is worse than it
" R.S.C. 1970, c. C-38.
would have been if that acquisition had not taken place.
I would allow the appeal with costs, dismiss the cross-appeal with costs, set aside the judgment of the Trial Division and dismiss with costs the respondents' action.
* * *
The following are the reasons for judgment rendered in English by
URIE J.: I have had the advantage of reading the draft reasons for judgment of each of my brothers, Pratte and Stone JJ. I agree with those of Mr. Justice Stone, including his proposed dispo sition of the appeal. I merely wish to add this observation. It is abundantly clear from the evi dence that until sometime in the latter part of 1973, four years after the commitments of March 26, 1969 had been entered into, all of those per sons who had been employed in implementing them, viewed the letter as being contractual in nature. As Stone J. has pointed out, there had been, in fact, substantial compliance with its terms, i.e., there had been part performance of the mutual obligations contained therein. That fact cannot be overlooked in deciding whether or not there had been an intention to contract and wheth er or not a contract had resulted. In such circum stances, only if the evidence is clear and unmistak able should the conclusion be that the parties neither intended to contract nor did they in fact, enter into a contract. For the reasons given by Stone J., I am of the opinion that the evidence is clear and unmistakable that the parties intended to and did, in fact, enter a binding contract.
* * *
The following are the reasons for judgment rendered in English by
STONE J.: I have had the advantage of reading in draft the reasons for judgment prepared by Mr. Justice Pratte. As the facts of the case are set out with some particularity in the reasons for judg ment of the Trial Judge 12 as well as by Mr. Justice Pratte it is not necessary to repeat them here.
12 [1983] 2 F.C. 616 (T.D.).
Five major questions are raised by this appeal and cross-appeal. For the appellant it is argued that the parties did not intend to form a binding legal contract, that if they did the document in question is so vague and uncertain or incomplete as to be unenforceable, that if it is not it cannot be enforced because it does not bind the appellant, that if it binds the appellant the learned Judge erred in concluding that the contract was breached and, finally, that he erred in quantifying damages flowing from that breach and in fixing the rate of interest. For their part the respondents join issue on these questions and press an alternative argu ment based upon negligent misstatement. By their cross-appeal they also contend that an error was made in assessing damages but say that an increased quantum ought to have been allowed and so also with costs.
Before taking up these issues, I should first deal with a preliminary point that was argued before us concerning the identity of the second party to the contract assuming, for the purpose, that a contract was made. The evidence on the point was referred to and considered by the learned Trial Judge so it is unnecessary to review it in detail. The respond ent CAE Industries Ltd. is the parent of two subsidiary companies. One is Northwest Industries Ltd. which, during the material period, carried on an aircraft maintenance operation at Edmonton. The second, the respondent CAE Aircraft Ltd., was incorporated a few weeks subsequent to March 26, 1969 for the express purpose of pur chasing and operating Air Canada aircraft mainte nance base at Winnipeg and it did so. CAE Indus tries Ltd. had also been involved for some time in the same line of business at its facilities in Mon- treal. It is clear and the learned Judge so found, that shortly after the initial contact was made with Northwest the president of CAE Industries Ltd., Mr. C. D. Reekie, became actively involved in the negotiations which led up to the letter of March 26, 1969.
The record discloses however that virtually until early 1969 the negotiations contemplated North west as the future purchaser and operator of the base. Indeed the letter of March 26, 1969 itself, while addressed to Mr. Reekie as president of CAE Industries Ltd., refers to the "proposed pur chase of Air Canada's Winnipeg Maintenance Base by Northwest Industries Ltd., a subsidiary of CAE Industries Ltd." The appellant argues from the evidence that it was therefore Northwest that became the other party to the contract and that neither CAE Industries Ltd. nor its subsidiary CAE Aircraft Ltd. is a party. From this it argues that Northwest was the proper party to the action as only it could recover any damages that result from a breach of the contract or, alternatively, in tort.
The respondents take the position that the learned Trial Judge was correct in treating them as the proper parties in that the letter of March 26, 1969 was addressed to CAE Industries Ltd. and that CAE Aircraft Ltd. came onto the scene as the buyer and operator of the Winnipeg base at the behest of its parent and with the full knowl edge of the government. Any interests which may have been held by Northwest, they claim and the Trial Judge agreed, became vested in CAE Air craft Ltd. by way of equitable assignment.
What impresses me most about the evidence is that throughout the negotiations it was the desire of the government to strike a deal with CAE Industries Ltd. in one form or other and, more over, that it seemed to matter not whether the deal was struck with the parent company or with a subsidiary. The CAE group of companies were seen as having the desired qualifications to pur chase and operate the base which remained throughout the central objective of the negotia tions. Viewed in this way I do not think we should be too astute to look for a technical answer on the point, the overall intention being apparent. I incline to the view that the contract, if any, was made with CAE Industries Ltd. but otherwise that CAE Aircraft Ltd., though incorporated after the offer was made, was accepted by both sides to the negotiations as a suitable substitute. In the latter case I would respectfully agree with the learned Trial Judge that the evidence supports the vesting
in CAE Aircraft Ltd. of any interest in the con tract which Northwest may have acquired. (See e.g. Brandt's (William) Sons & Co. v. Dunlop Rubber Company, [1905] A.C. 454 (H.L.), per Lord Macnaghten, at page 462.) I think the Trial Judge was correct in treating both CAE Industries Ltd. and its subsidiary CAE Aircraft Ltd., the respondents herein, as having a sufficient interest to support the causes of action alleged. For the sake of convenience I will refer to both respond ents simply as "the respondent".
I now turn to discuss the major issues identified above.
Was a Contract Intended?
The appellant contends that in the circum stances the letter of March 26, 1969 was never intended to become a binding legal contract, assuming always that it can be characterized as an offer that was accepted by the respondent and that there was legally sufficient consideration. It is the question of intention to enter a contract that arises here. I take as a starting point the following statement of the law in Attorney-General for Brit- ish Columbia v. Esquimalt and Nanaimo Railway Company, [1950] A.C. 87 (P.C.), at page 108:
Besides involving an offer and an acceptance (either of which may in appropriate cases be expressed in words or by conduct) and the presence of consideration a contract can only come into existence if an intention to contract is present.
See also Rose and Frank Co. v. Crompton and Brothers, [1923] 2 K.B. 261 (C.A.).
I share the view expressed by Mr. Justice Pratte that the circumstances in which the letter was written do not disclose an intention to enter into a purely political arrangement rather than a con tract. Intention to enter a contract may be gath ered from the surrounding circumstances, as was pointed out by Middleton J. in Lindsey v. Heron & Co. (1921), 64 D.L.R. 92 (Ont. C.A.), at pages 98-99 quoting from Corpus Juris, Vol. 13 at page 265:
The apparent mutual assent of the parties essential to the formation of a contract, must be gathered from the language employed by them, and the law imputes to a person an inten tion corresponding to the reasonable meaning of his words and acts. It judges of his intention by his outward expressions and excludes all questions in regard to his unexpressed intention.
The government of the day was faced with a decision by Air Canada to phase out its aircraft maintenance base at Winnipeg. The initiative to find a buyer in the private sector was taken by the government itself and it was the government that approached the respondent as a potential buyer. It was seeking through the respondent a solution for a particular problem. It was eager and anxious to find a buyer so that the maintenance base and associated employment in Winnipeg could be preserved.
In my view the circumstances in which the letter was written distinguishes this case from others where it has been found that no intention to con tract was present. (See e.g. Joy Oil v. The King, [1951] S.C.R. 624; 3 D.L.R. 582, and Meates y Attorney-General, [1979] 1 NZLR 415 (S.C.)). It is clear from the evidence that the parties treated the document as a binding contract to the extent that it was partly performed. Moreover, as has been pointed out the onus of proof in a case of this kind "is on the party who asserts that no legal effect was intended, and the onus is a heavy one" (Edwards v. Skyways Ltd., [1964] 1 W.L.R. 349 (Q.B.), at page 355; and see also Bahamas Oil Refining Co. v. Kristiansands Tankrederei AIS and Others and Shell International Marine Ltd. (The "Polyduke"), [1978] 1 Lloyd's Rep. 211 (Q.B.)). It is my view that that burden has not been discharged. I have concluded on the basis of evidence and the findings of the Judge below that there was an intention on the part of both parties to enter into a binding legal contract.
Is the Contract Vague and Uncertain or Incomplete?
My conclusion that the parties intended to enter into a binding legal contract does not mean that they succeeded in doing so. The appellant stren uously contends that the language used by the parties is so vague and uncertain or the document is so incomplete as to render the contract unen forceable. The learned Judge below disagreed.
No doubt the parties chose to cast their agree ment, arrived at after lengthy negotiations, in a somewhat unusual form and style. But that, in
itself, ought not to deter us from giving it effect if the parties have expressed themselves in language sufficiently clear as to have created rights and obligations enforceable in a court of law. This is especially so where, as already noted, the contract has been partly performed for then, as Mignault J. said in Kelly v. Watson (1921), 61 S.C.R. 482, at page 490, unless it be incomplete "the court ... will struggle against the difficulty ensuing from the vagueness of the contract." As in Hillas and Co. Limited v. Arcos Limited (1932), 147 L.T. 503 (H.L.) we are dealing here with a commercial contract and as Lord Wright pointed out in that case (at page 514):
Business men often record the most important agreements in crude and summary fashion; modes of expression sufficient and clear to them in the course of their business may appear to those unfamiliar with the business far from complete or precise. It is accordingly the duty of the court to construe such docu ments fairly and broadly, without being too astute or subtle in finding defects ....
I am of the view that we should make every effort to find a meaning in the words actually used by the parties in deciding whether an enforceable contract exists. That, it seems to me, is called for by the cases. Thus in Marquest Industries Ltd. v. Willows Poultry Farms Ltd. (1969), 66 W.W.R. 477 (B.C.C.A.), it was stated (at pages 481-482):
In the first place, consideration must be given to the duty of a court and the rules it should apply, where a claim is made that a portion of a commercial agreement between two con tracting parties is void for uncertainty or, to put it another way, is meaningless. The primary rule of construction has been expressed by the maxim, "ut res magis valeat quam pereat" or as paraphrased in English, "a deed shall never be void where the words may be applied to any extent to make it good." The maxim has been basic to such authoritative decisions as Scam- mell & Nephew Ltd. v. Ouston [1941] AC 251, 110 LJKB 197, [1941] 1 All ER 14; Wells v. Blain [1927] 1 WWR 223, 21 Sask LR 194 (C.A.); Ottawa Elec. Co. v. St. Jacques (1902) 31 SCR 636, reversing 1 OLR 73, as well as many others, which establish that every effort should be made by a court to find a meaning, looking at substance and not mere form, and that difficulties in interpretation do not make a clause bad as not being capable of interpretation, so long as a definite meaning can properly be extracted. In other words, every clause in a contract must, if possible, be given effect to. Also, as stated as early in 1868 in Gwyn v. Neath Canal Navigation Co. (1868) LR 3 Exch 209, 37 LJ Ex 122, that if the real intentions of the parties can be collected from the language within the
four corners of the instrument, the court must give effect to such intentions by supplying anything necessarily to be inferred and rejecting whatever is repugnant to such real intentions so ascertained.
On the other hand I would also agree that the contract before us would not be good if it is so vague and uncertain as to be unenforceable, or if it is incomplete in the sense described in May and Butcher, Ltd. v. R., [1929] All E.R. Rep. 679 (H.L.), at page 682, where Lord Buckmaster wrote:
It has been a well-recognised principle of contract law for many years that an agreement between two parties to enter into an agreement by which some critical part of the contract matter is left to be determined is no contract at all.
Viscount Dunedin added the following observa tions (at pages 683-684):
The law of contract is that to be a good contract you must have a concluded contract, and a concluded contract is one which settles everything that is necessary to be settled, and leaves nothing still to be settled by agreement between the parties. Of course, it may leave something which still has to be determined, but then that determination must be a determination which does not depend on the agreement between the parties.
In this country, a land purchase contract which provided that the balance of the purchase price was "to be arranged" was found by the Supreme Court of Canada to be unenforceable in that the Court could not make the bargain that the parties themselves had not made (Murphy v. McSorley, [1929] S.C.R. 542).
Is the contract in question so incomplete as to be unenforceable within these principles? In my opin ion it is not. Unlike in the cases referred to, it does not leave anything unsettled that was necessary to be settled between the parties. It is in itself an entire contract capable of standing on its own feet. The fact that, following on its own performance, there would need to be formed individual service contracts for the carrying out of individual items of aircraft repair and overhaul work did not, to my mind, detract from its central commitment which was to "set-aside" repair and overhaul work and to employ "best efforts" to secure other like work for the respondent within the context of the letter of March 26, 1969.
The more difficult question, it seems to me, is whether the contract is capable of being enforced
despite what I think may properly be viewed as a certain looseness of language as, for example, the presence of such terms as "assurances" in the first paragraph, as well as "can guarantee", "set-aside" and "best efforts" appearing in paragraph (c) of the letter. As to the first of these I have no difficulty in concluding in the circumstances that what were described as "assurances" were, upon acceptance by the respondent, intended to be and did become binding commitments. That this is so is reflected in paragraph (d) immediately follow ing where the words "In fulfilling the commitment set out in (c) above" appear. Clearly, the ministers viewed paragraph (c) as a "commitment" despite the use of the word "assurances" in the first paragraph of the letter. I would view the term "can guarantee" in the same light. It was intended to convey and did convey the limit of "set-aside" repair and overhaul work the respondent could expect to receive if it decided to accept what by that time had become a counter-proposal. Upon acceptance the proposal became a binding commit ment guaranteeing provision of "set-aside" work. At the same time that commitment must be con strued in a reasonable fashion in the light of the language used, for I would agree that as a guaran tee it had to be definite in extent. It is my view that by the language used the parties intended that at least 40,000 direct labour man-hours of "set- aside" work would be provided. As both parties conceded before us, any hours in excess of that figure were not within the "set-side" guarantee.
The term "set-aside" was itself the subject of evidence at trial to the effect that it consisted of work to be directed to the respondent without competition to be performed at full in-plant over head rates. There was also evidence that it consist ed simply of work done without competition and without any contribution to overhead. The Trial Judge, it appears, accepted that the former was the case and rejected the latter evidence. On the basis of that evidence he concluded (at page 638) that the "set-aside" work was "a guarantee with no strings attached" and that the appellant was bound to carry out this aspect of the agreement even if it was necessary "to take work away from others". I am unable to disagree with his finding in this regard or with the interpretation he placed
upon the term based upon his appreciation of the evidence before him. In all of the circumstances surrounding the transaction the explanation of the appellant's witnesses as to the meaning of the term "set-aside" is simply not a reasonable one. That, in effect, was the conclusion which the Trial Judge drew, perhaps not specifically but as he clearly implies in his reasons.
Finally, I come to the term "best efforts" which the government promised to employ to secure ad ditional work. The appellant attacks it as so lack ing in precision as to render it incapable of creat ing legal rights and obligations enforceable in a court of law. I would agree that it is a rather general term but our task here is to discover, if we can, what the parties intended by it. It was the view of the learned Trial Judge that it is an equivalent term to "best endeavours" as interpret ed in the case of Sheffield District Railway Com pany v. Great Central Railway Company (1911), 27 T.L.R. 451 (Rail and Canal Corn.) where A. T. Lawrence J. (sitting as a member of the Railway and Canal Commission) stated (at page 452) that, subject to certain qualifications, the term, broadly speaking, meant "leave no stone unturned". In my view the construction of the term "best efforts" must be approached in the light of the contract itself, the parties to it and its overall purpose as reflected in the language it contains. It created a broad obligation to secure for the respondent air craft repair and overhaul work up to the limit it lays down.
This did not mean, and the contrary is not suggested, that it required the government to disregard any existing contractual obligations or, certainly, to neglect the public interest. To the extent that that interest required work to be done by persons other than the respondent, there could be no valid complaint that the contract would thereby be breached. Indeed, this limitation seems implicit in the language of the contract itself for the appellant did not bind itself to provide work to the respondent but only to employ its "best
efforts" to secure it. I am therefore unable to find anything in the language of the contract which purported to bind the appellant to a course of action that would be contrary to the public interest.
In summary, I would respectfully agree with the conclusion arrived at by the learned Trial Judge that this feature of the contract obliged the gov ernment to employ its "best efforts" to secure additional work from other departments and crown corporations "in respect of any shortfall up to 700,000 hours per year for the years 1971 to 1976". He put it in greater detail (at page 635) in this way:
The agreement by the defendant was to provide a guaranteed number of man-hours from DDP and to use its (the Crown's) best efforts to make up any shortfall between what was realized by the plaintiffs from that and other sources, up to 700,000 hours per annum. I have summarized the agreement in broad terms. From a strict legal view, no further matters had to be agreed upon. Best efforts, from the defendant's side to provide the necessary hours, were required. How those best efforts were to be made, when and if necessary, was up to the defendant. As a matter of commercial and practical necessity, consultation and negotiation as to the work, and cost of it, which would go to any 700,000-hour shortfall, would likely have taken place. In fact, that is what happened. But as a matter of binding legal necessity, no further agreements, to make the March 26 letter valid, were required.
Does the Contract Bind the Crown?
It is necessary now to consider whether the contract in question binds the appellant. The learned Trial Judge was of the opinion that it did and that the respondent was entitled to damages for its breach. In so deciding it was his view that the action of the three Ministers who signed it was the action of the government in that these Minis ters either had actual authority to bind the Crown under a number of federal statutes" or that the Ministers had ostensible authority to do so thereby rendering applicable the principle enunciated by the Supreme Court of Canada in Verreault (J. E.) & Fils Ltée v. Attorney General (Quebec), [1977] 1 S.C.R. 41. The appellant takes the posi-
13 The statutory provisions relied upon are found in the Defence Production Act, R.S.C. 1952, c. 62 as amended, the Aeronautics Act, R.S.C. 1952, c. 2 and the Department of Trade and Commerce Act, R.S.C. 1952, c. 78.
tion that the Ministers' actions did not bind the Crown to the contract because they had neither actual nor ostensible authority. Indeed it is urged that the appellant can only be bound in contract if authority to do so is found under a statute or an order in council. Actual authority of the Ministers to bind the Crown in virtue of their statutorily conferred powers of "management" or "direction" of the departments they head, it is argued, does not extend to authorize the signing of a contract of the kind that is in issue.
In order to put the issue in perspective it is necessary to review decided cases which preceded that of Verreault and then to decide whether the principle of that decision is applicable here. In a line of decisions of the Exchequer Court of Canada reaching back into the last century, the view has been consistently expressed that authority to bind the Crown in contract must be founded either upon a statute or an order in council. It was thus expressed by Mr. Justice Audette in The King v. McCarthy (1919), 18 Ex.C.R. 410, at page 414:
Unless authorized by order in council or by statute, a Minister of the Crown cannot bind his Government. 14
14 I consider the word "government" in this context to be quite appropriate though it leaves open the principal question wheth er the "government" or the "Crown" (whichever term be used) is bound by a given contract. A disinclination to differentiate between the two terms was expressed in the House of Lords by Lord Diplock in Town Investments Ltd. v. Department of the Environment, [1978] A.C. 359 (at p. 381):
Where, as in the instant case, we are concerned with the legal nature of the exercise of executive powers of govern ment, I believe that some of the more Athanasian-like fea tures of the debate in your Lordships' House could have been eliminated if instead of speaking of "the Crown" we were to speak of "the government"—a term appropriate to embrace both collectively and individually all of the ministers of the Crown and parliamentary secretaries under whose direction the administrative work of government is carried on by the civil servants employed in the various government depart ments. It is through them that the executive powers of Her Majesty's government in the United Kingdom are exercised, sometimes in the more important administrative matters in Her Majesty's name, but most often under their own official designation. Executive acts of government that are done by any of them are acts done by "the Crown" in the fictional sense in which that expression is now used in English public law.
That learned Judge cited several cases in support of this view, the earliest being The Quebec Skating Club v. The Queen (1893), 3 Ex.C.R. 387. My appreciation of that case is that, because of statu tory restrictions, the lands which the petitioner had agreed to accept in substitution for his own could not be transferred by the Governor in Council and that the authority of a further statute was required. That being so, an agreement made by the minister with the appellant in the absence of statu tory authority lacked binding effect. Nevertheless, the views of Mr. Justice Audette were subsequent ly accepted as "an elementary principle" (Drew, Aileen M. v. The Queen, [1956-1960] Ex.C.R. 339, at page 350) and "as a general proposition" (Walsh Advertising Co. Ltd. v. The Queen, [1962] Ex.C.R. 115, at page 123). 15 It is to be noted that these decisions were based upon the existence of express statutory restrictions regulating the power to contract. 16
15 In Wood v. The Queen (1877), 7 S.C.R. 634 the Chief
Justice of Canada, Sir William B. Richards, sitting as a
member of the Exchequer Court of Canada, stated (at p. 644):
The Public Works Department in this Dominion, being a department of state, presided over by a minister of the Crown, responsible to Parliament for the conduct of the business of his department, may, I have no doubt, as the agent of or representing the Crown in all matters under the charge of that department, make agreements and enter into contracts which would bind the Crown, unless there is some legislative enactment or, perhaps, Orders in Council, control ling and limiting such power.
However, Mr. Justice Thurlow (as he then was), in giving judgment in the Walsh Advertising case, was of the view that certain statements in the Wood case could not prevail over different views expressed in Drew, Aileen M. v. The Queen, The King v. McCarthy and, possibly, Livingston vs The King (1919), 19 Ex.C.R. 321.
16 The latest statement in this Court on the subject is contained in the dictum of Chief Justice Jackett in R. v. Transworld Shipping Ltd., [ 1976] 1. F.C. 159 (C.A.) where he stated (at p.
163):
With regard to departmental authority in respect of con tracting, just as when any person contracts as agent of an ordinary person, so, when some person contracts on behalf of Her Majesty, there must be authority for the agent to act on behalf of the principal; and, in the case of a government under our system of responsible government, such authority must ordinarily be found in or under a statute or an order in council. In this connection, it is to be noted that ordinary government operations in Canada are divided among statutorily created departments each of which is presided over by a Minister of the Crown who has, by statute, the "management" and direction of his department. In my view,
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The decisions of the Supreme Court of Canada in the Jacques-Cartier Bank v. The Queen (1895), 25 S.C.R. 84 and The King v. Vancouver Lumber Co. (1914), 41 D.L.R. 617 (Ex. Ct.) [affirmed on appeal to Supreme Court of Canada, December 4, 1914] are also cited in support of the principle relied on in the McCarthy case. In the first of these cases it was held that a minister lacked authority to bind the Crown where the subject- matter of the alleged contract (the printing of certain material) had not been authorized by the House which had taken some action concerning the matter but had stopped short of authorizing the printing. The Vancouver Lumber decision (subsequently upheld by the Privy Council (1919), 50 D.L.R. 6) held that in the absence of a further order in council authorizing him to do so, a minis ter had no authority to alter a contract made pursuant to an order in council. To the same effect is the decision of the Privy Council in Mackay v. Attorney-General for British Columbia, [1922] 1 A.C. 457. There, the power to enter into a contract had been conferred by statute upon the Lieuten- ant-Governor in Council, leading their Lordships to conclude (at pages 461-462) that in the absence of an order or resolution of the Lieutenant-Gover nor in Council, "the mere assent of the ministers of the day to the contract could not ... make the contract a legally binding one...." See also Prov ince of Quebec v. Province of Ontario (1909), 42 S.C.R. 161.
It seems to me that the decisions referred to above support the broad proposition that where a statute regulates the power to make contracts, a contract binding upon the Crown does not come into existence unless the requirements of the stat ute are fulfilled. The decision of the Exchequer Court of Canada in Livingston vs The King (1919), 19 Ex.C.R. 321 appears not so qualified, holding that a contract to bind the Crown for a term of years required authorization by the Gover nor in Council. The question is not otherwise discussed in that case and there is absence of reliance upon prior authorities. The above proposi-
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subject to such statutory restrictions as may otherwise be imposed, this confers on such a Minister statutory authority to enter into contracts of a current nature in connection with that part of the Federal Government's business that is assigned to his department.
tion was, I think, well put by Rich J. in State of New South Wales v. Bardolph (1933-1934), 52 C.L.R. 455 (Aust. H.C.) (at page 496):
When the administration of particular functions of Government is regulated by statute and the regulation expressly or impliedly touches the power of contracting, all statutory conditions must be observed and the power no doubt is no wider than the statute comtemplates.
This passage was cited with approval by Lord Wilberforce in Cudgen Rutile (No. 2) Pty. Ltd. v. Chalk, [1975] A.C. 520 (P.C.), at page 533.
In concluding that the Ministers in question had authority to contract on behalf of the Crown, the Trial Judge relied upon the Verreault case which he interpreted (at page 630) as rejecting as too restrictive "the proposition that Crown contracts can only be valid when authorized by Order in Council, or by a statute" and (at page 631) as applying the doctrine of "apparent or ostensible authority". Under ordinary principles of the law of agency ostensible authority requires a representa tion by the principal as to the extent of the agent's authority. (See e.g. Attorney-General for Ceylon v. A. D. Silva, [1953] A.C. 461 (P.C.), at page 479.)
The facts of the Verreault case were straight forward. On June 7, 1960 the Deputy Minister of Social Welfare for Quebec signed an agreement with the appellant for the construction of a home for the aged. On June 22 of that year a provincial general election was held as a result of which a new government took office. Two months later the appellant was ordered by the new government to stop work under the contract. The following month the contract was cancelled and the work put out to public tender. The appellant sued for loss of profit and for damages to reputation. He succeeded at trial but failed on appeal. The Quebec Court of Appeal held that under section 10 of The Depart ment of Social Welfare Act, S.Q. 1958-59, c. 27, the Minister of Social Welfare on whose behalf the contract was signed lacked authority to enter a construction contract but had authority to enter one for the purchase of land. Section 10 of the statute reads:
10. The Lieutenant-Governor in Council may authorize the Minister of Social Welfare, upon such conditions as he deter mines, to organize schools and other institutions administered by the Department of Social Welfare.
He may also authorize him to acquire, by agreement or expro priation, lands or immovables necessary for such purposes.
It was also provided, in section 8 of the statute, that a contract did not bind the Department unless signed by the Minister or by the Deputy Minister.
As Pigeon J. put it (at page 46), the question in that case was "whether, in the absence of any statutory restriction a minister is capable of con tracting in the name of the government." After quoting with approval the following statement of the law from Griffith and Street, Principles of Administrative Law (3rd. ed., 1963, at page 269):
... a contract made by an agent of the Crown acting within the scope of his ostensible authority is a valid contract by the Crown; in the absence of a Parliamentary appropriation either expressly or impliedly referable to the contract, it is unenforceable.
and, after noting that under section 9 of The British North America Act, 1867 [30 & 31 Vict., c. 3 (U.K.) [R.S.C. 1970, Appendix II, No. 5]] (now the Constitution Act, 1867 [30 & 31 Vict., c. 3 (U.K.) [R.S.C. 1970, Appendix II, No. 5] (as am. by Canada Act 1982, 1982, c. 11 (U.K.), Schedule to the Constitution Act, 1982, Item 1)]) "executive authority is vested in the Queen", he answered the question on behalf of a unanimous Supreme Court (consisting of Laskin C.J., Pigeon, Dickson, Beetz and de Grandpré JJ.), in this way (at page 47):
Her Majesty is clearly a physical person, and I know of no principle on the basis of which the general rules of mandate, including those of apparent mandate, would not be applicable to her. In this respect the position of ministers and other officers of the government is fundamentally different from that of municipal employees. In our system municipalities are the creatures of statute, and the ultra vires doctrine must accord ingly be applied in its full rigour.
With regard to certain earlier cases, the Supreme Court was of the view (at page 48) that "in most instances the opinion expressed on this point was merely given obiter, and not as the basis for the
conclusion". Concerning the Walsh Advertising case in particular it was observed (at page 49):
... it must be noted that the judgment was rendered after the coming into force of the Financial Administration Act, R.S.C. 1952, c. 116. In this kind of code on the subject of government contracts, restrictive provisions were to be found which had to be applied, without it being really necessary to have resort to general principles. As counsel for the appellant pointed out at the hearing of the instant case, it was not until 1961 that the Quebec Legislature enacted similar provisions (1960-61 (Que.), c. 38).
In the result the Supreme Court concluded that the contract in question was binding and that the appellant was entitled to damages for its cancellation.
I am satisfied that by its decision in Verreault the Supreme Court of Canada meant to depart from what had been regarded as conventional legal wisdom, namely, that a minister of the Crown has no authority to bind the Crown in contract unless the authority to do so exists under a statute or an order in council. I understand that case to hold that by the general rules of mandate including those of apparent mandate a minister of the Crown as head of a government department has authority to bind the Crown in contract unless that authority is restricted by or pursuant to statute." In my view the subject-matter of the contract with which we are concerned fell within the general responsibili ties of the ministers from whose departments the work with which it is concerned would emanate or was related. True, the letter was signed by only three ministers but, as the learned Trial Judge found (at page 625) the "Cabinet of the day had, on March 20, 1969, authorized the three Ministers to sign the letter of March 26". It seems to me that this action by the ministers constituted by each of them an exercise of his authority to the extent necessary even though the letter was signed by only three of his colleagues. The overall inten tion, it appears, was that the government fully intended to be bound.
17 The Crown as a non-statutory corporation sole has power to contract without the need for specific statutory authority, nevertheless, as was pointed out by the learned editors of Chitty on Contracts (25th ed., Vol. 1) (1983) para. 685, at pp. 369-370, this must be subject to any statute restricting that power or the scope of authority of individual ministers:
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There remains a question whether in the present circumstances the authority of the ministers in signing or approving of the March 26, 1969 letter was somehow restricted by statute so as to make their actions non-binding upon the Crown. This calls for some consideration of the relevant legisla tion. By paragraph 3(d) of the Aeronautics Act the duty to "control and manage all aircraft and equipment necessary for the conduct of any of Her Majesty's services" was placed upon the Minister of Transport and, in any matter relating to defence, upon the Minister of National Defence. I can find nothing in this language restricting the authority of either of the ministers as head of his respective department. Nor do I find any such restriction in the relevant language of the Depart ment of Trade and Commerce Act. In particular I do not read the provisions of section 5 thereof as limiting the general authority conferred by section 3. Those two sections read:
3. The Minister of Trade and Commerce shall be a member of the Queen's Privy Council for Canada, holds office during pleasure and has the management and direction of the Depart ment of Trade and Commerce.
5. The duties and powers of the Minister of Trade and Commerce extend to the execution of laws enacted by the Parliament of Canada, and of orders of the Governor in Council, relating to such matters connected with the trade and commerce generally as are not by law assigned to any other department of the Government of Canada, as well as to the direction of all public bodies, officers and servants employed in the execution of such laws and orders.
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As a non-statutory corporation sole the contracts of the Crown are not subject to the ultra vires doctrine. In certain cases the powers of individual ministers have been defined by statute or statutory instruments.... These may limit the capacity of the Crown itself (Cugden Rutile (No. 2) Ltd. v. Chalk [1975] A.C. 520), or the scope of authority possessed by Crown agents (Daintith 1979) 32 Current Legal Prob lems 41, 42-45; see post, § 695). Apart from such statutory restrictions, the Crown has the power to contract without the need for any specific statutory authority. It has been suggest ed that this may be the case only for contracts which are incidental to the ordinary and well-recognized functions of government (New South Wales v. Bardolph (1934) 52 C.L.R. 455, 474-496, 502-503, 508, 518) although there appears to be no reason in principle for this limitation (Verreault & Fils Ltée v. Att.-Gen. for Quebec (1975) 57 D.L.R. (3d) 403 (Sup. Ct. of Canada); Campbell (1970) 44 A.L.J. 14; Hogg, Liability of the Crown (1971), pp. 120-121; Turpin, Government Contracts (1972), p. 19).
It is noteworthy here that the general authority of the Minister is not in any way limited by the provisions of section 5. Rather, as I read that section it is, as it states by use of the words "extend to", intended to extend the Minister's duties and powers to the matters mentioned there in rather than to limit them. As head of his Department the Minister held a general mandate of "management and direction". 18
A review of the provisions of the Defence Pro duction Act has not convinced me that it contained any restriction on the power of the responsible Minister to contract in the matter. The Minister was authorized, as section 15 made clear, to "repair, maintain or service defence supplies" and by section 1 thereof defence supplies included an aircraft. Paragraph 17(1)(d) [as am. by S.C. 1967-68, c. 27, s. 1] of the statute applied with respect to every contract entered into by the Min ister on behalf of Her Majesty:
17. (1)
(d) no contract may be entered into by the Minister except in accordance with such regulations under the Financial Administration Act as apply to the contract.
18 While statutory language respecting the creation of gov ernment departments, the appointment of the minister and his general mandate is not uniform, (see sections 2 and 3 of the Department of Trade and Commerce Act, sections 3 and 9 of Defence Production Act, and section 3 of the Department of Supply and Services Act, R.S.C. 1970, c. S-18 (that minister on April 1, 1969 becoming the responsible minister under the Defence Production Act, by virtue of section 103 of the Gov ernment Organization Act, 1969, S.C. 1968-69, c. 28), and section 3 of the Department of Transport Act, R.S.C. 1952, c. 79 (that minister being the responsible minister under the Aeronautics Act), it seems clear that the minister, appointed by commission under the Great Seal of Canada, presides over the department, holds office during pleasure and has the "manage- ment and direction" of the department. As a member of the Queen's Privy Council (see e.g. section 3 of the Department of Trade and Commerce Act), the minister takes an oath as such in which, inter alia, he swears "to serve Her Majesty truly and faithfully in the Place of Her Council in this Her Majesty's Dominion of Canada".
However, I do not read this restriction as relevant in view of the fact that, for our purposes, the regulations made under that statute applied only to a "service contract" as defined therein. 19 The contract before us is not within that definition.
The contract letter of March 26, 1969 created legal commitments to "set-aside" repair and over haul work and to employ "best efforts" to secure additional work. There remained the need, as these commitments were met, for individual service con tracts to be made respecting the performance of this work from time to time over the lifetime of the contract. Nevertheless I do not see the existence of the Government Contracts Regulations as a barri er to implementing the intention of the parties and, indeed, in practice they appear not to have done so. I have no doubt that actual performance of the work referred to in the contract was subject to the requirements of those regulations and that the respondent must be taken to have known of their existence when the contract was entered into. However, it is abundantly clear, even though a breach of contract is alleged, that the appellant did in fact direct a significant quantity of work to the respondent in accordance with its commitments under the contract. We were not referred to evi dence showing that any problem had arisen in this regard and that somehow the existence of those regulations had prevented the respondent from securing some such work. This may perhaps be explained by the fact that the Government Con tracts Regulations themselves, as they pertain to "service contracts", contain a degree of flexibility that would have enabled the government through its ministers and, if necessary, the Treasury Board to direct the work referred to in the contract without the necessity for tenders or regard to
19 The regulations are the Government Contracts Regula tions, SOR/64-390 as amended, made pursuant to section 39 of the Financial Administration Act, R.S.C. 1952, c. 116. Sub- paragraph 2(1)(c)(iii) thereof defines the term as "a contract for the furnishing ... of a service of any kind".
monetary limits. 20
I have concluded from my analysis of the cir cumstances of this case that the appellant is bound by the contract in question. In view of that conclu sion I wottl f d refrain from discussing the respond ent's alternative argument that it also had a good cause of action in tort based upon alleged negli gent misstatement. This is particularly desirable in view of the fact that a case upon which the appel lant relies for the proposition that no such cause of action exists, (Meates y Attorney-General, [1979] 1 NZLR 415 (S.C.)) was later reversed on appeal ((1983) NZLR 308 (C.A.)).
Was the Contract Breached?
The answer given to this question by the Judge below is that both with respect to "set-aside" work and to "best efforts" work, the contract had been breached. Only in the 1972-1973 fiscal year, he found, was the "set-aside" obligation met. He also found that in none of the years of the contract period except in the 1971-1972 fiscal year was the "best efforts" commitment fulfilled. In reaching these conclusions he showed a clear preference for the evidence of the respondent's witnesses particu larly that of Mr. D. A. Race, Executive Vice- President of CAE Aircraft Ltd., whose credibility he obviously accepted for he described him in his reasons as "an excellent witness". Mr. Race had kept detailed memoranda of discussions and con versations with cabinet ministers and senior civil servants concerned with the matter. Of his evi dence, touching upon the respondent's own efforts
20 Thus by section 14 of those Regulations the appropriate minister, as "the contracting authority", was authorized to except from the tendering requirements thereof "such cases or classes of cases as the contracting authority considers the invitation of tenders not to be in the public interest" and limitation of a minister's authority to enter a service contract according to the amount payable thereunder as well as the need for tenders under certain circumstances, applied only where a minister acted "without the approval of the Treasury Board." No evidence was drawn to our attention establishing that the approval of the Treasury Board which it could give under section 6 of the Regulations (if, indeed, it was required) was not in fact given. Some evidence of Treasury Board approval in the matter may be found in the record of the trial. (See Evidence, p. 532, 11. 19-24; p. 2191, 11. 19-26; p. 2848, 11. 17-31;p. 3055, 11. 10-21).
to secure work from the government and of profits lost due to the breach, he wrote at pages 30-31 of the unreported portion of his reasons for judgment:
I accept his evidence as to his constant endeavors in pressing the defendant, through ministers and their subordinates, to provide work to make up the 700,000 hours; his suggestions and plans as to work that could have been allotted to Aircraft. I accept as well, his evidence, and that of L. H. Prokop, as to the calculation of the plaintiffs' loss of profits ....
During the early part of the contract period the respondent actually enjoyed considerable growth in the level of work at the Winnipeg base. But with the loss of two valuable contracts, this was short- lived. A contract for repair and overhaul of a number of United States military aircraft called the "T-39" had been secured by Northwest Indus tries Ltd. from the prime contractor, Canadian Commercial Corporation, in 1969 and it was later turned over to CAE Aircraft Ltd. It was cancelled effective as at the end of 1971. Its cancellation, in the view of the learned Trial Judge, dealt a "severe blow to the fortunes" of the respondent. Coupled with it was the phasing out of the repair and overhaul work on Air Canada's fleet of Viscount aircraft at the end of the 1970-1971 fiscal year. The Judge below was satisfied with the steps taken by the respondent to counteract these setbacks for, at page 33 of the unreported portion of his reasons for judgment, he stated:
Following these setbacks, Aircraft, through Race and Reekie, put continuous pressure on the defendant and various departments of government. Race dealt with Ministers and other officials endeavouring to obtain work commitments in respect of the March 26, 1969 agreement. A great deal of evidence, documentary and oral, in respect of those matters, was adduced on behalf of the plaintiffs.
That evidence can be summarized quite briefly. Aside from what might be termed token commitments, there was no signifi cant direction of work to Aircraft to meet the undertakings given.
It seems unnecessary to discuss in detail the evidence upon which the learned Trial Judge relied in concluding that the contract had been breached. It was agreed that certain work programmes had met the "set-aside" obligations under the contract. The appellant claims that other programmes
should have been so treated but the Trial Judge disagreed. Nor would he agree that several pro grammes had met the "best efforts" commitment. On the other hand, it was his view that the individual programmes contained in a workload proposal (Ex. P-150(19) dated April 23, 1971) prepared by the Director of the Aerospace Branch, Department of Supply and Services shortly after it became known that the T-39 work programme would be cancelled, would have constituted "best efforts" work had they been made available to the respondent. In my view as there was ample evi dence to support his findings I propose not to disturb them and would agree with the overall conclusion he reached.
It was also the opinion of the Trial Judge that failure of the appellant to fulfil its commitments of March 26, 1969 was influenced by a view that they were not legally binding. Some support for that opinion may be found in evidence of reaction from within the Department of Supply and Ser vices to a proposal by CAE Aircraft Ltd. to estab lish a jet aircraft maintenance centre at Winnipeg. In a memorandum dated November 29, 1973 from the Director of the Aerospace Branch to another official of that Branch it was stated that the proposal was "in conflict with the present depart mental position" which was "to phase out this company and meet the Government's commitment to Winnipeg by redirection of Government work load throughout the Winnipeg A/S industry". At all events, the Trial Judge clearly regarded the treatment by the government of an attempt by CAE Aircraft Ltd. to secure repair and overhaul work of the Department of National Defence's fleet of Boeing 707s as particularly telling. During the contract period this work became available to be done in the private sector. CAE Aircraft Ltd. had received an oral promise of it from the respon sible cabinet minister as well as confirmation from a cabinet colleague. The Trial Judge found that the company had relied heavily on the promise as it was a key in its plan to establish a jet aircraft maintenance centre at Winnipeg. In the fall of 1974 both the Department of Supply and Services and the Treasury Board approved the company for
the work but that approval was soon afterward reversed and the work was awarded to a competi tor, Transair. The Trial Judge commented on this turn of events at pages 42-43 of the unreported portion of his reasons for judgment:
The decision understandably appalled Aircraft, as well as Race and Reekie. Reekie met with Mr. Goyer, then the Minis ter of Supply and Services, on December 23, 1974. The Deputy Minister of the Department was present as well. Goyer told Reekie of the decision to award the 707 work to Transair. Reekie bluntly took the position this seemed against the com mitments in the March 26, 1969, letter. Goyer told Reekie that as far as he (Goyer) was concerned, there were no obligations to Aircraft under the March letter; it was not worth anything; he had no intention of doing anything in respect of it.
Reekie told Goyer the Company had no choice but to take legal action. Goyer's reply was, according to Reekie:
Mr. Goyer then informed me that—he told me that wouldn't be very wise, that if our company took legal action against the government on this March 26th, 1969 letter that he would destroy me and destroy my company. Those are his words.
Q. And what did you say to Mr. Goyer?
A. My words to Mr. Goyer were that he should do whatever he felt he need (sic) to do because we certainly intended to do what we needed to do and with that, I got up and left the office.
And at page 44 he continued:
Race's evidence continued: MR. D.G. HILL:
Q. In addition to those contracts, what further did you discuss with Mr. Goyer?
A. Well, Mr. Goyer very explicitely (sic) stated to me that, to use his words, if I would choose to "tear up the bloody letter" he felt that perhaps this might improve relations between the Federal Government and CAE and, in par ticular, between D.S.S and CAE.
The "bloody letter" was the letter of March 26, 1969.
The above evidence indicates the then Minister of Supply and Services viewed the 1969 letter as not binding. His actions indicate anything but "best efforts" from his department of government.
A review of the matter leads me to agree with the opinion of the Trial Judge that the contract was breached by the appellant. That being so, it becomes necessary to address the various conten tions and cross-contentions urged by the parties that the damages awarded were assessed either at too high or too low a level. This also requires consideration of the appellant's contention that damages for loss of capital ought not to have been allowed in any event.
Damages
The respondent claimed damages of $2,520,000 for loss of profits and $3,400,000 for loss of capi tal. The Trial Judge assessed the damages for loss of profits at $1,900,000 and for loss of capital at $2,400,000. In doing so he thought the claims for loss of profit as well as for loss of capital should be reduced, the first by approximately one-quarter and the other by approximately one-third. Other wise the respondent's evidence was accepted. The appellant argues that the claim for loss of capital is not recoverable as being too remote and uncer tain. Both sides led opinion evidence touching upon the calculation of the damages claimed under that head. The appellant asserts, in any event, that the awards are excessive having regard to the evi dence. The respondent claims that the reductions made by the learned Trial Judge in the damages otherwise calculated should be restored.
It is not, of course, for this Court sitting in appeal to assess the damages, for to do so would be to remove the function from the hands of the Trial Judge where it properly belongs. It has been stated many times over that an appellate court ought not to reverse a finding of a Trial Judge as to the amount of damages merely because it thinks that, had it tried the case in the first instance, it would have awarded a lesser or greater sum. In order to justify reversing a Trial Judge on his assessment of damages it must be demonstrated that he acted on a wrong principle. (See e.g. Guerin et al. v. The Queen et al., [1984] 2 S.C.R. 335; (1985), 55 N.R. 161, per Dickson J. at pages 390-391 S.C.R.; 178 N.R.; and per Wilson J. at page 364 S.C.R.; 191 N.R.; Nance v. British Columbia Electric Ry.
Co. Ld., [1951] A.C. 601 (P.C.), at page 613; Flint v. Lovell, [1935] 1 K.B. 354 (C.A.), per Greer L.J. at page 360.)
With these principles in mind I wish now to address the contentions that the damages claimed, under both heads, were allowed in too little or too great a sum and also that the claim for loss of capital ought not to have been allowed at all.
(a) Loss of Profits
I have not been persuaded that the Trial Judge erred in principle in assessing these damages. Nor am I persuaded that he so erred in reducing the damages awarded. He was careful to explain the reasons which led him to reduce them and the fact that, due to the absence of evidence, it may have been difficult to accurately calculate the reduction is not a reason for rejecting it as having been made in error. It was his view that the damages could not, or ought not, to "be assessed on a purely mathematical basis". Despite the difficulty, the respondent was entitled "to be placed, as far as money could do it, in as good a position as if the contract had been performed" (per Viscount Hal- dane L.C. in British Westinghouse Electric and Manufacturing Company v. Underground Electric Railways Company of London, [ 1912] A.C. 673 (H.L.), at page 689, as quoted by Spence J. in Penvidic Contracting Co. Ltd. v. International Nickel Co. of Canada Ltd., [1976] 1 S.C.R. 267, at page 278). It is my view that the observations of Davies J. in Wood v. Grand Valley Railway Co. et al. (1915), 51 S.C.R. 283, at page 289, comment ing on the case of Chaplin v. Hicks, [1911] 2. K.B. 786 (C.A.), are applicable here as well:
It was clearly impossible under the facts of that case to estimate with anything approaching to mathematical accuracy the damages sustained by the plaintiffs, but it seems to me to be clearly laid down there by the learned judges that such an impossibility cannot "relieve the wrongdoer of the necessity of paying damages for his breach of contract" and that on the other hand the tribunal to estimate them whether jury or judge must under such circumstances do "the best it can" and its
conclusion will not be set aside even if the amount of the verdict is a matter of guess work.
Those observations were unanimously adopted by the Supreme Court of Canada in the Penvidic case, at page 279.
I would therefore dismiss the appeal as well as the cross-appeal on this aspect of the case.
(b) Loss of Capital
The attacks on the award of damages made under this head were threefold. It was asserted by the appellant that an error was made in calculat ing the amount of these damages. Secondly, the respondent submits that the Trial Judge erred in reducing the damages otherwise calculated to the amount allowed. Finally, the appellant takes the position that no damages of the nature claimed under this head ought to have been allowed in any event. In view of the conclusion I am about to state on the third point of attack it becomes unnecessary to consider the other two points.
The third point was argued at some length and requires consideration. The appellant argues that the claim is too remote and uncertain to be com pensated for in damages for breach of contract. The classic statement of the principles governing recovery of damages flowing from a breach of contract is found in the judgment of the Court of Exchequer in Hadley v. Baxendale (1854), 9 Ex. 341; 156 E.R. 145 where Baron Alderson stated (at pages 354-355 Ex.; 151 E.R.):
Now we think the proper rule in such a case as the present is this:—Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising natural ly, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be sup posed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it. Now, if the special circumstances under which the contract was actually made were communicated by the plain tiffs to the defendants, and thus known to both parties, the damages resulting from the breach of such a contract, which they would reasonably contemplate, would be the amount of injury which would ordinarily follow from a breach of contract under these special circumstances so known and communicated. But, on the other hand, if these special circumstances were wholly unknown to the party breaking the contract, he, at the
most, could only be supposed to have had in his contemplation the amount of injury which would arise generally, and in the great multitude of cases not affected by any special circum stances, from such a breach of contract. For, had the special circumstances been known, the parties might have specially provided for the breach of contract by special terms as to the damages in that case; and of this advantage it would be very unjust to deprive them. Now the above principles are those by which we think the jury ought to be guided in estimating the damages arising out of any breach of contract.
That rule has been applied and re-applied on numerous occasions in Canada. It was restated by the English Court of Appeal in Victoria Laundry (Windsor), Ld. v. Newman Industries Ld., Coulson & Co., Ld. (Third Parties), [1949] 2 K.B. 528 which in turn was qualified by the House of Lords in Czarnikow (C.) Ltd. v. Koufos, [ 1969] 1 A.C. 350. In the latter case a majority of the Lawlords generally supported the sixth proposition (relied on by the respondent) propounded by Asquith L.J. in the Victoria Laundry case (at page 540):
(6.) Nor, finally, to make a particular loss recoverable, need it be proved that upon a given state of knowledge the defendant could, as a reasonable man, foresee that a breach must neces sarily result in that loss. It is enough if he could foresee it was likely so to result. It is indeed enough ... if the loss (or some factor without which it would not have occurred) is a "serious possibility" or a "real danger." For short, we have used the word "liable" to result.
The appellant says that the claim for loss of capital falls outside these principles and should have been rejected at trial. In this, particular reliance was placed upon the case of Freedhoff v. Pomalift Industries Ltd. et al., [1971] 2 O.R. 773 (C.A.). In that case the plaintiff sought to recover a claim for loss of property arising from the breach of a contract for the sale and installation of a ski-tow. The Trial Judge agreed that a fundamen tal breach of the contract had occurred and that the claim for loss of property as well as for other losses were recoverable. However, the Court of Appeal decided that the damages for loss of prop erty were too remote to be recoverable in the circumstances of the transaction.
I do not find it necessary to express an opinion on whether the claim for loss of capital is recover able under the principles of remoteness referred to above. The respondent's valuation evidence came
from an expert, one Kent, and it is clear that the Trial Judge accepted his evidence in preference to that of the appellant's expert. It was to the effect that had the contract been performed the max imum going concern value of CAE Aircraft Ltd. as of March 31, 1976 (being also the end of the contract period) would have been $3,600,000 whereas it had an actual going concern value as of that date of $200,000, resulting in a capital loss of $3,400,000. The Trial Judge concluded at page 56 of the unreported portion of his reasons for judg ment that while "Kent's methods and basic assumptions are correct" it was necessary for the reasons he gave to reduce the damages for loss of capital to $2,400,000.
With respect, it seems to me that there is force to the appellant's argument that the determination that damages for loss of capital are recoverable here involved an error in principle on the part of the learned Trial Judge. The error, I think, lay in the quality of the proof tendered as going to support certain underlying assumptions made by Mr. Kent in expressing his opinion. These assump tions, to which his opinion was expressly made subject, are set out in Ex. P-151 which appears at pages 5917-5918 of the Case on Appeal:
Selection of Capitalization Rate and Underlying Assumptions
We have selected the aforementioned capitalization rates of 11.1% to 14.3% for the valuation of the business operations of the contemplated Company as at March 31, 1976 based on our review of the prevailing economic, stock and money market conditions in Canada as at March 31, 1976 (see Appendix E). It was also necessary to make certain assumptions as to the conditions which would likely have affected this contemplated Company at the valuation date, and therefore would affect the selection of an appropriate capitalization rate.
In this regard, it was necessary to assume that the Company would continue, after the valuation date, to garner suitable work, from both the public and private sectors, in sufficient quantity to maintain operating levels equal to or greater than those considered to be attained during 1971 to 1976, inclusive. It would seem reasonable to assume that the Company would have established a reputation as a successful operation over the 1971 to 1976 period and this reputation would form the basis for acquiring new work in future years. In addition, we assumed that this new work would be of a type compatible with the Company's facilities. If sufficient compatible work had not existed, we were advised by management that the funds neces-
sary for conversion to facilities suitable for the work available could have been readily obtained provided that a viable opera tion was in place.
Our discussions with management regarding the likely competi tive situation suggested that few, if any, other companies in Canada would have the same capacity, capabilities and hangar facilities as CAE Aircraft Ltd. Given that the Company's plant facilities are extensive and unique to the industry, the Company was capable of performing all necessary overhaul and mainte nance work on turbo prop and piston engine aircraft and small to medium size military and civil jet aircraft. The likelihood of other companies becoming serious competitors in this field was remote, as the cost and effort to duplicate such facilities would have been formidable, and hence the risk to the Company of losing business to new competitors appeared to be low.
Further, it was necessary to assume that the Company's plant facilities would be of sufficient capacity to operate at a 700,000 annual manhour level. In 1970/71 the Company demonstrated that it could attain an operating level of over 900,000 man- hours, in the equivalent basic facilities as existed throughout the 1971-1976 period and continued to exist after the valuation date.
We have also assumed that the Company would not encounter substantial difficulties in obtaining the labour and materials necessary to operate at the 700,000 manhour level. Our discus sions with management suggested that the Company would maintain the amicable relations with the International Associa tion of Machinists and Aerospace Workers, Astro Lodge 2397, it had enjoyed in the early years of its operations. We have further assumed that the Company would be able to obtain aircraft parts and other materials from various reliable sources.
The term "the contemplated Company" is described as follows elsewhere in the same section of the opinion:
For the purpose of this section, the contemplated Company is deemed to be the actual Company, CAE Aircraft Ltd., under the supposition that it had realized a demonstrated level of earnings for the period April I, 1971 to March 31, 1976 as a result of operating at an annual level of 700,000 direct man- hours of aircraft related work which would have satisfied the alleged government commitment as well as continuing various non-aircraft type work which had been carried on since the inception of the Company.
The respondent called our attention to some evidence which it claims as supporting these underlying assumptions. But, on the whole, it is I think of entirely too tenuous and speculative a nature to be accepted as establishing a factual underpinning of assumptions made by the valua- tor. This is especially so, for example, of the
assumptions of future operating levels of work and of maintainable earnings of the company after the contract ended on March 31, 1976. I am quite unable to see from this evidence that the factual bases of these important assumptions were satis factorily established so as to make the valuator's opinion reliable as evidence in a court of law.
I have concluded that the appeal should succeed on this point and that the damages awarded at trial should be reduced accordingly.
Interest and Costs
The appellant attacks the rates at which interest was allowed by the learned Trial Judge on his judgment rendered July 31, 1982. At page 9 of his reasons for judgment delivered on November 18, 1983 upon an application brought by the respond ent for special directions in respect of taxable costs and the fees of expert witnesses, as well as for an increase in the rate of interest on the basis of this Court's decision in Domestic Converters Corpora tion v. Arctic Steamship Line, [1984] 1 F.C. 211; (1983), 46 N.R. 195 (C.A.), he stated:
The Domestic Converters case allows me to vary the post- judgment interest rate from 5%. At my request, counsel for the plaintiffs has provided me with Bank of Canada rates for a number of years up to and including April 1983. I have obtained the rates from May to July of this year.
The weekly rates from August 1983 (sic) to the end of July 1983 range from 15.60% to 9.27%. The average weekly rate is approximately 10.9%.
There will be direction that the post-judgment interest from July 31, 1982 to July 30, 1983 will be 10.9%.
The per annum rate after July 31, 1983 will be the average of the Bank of Canada rate in succeeding years, or 5%, whichever is higher, until the date of satisfaction of the judgment.
The 5% interest rate referred to is, of course, the rate provided for under section 3 of the Interest Act, R.S.C. 1970, c. I-18.
The appellant contends, in effect, that the Domestic Converters case was wrongly decided and that we should review it. I am unable to accept
this contention. It dealt with the power of the Court under section 40 of the Federal Court Act:
40. Unless otherwise ordered by the Court, a judgment, including a judgment against the Crown, bears interest from the time of giving the judgment at the rate prescribed by section 3 of the Interest Act.
and held that the section allows the Court, in the words of Mr. Justice Pratte (at page 229 F.C.; at page 208 N.R.), "to order a judgment to bear or not to bear interest, and in the first case, to set the rate of such interest and the time after the judg ment from which it will begin to run." Mr. Justice Le Dain and Mr. Justice Lalande, who also sat on that case, agreed. In my opinion the Trial Judge, in fixing the rates of interest for the periods subse quent to the judgment, acted within the authority conferred. I am unable to accept the appellant's contention that the authority is limited to directing that a judgment shall bear or not bear interest and that it did not empower the Court to fix a rate of interest beyond that provided under section 3 of the Interest Act. In so far as this Court is con cerned, that issue was settled by the Domestic Converters case. I would therefore dismiss this aspect of the appeal.
In his decision of November 18, 1983 the Trial Judge refused to increase the party-and-party costs at trial beyond that provided in Tariff B of the Federal Court Rules [C.R.C., c. 663]. The trial had extended over many days and it was exceed ingly expensive. By the respondent's own reckon ing almost $650,000 in legal fees alone were incurred. By comparison, he projected that recov erable party and party costs, on the basis of the tariff, would be in the neighbourhood of $11,000- $12,000 plus disbursements. Perhaps in a superior court of a province such as Ontario, for example, the respondent might have been able to recoup party and party costs in greater measure than may be possible under ,the Rules of the Court. But the Trial Judge had to apply our Rules and by those Rules, subject to a discretion, the Tariff governs (Rule 344).
The Trial Judge, in my view, properly addressed the issue in exercising his discretion. He referred
to two earlier decisions of this Court and to his own decision in Midway Mfg. Co. v. Bernstein, [1983] 1 F.C. 510 (T.D.), at page 519, where he said:
My personal position has always been, that while I had sympathy for the criticism of low tariffs, I have never yet increased, in any case, the tariffs.... I take the view any increase should rarely be made. I find support in two court of appeal cases.... I agree the tariffs are extremely low. But it is my view the remedy is to change the rules setting out the tariffs, rather than for judges to get around the tariffs by, in a particular case, increasing them.
Even while sharing his "sympathy" in this case as well, I am unable to say that he exercised his discretion improperly when he would not consider this case an exception to his usual practice. I would therefore dismiss this aspect of the cross-appeal.
In the result I would dismiss all aspects of the appeal as well as the cross-appeal save for the appeal against the award of damages for loss of capital which I would allow. As success has been fairly evenly divided I would make no order as to costs in this Court.
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