DAVID WALSH v. LENORA WALSH, 2023 NLCA 23

IN THE COURT OF APPEAL OF NEWFOUNDLAND AND LABRADOR Citation : Walsh v. TRA Company Limited , 2023 NLCA 23 Date : August 15, 2023 Docket Number : 202201H0014 and 202201H0019 BETWEEN: DAVID WALSH and LENORA WALSH APPELLANTS/ RESPONDENTS BY CROSS-APPEAL AND: TRA COMPANY LIMITED FIRST RESPONDENT/ APPELLANT BY CROSS-APPEAL AND: FOODLAND LIMITED SECOND RESPONDENT/ APPELLANT BY CROSS-APPEAL AND: SOBEYS GROUP INC. THIRD RESPONDENT/ APPELLANT BY CROSS-APPEAL AND: SOBEYS CAPITAL INCORPORATED FOURTH RESPONDENT/ APPELLANT BY CROSS-APPEAL AND:

SOBEYS LAND HOLDINGS LIMITED FIFTH RESPONDENT/ APPELLANT BY CROSS-APPEAL AND: JOSEPH GREEN SIXTH RESPONDENT/ APPELLANT BY CROSS-APPEAL Coram: D.E. Fry C.J.N.L., F.P. O’Brien and F.J. Knickle JJ.A. Court Appealed From: Supreme Court of Newfoundland and Labrador, General Division 200101T1035 (2022 NLSC 6) Appeal Heard: January 25, 2023 Judgment Rendered: August 15, 2023 Reasons for Judgment by: D.E. Fry C.J.N.L. Concurred in by: F.P. O’Brien and F.J. Knickle JJ.A. Counsel for the Appellants: Paul D. Dicks K.C. and Megan S. Reynolds Counsel for the Respondents: Colm St. R.J. Seviour K.C., Jonathan D.

Dale and Christopher D. Goodridge Authorities Cited: CASES CITED: Foss. v. Harbottle (1843), 2 Hare 461, 67 E.R. 189; Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235; H.L. v.Canada (Attorney General), 2005 SCC 25, [2005] 1 S.C.R. 401; Queen v. Cognos Inc., (SCC), [1993] 1 S.C.R. 87;Fiorillo v. Krispy Kreme Doughnuts Inc. (2009), (ON SC), 98 O.R. (3d) 103 (Ont. Sup. Ct. J.); Catalyst Pulp andPaper Sales Inc. v. Universal Paper Export Company Ltd., 2009 BCCA 307; Geophysical Services Inc. v.

Sable Mary Seismic Inc., 2009NSSC 404, aff’d 2012 NSCA 33, leave to appeal to SCC refused, 34847 (15 November 2012); Bozzo, Re (2005), (ON SC), 10 C.B.R. (5th) 1 (Ont. Sup. Ct. J.); Central Trust Co. v. Rafuse, (SCC), [1986] 2 S.C.R. 147, application forvariation allowed (SCC), [1988] 1 S.C.R. 1206; Ryan v. Moore, 2005 SCC 38, [2005] 2 S.C.R. 53; Grant Thornton LLPv. New Brunswick, 2021 SCC 31; WEH Enterprises Ltd. v. Squires et al., 2010 NLCA 41, 300 Nfld. & P.E.I.R. 98; Rogers v. Morgan etal., 2011 NLCA 27, 307 Nfld. & P.E.I.R. 292; Brunette v.

Legault Joly Thiffault, S.E.N.C.R.L., 2018 SCC 55, [2018] 3 S.C.R. 481; Tranv. Bloorston Farms Ltd., 2020 ONCA 440; Johnson v. Gore Wood & Co, [2000] UKHL 65, [2001] 1 All ER 481; Midland ResourcesHolding Limited v. Shtaif, 2017 ONCA 320, leave to appeal to SCC refused, 37653 (21 December 2017); Houle v. Canadian NationalBank, (SCC), [1990] 3 S.C.R. 122; Salah v. Timothy's Coffees of the World Inc., 2010 ONCA 673; Kosmopoulos v.Constitution Insurance Co., (SCC), [1987] 1 S.C.R. 2; 642947 Ontario Ltd. v. Fleischer (2001), (ONCA), 56 O.R. (3d) 417 (ONCA); Chevron Corp. v.

Yaiguaje, 2015 SCC 42, [2015] 3 S.C.R. 69; Robak Industries Ltd. v. Gardner, 2007BCCA 61; Hercules Managements Ltd. v. Ernst & Young, (SCC), [1997] 2 S.C.R. 165; McGowan v. Bank of NovaScotia, 2010 PESC 17, aff’d 2011 PECA 20, leave to appeal to SCC refused, 34664 (31 May 2012); Meditrust Healthcare Inc. v.Shoppers Drug Mart (2002), (ON CA), 61 O.R. (3d) 786 (ONCA); Hiscott v. Hall, 2015 NLCA 1, 361 Nfld. &P.E.I.R. 141; Fong v. Reese, 2022 NLCA 1, 7 C.A.N.L.R. 199; British Columbia (Minister of Forests) v. Okanagan Indian Band, 2003SCC 71, [2003] 3 S.C.R. 371; Portugal Cove - St. Phillips (Town) v.

Willcott (1997), (NL CA), 150 Nfld. & P.E.I.R.

183 (NLCA); Cooper v. Whittingham (1880), 15 Ch. D. 501, [1880] UKLawRpCh 159 . STATUTES CONSIDERED: Limitations Act , SNL 1995, c. L-16.1, sections 5 (a), 5 (b), 14(1) , 13(1) , 6(1) (c); Limitation of Actions Act , SNB 2009, c. L-8.5 . RULES CONSIDERED: Rules of the Supreme Court, 1986 , SNL 1986, c. 42

Schedule D, rule 55 ; Court of Appeal Rules , NLR 38/16, rule 58 . TEXTS CONSIDERED: Mark M. Orkin & Robert G. Schipper, Orkin on the Law of Costs , 2nd ed (Toronto, ON: Thomson Reuters Canada, 1987) (loose-leaf updated 2023, release 4). D.E. Fry C.J.N.L.: INTRODUCTION [ 1 ] This is an appeal from a decision of the Supreme Court of Newfoundland and Labrador, Walsh v.

TRA Company Limited , 2022 NLSC 6 , dismissing the appellants’ (the Walshes’) claims for monetary losses arising from alleged negligent and fraudulent misrepresentations by the respondents. [ 2 ] The Walshes attended a presentation in the fall of 1983 to learn about the benefits of the Foodland Program offered by TRA Company Limited (TRA) to small rural supermarkets. The Walshes operated a grocery business in the Bay Bulls area.

They were interested in obtaining the benefits of bulk purchasing power for their grocery business and to access various supplier discounts, trade deals, and allowances. [ 3 ] A company owned by the Walshes joined the Foodland Program to avail of TRA’s buying power, which was increased by having a number of Sobeys’ corporations within their buying group. This led to an oral supply agreement (the Supply Arrangement).

Because of its bulk purchasing power and warehousing capabilities, TRA was able to purchase significant volumes of grocery products at the lowest possible prices. [ 4 ] In 1995, the Walshes incorporated a second company to purchase a grocery business on Merrymeeting Road in St John’s to which the Supply Arrangement also applied. [ 5 ] The shares of both companies were sold in February of 1995 (the Bay Bulls store) and July of 1996 (the Merrymeeting Road store). [ 6 ] A fundamental disagreement arose between the parties as to the terms of the Supply Arrangement, particularly in respect of the treatment of the trade deals.

The Supply Arrangement was never committed to writing. [ 7 ] As noted in the Trial Decision: [55] The trade deals fell into three broad categories: 1. TRA invoiced the Walshes’ Corporations the Supplier’s Invoice Cost plus a 5% upcharge less the off-invoice supplier deal or allowances on products from TRA’s warehouse (the “Off-Invoice Allowance”). 2. Suppliers paid rebates to TRA on the products delivered directly to the Walshes’ stores (“Rebates on Directs”). 3.

Suppliers paid various allowances after they had issued the invoices, including by-cheques, volume discounts, co-op advertising, and other rebates (referred to collectively as “ Rebates on Non-Directs.”... [ 8 ] There was no dispute that the Walshes’ corporations received the benefit of the Off-Invoice Allowance.

The disagreement between the parties arose out of the claim that the Walshes’ corporations never received the full entitlement to the Rebates on Directs and the Rebates on Non-Directs. [ 9 ] The Walshes claimed that they relied to their detriment on representations made by the respondents which resulted in their stores becoming unprofitable, forcing them to sell their shares in their corporations at lower than their value due to the actions of the respondents. [ 10 ] The Walshes argued they would not have suffered this loss had the respondents not negligently or fraudulently misrepresented the benefits of the Supply Arrangement under the Foodland Program.

The Judge dismissed the Walshes’ claim with no order as to costs. The Walshes have appealed the Judge’s decision. [ 11 ] The respondents cross-appealed the Judge’s decision making no order as to costs. BACKGROUND

[ 12 ] The Judge provided a short chronology and background to what he describes as one of the longest active civil cases before the courts, with the Walshes having commenced their action in 2001: How It Started for the Walshes and TRA Newfoundland [17] Mr. Walsh in 1975 joined with three partners to incorporate Southern Discount Limited and purchase a convenience store business in Bay Bulls. Shortly thereafter, they built a 5000 square-foot Quonset hut (semi-circular metal building) and operated a supermarket. Mr.

Walsh and his partner Tony Barton bought out their other partners in Southern Discount. [18] TRA got its start in Newfoundland in the early 1980s when Sobeys purchased the assets of an insolvent wholesaler.

TRA with its warehousing capability began supplying product to the Sobeys stores; other Sobeys group banner stores, such as the Foodland; and some independents that included Southern Discount. [19] TRA and TRA Newfoundland Limited over the years went through various corporate amalgamations and renaming within the Sobeys group of companies, and ultimately amalgamated and continued as Sobeys Capital Incorporated (“Sobeys”). There is no dispute that the Walshes have named the responsible legal entities (I refer to TRA and TRA Newfoundland Limited interchangeably in these reasons). [20] In 1983, Mr.

Walsh approached TRA for financial support to buy Tony Barton out of the Bay Bulls business. Mr. Walsh accepted TRA’s loan of $200,000 to allow him to buy out Barton for a total of $250,000. The Walshes Becoming Independent Foodland Operators [21] Foodland was a tradename owned by Sobeys and was used to expand sales in the province through the Foodland banner-store concept for small rural supermarkets. The “Foodland Program” was a retail program provided by TRA. [22] In the fall of 1983, the Foodland Program was presented to Mr. and Mrs. Walsh. The meeting occurred at TRA’s office in Donovans Business Park. Mr.

Walsh put the timing of this meeting as being in October/November 1983, shortly after the buyout of Barton. [23] [Joseph] Green and Russ Tiller of TRA, in the Foodland presentation meeting, reviewed and provided a brochure to the Walshes titled “The Foodland Program.” Following the meeting, Mr. and Mrs. Walsh, Green and his wife, and Tiller and his wife went out for a celebratory dinner. [24] The Walshes allege it was based on the representations made at the Foodland presentation meeting, together with discussions that Mr.

Walsh had with Darrell Rushton, Sobeys Vice-President and subsequent President of wholesale operations, that they decided to become an independent Foodland banner store on January 1, 1984. [25] Southern Discount was renamed Walsh’s Foodland Limited on February 29, 1984, and operated at Bay Bulls as “Walsh’s Foodland.” The Walshes owned the shares of Davlen Holdings Limited, which held the shares of Walsh’s Foodland Limited. Merrymeeting Road Store Acquisition [26] In 1995, the Walshes incorporated DLW Investments Ltd. with the intent of purchasing a grocery business in St. John’s.

DLW Investments proceeded with this acquisition in mid-1995, purchasing the Merrymeeting Road store, which it operated as “Walsh’s Family Foods.” Although not a Foodland banner store, the supply arrangement also applied to Walsh’s Family Foods.

Walshes’ Sale of their Stores and Shares [27] The Walshes claim they relied on the representations of the Defendants to their detriment, resulting in the stores becoming unprofitable and forcing them to sell the stores. [28] On February 10, 1995, the Walshes sold their shares in Davlen Holdings, the company that owned the Bay Bulls store, to Sobeys, and on July 16, 1996, sold their shares in DLW Investments, the company that owned the Merrymeeting Road store to Colemans. (I will refer to Davlen Holdings and DLW Investments as the “Corporations”). [ 13 ] The Judge noted that the late Joseph Green, described as a central figure in the litigation, was the General Manager/President of TRA Newfoundland Limited until his retirement in 1990.

Mr. Green did not give viva voce evidence at the trial as he died long before the trial commenced. His evidence at trial consisted of secretly recorded private conversations by Mr. Walsh with Mr. Green, as well as four days of discovery testimony when Mr. Green was 85 years old (Trial Decision, at para. 8).

The Trial Decision [ 14 ] The matter for determination by the Judge was whether the Walshes could recover money they alleged was lost due to the sale of their shares in their two corporations, in 1995 and 1996, as a result of the respondents’ failure to pay various trade deals to the Walshes’ corporations. [ 15 ] The Walshes’ position was that they would not have suffered losses had the respondents not negligently or fraudulently misrepresented the Supply Arrangement under the Foodland Program to them. The Judge noted, “[n]o documentation exists detailing the specific terms of the Supply Arrangement” (para. 50).

[ 16 ] There were a number of types of rebates the Walshes claimed TRA verbally represented they would receive, not all of which they received. These were described in the Trial Decision at paragraphs 54-55. [ 17 ] The respondents’ position was that the Walshes’ misrepresentation claims could not succeed because: a. the claims are for losses to their corporations, and the law does not permit the Walshes as shareholders to recover for a wrong to the corporations; b. the claims are time-barred under the Limitations Act, SNL 1995, c.

L-16.1 ; c. the misrepresentation allegations are demonstrably unfounded; and d. even if the claims are somehow tenable, the trial evidence confirms that no damages were incurred by either the Walshes or their corporations. [ 18 ] The Judge accepted the respondents’ position and determined that: (

a) the Supply Arrangement was an agreement between TRA and the Walshes’ corporations. The Walshes as individuals and shareholders were not parties to any agreement with TRA. The Walshes did not sustain any direct personal losses for which they can recover damages. The Walshes failed to establish: (

i) an independent and separate wrong to them personally as shareholders, and (ii) the claims for loss of share value are a direct loss to them as shareholders and not damages sustained by the corporations. The common law rule in Foss v. Harbottle (1843), 2 Hare 461 , 67 E.R. 189 precluded their claims. (

b) all but one of the Walshes’ claims were time-barred. The only claim not time-barred, that being, economic loss arising from fraudulent misrepresentation was dismissed as no liability was established. (

c) the elements necessary to prove negligent or fraudulent misrepresentation had not been established. (

d) the expert opinion evidence failed to establish the Walshes suffered losses associated with the sale of their shares in either of the Bay Bulls or Merrymeeting Road corporations. The Judge determined the Walshes’ expert report, was unreliable and relied on that of the respondents. [ 19 ] Notwithstanding their success at trial, the Judge refused to award costs to the respondents. The Judge stated he was exercising his discretion, as the respondents, in not putting the contract into writing or clarifying the unwritten agreement, were not without fault.

ISSUES [ 20 ] The Walshes describe the issues on the appeal as follows: 1. Did the Learned Trial Judge err in his application of the law of negligent and/or fraudulent misrepresentation? 2. Did the Learned Trial Judge err in accepting the evidence of the Respondents’ witnesses over that of the Appellants and Russ Tiller with respect to the agreed terms of the Supply Agreement? 3. Did the Learned Trial Judge err in accepting the evidence of Karl Vokey that all rebates and allowances were passed on to the Appellants’ stores as price supports? 4.

Did the Learned Trial Judge err in holding that the Appellants ought to have known that they had a cause of action by December 1998 and that their claims were out of time? 5. Did the Learned Trial Judge err in failing to hold that the [Respondents] had made fraudulent representations and that the Appellants were not entitled to the six-year limitation period of s. [6(1)(c)] of the Limitations Act ? 6. Did the Learned Trial Judge err in holding that the Appellants’ claims are precluded by the common law rule in Foss v. Harbottle (1843) 67 E.R. 189 ? 7.

Did the Learned Trial Judge err in holding that the evidence of Susan Glass was to be preferred over that of Ashley Power-Stack which he held to be unreliable and inadmissible? 8. Did the Learned Trial Judge err in ruling that Susan Glass could not be examined on her prior reports of September 19, 2018 and Dec 21, 2017? 9. Did the Learned Trial Judge err in his decision on costs? STANDARD OF REVIEW [ 21 ] Housen v. Nikolaisen , 2002 SCC 33 , [2002] 2 S.C.R. 235, is the governing authority with respect to an appellate court’s standard of review.

[22] The standard of review on pure questions of law is one of correctness. On a question of law an appellate court is able to replacethe opinion of a judge with its own. A question of mixed fact and law is subject to the standard of palpable and overriding error.However, if it is clear that the Judge made an extricable error in principle with respect to the characterization of the standard or itsapplication that error amounts to an error in law and the applicable standard is correctness.

Findings of fact and mixed fact and law arereversible where the trial judge has made a palpable and overriding error (Housen, at paras. 8, 10, 26, 27, 36-37). [23] The threshold principle stated in Housen at paragraphs 3 and 7 is that the appellate court must not retry a case. This principlewas reaffirmed by the Supreme Court in H.L. v. Canada (Attorney General), 2005 SCC 25, [2005] 1 S.C.R. 401, at paragraph 64. [24] The Walshes do not challenge the legal tests employed by the Judge.

Rather they assert that the Judge made palpable andoverriding errors by failing to consider relevant evidence and making factual findings and drawing inferences which were plainly wrongor unsupported by the evidence. [25] The respondents’ position is that the Walshes’ attack on the Judge’s findings of fact and his application of the relevant legaltests to the facts engages the palpable and overriding appellate review standard. [26] The respondents assert that the trial record fully supports the Judge’s findings that there is no error, much less a “palpable andoverriding error,” which would warrant this Court’s intervention.

They further assert that the appeal concerns the Walshes’ improperattempt to retry their case on the facts. ANALYSIS [27] The issues under appeal in this case arise in the context of a six-week trial with heavy emphasis on the facts surrounding averbal agreement, made 36 years before the commencement of the trial. The evidence consisted of examination and cross-examination ofthe Walshes’ witnesses including: Mr. Walsh (seven days of testimony), Mrs. Walsh, two former employees of TRA (Russ Tiller andJoseph O’Leary), and Ashley Power-Stack, an expert in business and share valuations (four days of testimony).

The respondents’evidence came primarily from Karl Vokey (seven days of testimony), John Gardiner and Darrell Rushton, who through their roles withTRA or Sobeys had knowledge of the Supply Arrangement with the Walshes’ corporations, and Susan Glass, an expert in businessvaluation and damage quantification (three days of testimony). [28] The documentary record included a Common Book of Documents consisting of 13 Volumes, 332 Tabs, and 4133 pages. Theparties agreed that Category 1 documents in the Common Book would be entered as consent exhibits and form part of the trial record forthe truth of their contents.

Category 2 documents did not form part of the trial record unless a witness identified and spoke to thedocument. Documents noted as Category “X” in the Common Book were subject to the right of a party to object to admissibility. [29] In addition to detailed trial briefs, lengthy written closing submissions, post-trial briefs, and closing oral submissions, the Judgerequested and received from Counsel a complete transcript of the trial proceedings. Issue 1.1: Negligent Misrepresentation [30] The legal test for negligent misrepresentation is outlined in Queen v.

Cognos Inc., (SCC), [1993] 1 S.C.R. 87,at page 110, and was correctly stated by the Judge. The test requires proof of a number of elements, including the threshold requirementthat there be a duty of care based on a “special relationship” between the representor and the representee: The required elements for a successful Hedley Byrne claim have been stated in many authorities, sometimes in varying forms.

Thedecisions of this Court cited above suggest five general requirements: (1) there must be a duty of care based on a “special relationship”between the representor and the representee; (2) the representation in question must be untrue, inaccurate, or misleading; (3) therepresentor must have acted negligently in making said misrepresentation; (4) the representee must have relied, in a reasonable manner,on said negligent misrepresentation; and (5) the reliance must have been detrimental to the representee in the sense that damagesresulted. … [31] The Judge directed himself on the “special relationship” necessary to ground the duty of care as follows: [63] To hold that the Defendants were in a “special relationship” with the Walshes, two factors need to be present: (

a) the Defendants ought reasonably to have foreseen that the Walshes would rely on their representations, and (

b) the Walshes’ reliance would, in the particular circumstances of the case, be reasonable: Hercules Managements Ltd v. Ernst &Young, (SCC), [1997] 2 S.C.R. 165, at para. 24. [32] The Judge also made reference to this Court’s earlier decision in Walsh v. TRA Co. et al., 2007 NLCA 50, 268 Nfld. & P.E.I.R.111 (Reinstatement Decision) as follows: [64] The Court of Appeal’s Reinstatement Decision provides additional direction on the nature of the relationship with the Defendantsthat the Walshes must establish.

The Walshes must demonstrate “a personal relationship, in addition to or as opposed to a corporaterelationship between the Walsh Companies on the one hand and the Sobey[s’] Companies and Green on the other hand.” [Emphasisadded.] The Requirement for a Special Relationship [33] The Walshes contend that the Judge erred in his finding that there existed no special relationship in this case which operated toimpose a duty of care on the respondents to ensure that representations to the Walshes were neither untrue, inaccurate, nor misleading. [34] The Walshes allege that this finding was contrary to the Judge’s observation at paragraph 71 of his decision, where the Judge

accepted Mr. Walsh’s evidence that he had respect for Mr. Green, that this was a significant factor in the Walshes’ decision to join the Foodland Program and that Mr. Walsh came to “look up to Green as a trusted advisor and considered him like a father”. The Judge stated: [71] The Walshes’ friendship with Green is of no assistance in establishing a “special” or “personal relationship.” When Green first made the representations to the Walshes to become part of the Foodland Program, they were not close friends but became so over the course of the business relationship. I accept Mr.

Walsh’s evidence that the respect he had for Green was a significant factor for the Walshes in joining the Foodland Program. He came to look up to Green as a trusted advisor and considered him like a father. That does not diminish that Green, in his capacity as TRA’s point person, was at all times dealing with the Walshes in a commercial capacity as representatives of their companies and not personally as individuals. [ 35 ] The Judge found that respect and later friendship did not create a special relationship necessary to satisfy the first element outlined in Cognos.

The relevant time for considering the special relationship was when the promises made by TRA respecting the formation of the Supply Arrangement were made in late 1983. The evidence was that at that time, Mr. Walsh and Mr. Green were not close. They were not then friends. They were business acquaintances who had transacted a short unsuccessful offer to sell the Southern Discount Limited (SDL) grocery store, the occasional TRA-SDL product supply purchase, and a personal financing arrangement whereby Mr.

Walsh bought out his partner, Tony Barton. [ 36 ] The Judge held that the facts did not establish the requisite special relationship between the Walshes and Mr. Green of TRA. He made the following findings of fact at paragraphs 65-72: • Despite the Walshes’ friendship with employees of TRA, specifically, Mr. Green, the representations made to the Walshes arose solely from a corporate relationship and were not made to the Walshes as individuals. • The Walshes did not contract as individuals with TRA.

The Supply Arrangement was strictly between corporate entities and the alleged promises were made to the Walshes’ corporations.’ • “TRA and Foodland’s affiliation with [SDL] evolved out of a corporate relationship.” • “[SDL] had a prior commercial relationship with TRA. It continued its commercial dealings with TRA under the Foodland banner.

The relationship was not with the Walshes personally.” • “The Foodland presentation was made to the Walshes in their capacities as [SDL] representatives, not as individuals.” • “Green, in his capacity as TRA’s point person, was at all times dealing with the Walshes in a commercial capacity as representatives of their companies and not personally as individuals.” • At the time of the Foodland Presentation, when he made the representations respecting the Foodland Program, Mr. Green and the Washes were not close friends. • TRA invoiced the Walshes’ corporations and not the Walshes personally.

The Walshes had no personal liability to pay invoices if their corporations failed to pay. [ 37 ] These findings of fact are well-supported on the record. Prior to the Foodland Presentation, SDL’s and the Walshes’ interactions with TRA were purely of a business nature. TRA was one of a number of SDL’s suppliers. [ 38 ] Additional evidence demonstrated the limited contact between the Walshes and Mr. Green or TRA and that Mr. Walsh interacted with Mr. Green only: • When Mr. Walsh and Mr. Barton offered to sell SDL to TRA (as Mr.

Green described it, a “brief meeting”); • During SDL’s sporadic purchases from TRA; and • When Mr. Walsh borrowed $200,000 from TRA to buy Mr. Barton out of SDL. Mrs. Walsh had only seen Mr. Green a couple of times in passing but was not involved in SDL’s business (Respondents’ Transcript Book, tab 1, at 12-14, 22-23, tab 9, at 2-3; and Respondents’ Factum, at paras. 80-89, 94). [ 39 ] The Judge found that the friendship, which developed over the years, was of no assistance in establishing a “special relationship” described in Cognos , and found that Mr.

Green, as TRA’s representative, was dealing at all times with the Walshes in a commercial capacity as representatives of their corporations and not personally as individuals. [ 40 ] The Walshes submit that the facts below “demonstrated not only the great trust the Walshes placed in Green and TRA/Sobeys but also the extent to which the Respondents sought to exercise control over the Appellants and their businesses creating a special relationship that went beyond that of the usual seller/purchaser” (Walshes’ Factum, at para. 85). It was noted in the Walshes’ Factum: a.

The Walshes changed their accountants to Doane Raymond (the accountants for TRA/Sobeys) on the recommendation of Mr. Green and TRA; b. The Walshes received professional services from TRA/Sobeys’ accountant; c. Sobeys provided financing for the Walshes’ corporations; d. The respondents purchased the Walshes’ Bay Bulls home (1995);

e. The respondents took a personal promissory note from Mr. Walsh (1995); f. The respondents purchased the Walshes’ personal shares; g. The respondents obtained a personal non-competition agreement from the Walshes; and h. For seven years after he retired, TRA had Mr.

Green provide consulting services to the Walshes (1990-1997 ). [1] [ 41 ] The flaw with the Walshes’ submission is that, as found by the Judge, these facts either establish a relationship between the respondents and the Walshes’ corporations or they relate to a period of time long after the Supply Arrangement came into effect. [ 42 ] The Walshes allege further that during the course of their relationship from 1983 to 1996, the respondents owed them a duty of care to be open and honest with them on matters relevant to their operations.

The Judge found that any duty of openness and honesty was to the Walshes’ corporations, and that the respondents had not breached any duty of care to the Walshes as individuals. [ 43 ] The evidence at trial was thoroughly considered by the Judge and supports his factual findings.

Despite the Walshes’ repetition of the undisputed facts again in this Court, the Walshes have not demonstrated a palpable and overriding error in the Judge’s application of the law to his factual findings that, pursuant to the threshold requirement of the first element of Cognos , there existed no special relationship between the Walshes and TRA and/or Mr.

Green. [ 44 ] Despite the Judge’s finding that the Walshes’ failure to establish the threshold requirement defeated their claim in negligent misrepresentation, he went on to outline each of the alleged misrepresentations, examine all of the evidence of the witnesses regarding each of the alleged misrepresentations, and made findings of credibility and of fact. [ 45 ] Having reviewed the Judge’s extensive reasons, I would not disturb his conclusion.

The Walshes have not demonstrated error in his application of the law to his factual findings and the Walshes have not established that negligent misrepresentation occurred.

Issue 1.2: Fraudulent Misrepresentation [ 46 ] The Walshes submit that the Judge erred in finding that the respondents had not acted fraudulently. [ 47 ] The allegations of fraudulent misrepresentation are set out in the Walshes’ Factum at paragraphs 121-124 and suggest: the respondents failed to disclose to the Walshes that their costs of goods was much higher than those of Sobeys and their corporations’ competitors, including Bidgoods; the respondents deliberately and fraudulently failed to disclose that the Walshes’ corporations were not receiving the same trade deals and rebates provided to TRA/Sobeys and falsely asserted that they were receiving them; that TRA/Sobey’s invoices were contrived to conceal their true costs, and to unjustly enrich the respondents; and that the April 29, 1994, Debert Supply Proposal was insufficiently considered by the Judge. [ 48 ] The Judge outlined the five elements necessary to establish fraudulent misrepresentation: [143] To establish fraudulent misrepresentation, or deceit, the Walshes must prove the following five elements: Hennessey v Eastern Regional Health Authority , 2019 NLSC 239 at para. 34 ; and Midland Resources Holding Ltd. v.

Shtaif , 2017 ONCA 320 , at para. 162 . (

i) a false representation of fact by the defendant to the plaintiff; (ii) knowledge the representation was false, absence of belief in its truth, or recklessness as to its truth; (iii) an intention the plaintiff act in reliance on the representation; (iv) the plaintiff acts on the representation; and (

v) the plaintiff suffers a loss in doing so… [ 49 ] The Judge highlighted that the principal difference between negligent misrepresentation and fraudulent misrepresentation was “the intention of deceit, which is required to ground fraudulent misrepresentation” (para. 144). [ 50 ] The Judge concluded that the Walshes had failed to prove deceitful conduct on the part of the respondents (para. 147). He further found the “all trade deals off” representation was not made to the Walshes (para. 148).

He then addressed whether “TRA deceitfully misrepresented to the Walshes that they were receiving the same equivalent cost or pricing as the Sobeys stores, after the Walshes’ Corporations entered into the Supply Arrangement” (para. 148).

He determined that “[t]he evidence fails to support a finding that the Defendants took active and deliberate steps to conceal the true nature of its cost arrangement with the Sobeys stores from the Walshes”(para. 156). [ 51 ] The Judge found in particular: [149] … The Walshes led no evidence to establish the creation of false invoices, nor any evidence of fraudulent concealment, nor an abuse of trust on the part of the Defendants. [ 52 ] In drawing this conclusion the Judge considered the evidence and made a number of findings of fact. [ 53 ] Mr.

Walsh asserted that he raised a concern with TRA that Bidgoods, a competitor, could undersell him on certain items (Tetley Tea and Fraser Meatballs). Mr. Walsh raised this pricing issue with Pat O’Keefe, TRA’s head buyer at the TRA offices. Mr. Green joined the discussion and Mr. Walsh was shown the Foodland price book and the Sobeys price book which demonstrated the costs were the same. Mr. Gardiner also gave evidence that he had also shown Mr. Walsh the Sobeys price book and the invoices for Sobeys stores being the same as the Foodland stores (Trial Decision, at paras. 151-152).

[ 54 ] The Judge noted that Mr. Walsh admitted that TRA management showed him the Sobeys price book and that the invoices were the same for the Sobeys store as Foodland stores. The Judge found that the evidence at trial established that the Sobeys stores were invoiced on the same basis as Foodland stores (with the exception of staple items - milk, sugar, and flour - for which the Foodland stores were not charged the 5% upcharge). The Judge concluded that there was no false or deceitful representation of fact made to the Walshes on this issue (paras. 153-154). [ 55 ] Mr.

Walsh alleged that TRA fabricated invoices, to the level that the respondents were guilty of devising a Ponzi scam. The Judge rejected this on the facts, finding that the Walshes’ corporations were invoiced the same cost or pricing as the Sobeys stores, and that the Walshes led no evidence to establish the creation of false invoices.

The Judge found as a fact that the respondents did not take active and deliberate steps to conceal the true nature of their cost arrangements with the Sobeys stores from the Walshes (paras. 146-149, 156). [ 56 ] The Judge also reviewed several other allegations of fraud or concealment alleged by the Walshes at paragraphs 157-229. [ 57 ] First, Mr. Walsh testified he asked Mr. Green, Mr. Gardiner and Mr.

Rushton about what deals the Sobeys stores were getting and alleges that their responses amounted to fraudulent misrepresentation or concealment. [ 58 ] The Judge noted: [158] Green consistently indicated that he was not involved with the Sobeys stores and did not have knowledge of or a role in their operations or business. When asked about the deals Sobeys stores were getting, he stated, “I don’t know … I was not associated with Sobeys stores.” In discussing rebates, he said, “I was never involved with Sobeys’ business.

I don’t know what they did.” And he testified further, “I had no arrangement with Sobeys, I didn’t do any dealings with Sobeys on anything really.” [159] Gardiner similarly had no involvement with the Sobeys stores management or operations, and had no knowledge of the SDAs. [160] Rushton had no involvement with the operations of the Sobeys stores. Asked about TRA’s ability to influence the cost of product sold in Sobeys stores, he stated it was up to Sobeys “to do whatever they felt was necessary to compete” with competitor stores.

He had no knowledge of SDAs and no reason to have access to any of the retail operations information. [ 59 ] The Judge found that although Sobeys and TRA were connected as part of a buying group, the businesses were separate operations at the relevant time. He also found TRA, as the warehouse operator and supplier for Sobeys stores, had no influence on Sobeys management, operations, merchandising, and prices. The Sobeys stores were not part of the Foodland Program and did not receive the benefits of the Foodland Program.

The Judge did not find these facts supported a claim of fraudulent misrepresentation or concealment. [ 60 ] Second, Mr. O’Leary, Director of Purchasing for TRA Newfoundland in the early 1980s, testified that although invoices for Foodland and Sobeys were the same, this would not reflect additional deals that Sobeys received that Foodland would not (paras. 161- 163). The Judge concluded there was nothing “nefarious or fraudulent” about this fact, stating that “O’Leary acknowledged in cross- examination that TRA’s management was not colluding and contriving to produce a method of invoicing to deceive Mr.

Walsh” (para. 163). [ 61 ] Third, the Judge considered the 1984 Sobeys Supply Agreement between Lofoods (a Sobeys subsidiary) and TRA, which the Walshes submitted was proof of the type and nature of rebates that TRA was supposed to pay the Walshes and evidence of a fraudulent scheme to artificially inflate the Sobeys invoices to make it appear that Sobeys was paying the same as the Foodland stores. The Judge noted that this agreement postdated the 1983 Foodland Presentation and arrangements arising therefrom did not pertain to Foodland stores.

The Judge found that it proved only that TRA was using benefits accrued from its agreement with Sobeys to benefit the Foodland Program, and that a certain rebate Sobeys received related to the fact that it paid its own freight charges, unlike beneficiaries of the Foodland Program (paras. 169-170). Mr. Walsh argued the 1984 Sobeys Supply Agreement was evidence of a “fraudulent scheme” by TRA, but the Judge accepted the evidence of Mr. Gardiner and Mr.

O’Leary outlining that the differences in the deal offered to Sobeys and the Foodland Program were simply different benefits, not proof of fraud (paras. 164-170). [ 62 ] Fourth, the Judge reviewed the benefits that the Walshes’ corporations did receive (paras. 171-217). The Judge found the evidence of Mr. Green, Mr. Rushton, Mr. Gardiner, and Mr. Vokey, highlighted the numerous benefits received by Foodland and not received by Sobeys and the different corporate realities that were reflected in the operation of the two programs.

The Judge found that the Walshes’ corporations Supply Arrangement with TRA did not include the benefit of “Incremental Supplier Funding”, which was accounted for in a different way due to the different corporate realities of Sobeys and Foodland stores (paras. 209-217). [ 63 ] Fifth, the Judge reviewed the Sobeys Departmental Analysis (SDA) which was addressed in Mr. Vokey’s testimony (paras. 218-226).

The Judge found all the SDA established was “the clear distinction between a corporate environment and an independent operator environment and confirmatory evidence of the substantial additional price support to the Walshes’ Corporations” (para. 219). [ 64 ] Sixth, in addressing TRA’s financial records the Judge concluded that TRA had no obligation to generate accounting records as meticulous as those of Sobeys to permit a direct comparison between their records (paras. 227-229).

Although the methods of accounting between TRA and Sobeys and TRA and the Walshes’ corporations were different, they were not fraudulent. [ 65 ] Finally, the Walshes submit the Judge erred because he did not refer to the April 29, 1994 Debert Supply Proposal in his reasons. In my view, he did not have to. It had no relevance to the Foodland Presentation or the Supply Arrangement between the Walshes’ corporations and the respondents, in that the Debert Proposal was developed in 1994 and the Foodland Presentation occurred in late 1983.

It is unreasonable to suggest that the Judge should have considered that dealings and documents between the parties in 1994, which related to only a small sub-set of supplied goods, provided support for the Walshes’ allegations of fraudulent concealment or misrepresentation. [ 66 ] The above considerations led to the Judge’s conclusion that the Walshes had not established fraudulent misrepresentation,

specifically finding no evidence of deceitful conduct (paras. 145-147, 231). [67] The Walshes cite Fiorillo v. Krispy Kreme Doughnuts, Inc. (2009), (ON SC), 98 O.R. (3d) 103 (Ont. Sup.Ct. J.), for the proposition that a half truth may be a misrepresentation.

They also state that a “plaintiff must establish that the falsestatement was made with the intention of deceiving the plaintiff, a defendant’s motive is irrelevant and it is therefore not necessary for aplaintiff to establish that the defendant intended to cause loss to the plaintiff” (emphasis in original, Walshes’ Factum, at para. 80). [68] The ‘half truth’ referred to in the excerpt from Fiorillo cited by the Walshes, was defined as “[t]o state a thing which is trueonly with qualifications or additions known to, but studiously withheld by, the representor ...is a “lie”” (Walshes’ Factum, at para. 80 andFiorillo, at para. 69).

However, there was no evidence that the respondents “studiously withheld” any information regarding theFoodland Program, including that which was sought by Mr. Walsh. This was thoroughly canvassed by the Judge. [69] The Walshes cite Catalyst Pulp and Paper Sales Inc. v. Universal Paper Export Company Ltd., 2009 BCCA 307, at paragraph62, for the proposition that fraudulent misrepresentations that arise during the course of the contract “are actionable, particularly if theycontinue to induce a person to alter their position to their detriment” (Walshes’ Factum, at para. 82).

The Walshes cite GeophysicalServices Inc. v. Sable Mary Seismic Inc., 2009 NSSC 404, aff’d 2012 NSCA 33, leave to appeal to SCC refused, 34847 (15 November2012), for the proposition that “false invoices can constitute fraudulent misrepresentations” (Walshes’ Factum, at para. 82). Lastly theWalshes cite Bozzo, Re. (2005), (ON SC), 10 C.B.R. (5th) 1 (Ont. Sup. Ct.

J.), for the proposition that although nolegal duty is required to ground a cause of action in fraudulent misrepresentation, “a person dealing with another is under a legal duty notto knowingly or recklessly make a false representation of fact to the other with the intention that the other act upon themisrepresentation” (Walshes’ Factum, at para. 83). [70] Catalyst is of no assistance to the Walshes as the Judge’s decision in this instance did not deny their claim because the allegedfraudulent misrepresentations were made while the Supply Arrangement was in effect.

The Judge here found that no fraudulentmisrepresentations were made at all. [71] Geophysical Services is of no assistance to the Walshes as the Judge did not find that the Walshes had proven the existence offalse invoices, as no evidence was provided establishing the invoices provided by TRA to the Walshes’ corporations were false (para.149). [72] Bozzo is of no assistance to the Walshes as the Judge found, well supported on the evidence, that there was no falserepresentation made to the Walshes or their corporations. [73] The Judge carefully reviewed the appropriate legal principles necessary to establish fraudulent misrepresentation.

He appliedthe law to his well supported factual and credibility findings.

I would not disturb his conclusion that fraudulent misrepresentation was notmade out. [74] The Walshes’ corporations took a risk when they did not secure a written agreement for the most important supplier agreementon which the majority of their corporations’ purchase of stock for their stores depended. [75] The Judge concluded that no representation was made by the respondents to the Walshes or the Walshes’ corporations that theWalshes’ corporations would be placed in the exact same financial and commercial position competitively as Sobeys stores. [76] Years after the agreement was made, Mr.

Walsh, in a piece-meal fashion, on behalf of the corporations, asked questions aboutthe Supply Arrangement for which he was given answers. At no point did Mr. Walsh or any representative of the Walshes’ corporationsask for confirmation of the exact terms of the Supply Arrangement or that it be put in writing. [77] The Walshes’ corporations were supplied with goods at a certain cost and provided a number of benefits under the FoodlandProgram. The Walshes’ corporations knew exactly what deal they were getting from the respondents because they had years of receivingthe supplies and additional benefits.

There was no allegation that the Walshes were fraudulently provided some inferior or differentFoodland Program than any other purchaser under the same program. [78] Years after the corporations were sold and dissolved Mr. Walsh continued asking questions and realized his understanding ofthe Supply Arrangement was incorrect.

It was also established on the record that his understanding of the Supply Arrangement wascommercially unreasonable. [79] At no point before the Supply Arrangement was made or while it was in effect did any representative of the Walshes’corporations ask the specific questions to confirm his understanding of the Supply Arrangement which, if not answered or answereddishonestly, might have grounded a claim in fraudulent misrepresentation. [80] The Walshes’ misunderstanding did not create a positive obligation on the respondents to educate them on the business realitiesin which they were operating.

This Court cannot declare that TRA, as a supplier, was required to provide the Walshes’ corporations withfull disclosure on the corporate realities of Sobeys or other competitors and how they might operate more successfully than the Walshes’corporations. [81] Based on the above, the Walshes have not established that the Judge made a palpable and overriding error by failing to findfraudulent misrepresentation. Issue 2: Did the Judge err in accepting the evidence of the Respondents’ witnesses over that of the Walshes and Mr.

Tillerregarding the terms of the Supply Arrangement The Walshes’ Submissions [82] The Walshes submit that the Judge erred in finding that they misunderstood what had been agreed to in the Supply

Arrangement. [ 83 ] The Walshes argue that the testimony of Mr. Tiller confirmed that they were told that their costs would be the same as Sobeys; that the Foodland Brochure stated that manufacturer and supplier deals would be passed on to the retailer; and that Mr. Walsh was told that he would get the by-cheques and trade deals, and that without this they would not have had an incentive to join the Foodland Program (Walshes’ Factum, at para. 86). [ 84 ] The Walshes criticize the Judge’s acceptance of the evidence of Mr.

Green, that he would only have promised supplier invoice costs, plus the 5% upcharge less any invoice deals. In addressing the testimony of Mr. Vokey, Mr. Gardiner, and Mr. Rushton, the Walshes criticize the Judge’s acceptance of their testimony on the Supply Arrangement as Mr. Walsh understood it, as being commercially unreasonable (Walshes’ Factum, at paras. 87-89). The Judge’s Review of the Evidence [ 85 ] The Judge provided an overview of the witnesses called over the course of the hearing: [46] The Walshes presented their evidence through Mr. Walsh's seven days of testimony followed by Mrs.

Walsh, and two former employees of TRA, Russ Tiller and Joseph O'Leary. … [47] Testimony from the Defendants came primarily from Karl Vokey (seven days duration) and two others, John Gardiner and Darrell Rushton, who through their roles with TRA or Sobeys had knowledge of the Supply Arrangement with the Walshes' Corporations. … [ 86 ] The Judge detailed the evidence of Mr. Walsh, Mr. Tiller, Mr. O'Leary, Mr. Vokey, Mr. Gardiner, Mr. Rushton, and Mr. Green, throughout his decision. The Evidence of Mr. Green [ 87 ] Mr.

Green was the General Manager and subsequently the President of TRA for the period of 1979 to 1990. He had primary responsibility for the Foodland Program and its upcharge and royalty operators. He and Mr. Tiller were present at the Foodland Presentation with the Walshes in 1983. [ 88 ] The Walshes took issue with the Judge’s acceptance of Mr. Green’s evidence and his finding that Mr. Green did not lie or mislead Mr. Walsh in any way (para. 95). [ 89 ] The basis for this arose from the fact that Mr. Green was discovered in April and June of 2010 when he was 85 years old.

His discovery testimony was admitted at trial as he died in 2014 before the trial began. His discovery testimony was that he had no specific recollection of the Foodland Presentation meeting in 1983 but he outlined what he would have told the Walshes about the Foodland Program and the Supply Arrangement. [ 90 ] The Judge admitted, without objection from counsel, and on a “ ‘principled approach’ to the admission of evidence” described with authorities at paragraph 102 of his decision, the transcript of three secretly recorded phone calls between Mr. Walsh and Mr. Green on May 28, May 30, and June 18 of 1999.

These were among the secret recordings made by Mr. Walsh of 18 persons. [ 91 ] The Judge attached significant weight to the statements of Mr. Green during the recorded phone calls in 1999 because: [103] … The calls occurred prior to the Walshes commencing litigation. Green was long-retired from TRA, with no residual connections to TRA and Sobeys. Green was wholly unaware that Walsh was taping him. Mr. Walsh challenged Green to tell the truth and Green confirmed each time, “I’m telling you the truth, Dave.” [ 92 ] At the time of the phone calls, 11 years before his evidence was taken at discovery, Mr.

Green was able to accurately reflect what he had outlined as the elements of the Supply Arrangement, which was entirely consistent with his discovery testimony on what he would have said about the Foodland Program and the Supply Arrangement. He provided explanations to each of the questions posed by Mr. Walsh. [ 93 ] The Judge also noted that: [106] Mr. Walsh, who later attended all of Green’s Discoveries, confirmed that Green was consistent “to the grave” with his version of the Foodland presentation. Mr. Walsh testified that Green had a “fantastic memory.” [ 94 ] The Judge made a finding that Mr.

Green spoke the truth in his taped conversations and that those statements undermined Mr. Walsh’s own memory of the Foodland Presentation. [ 95 ] Mr. Walsh’s purpose in making and taping the phone calls was to confirm his version of the particulars of the 1983 Foodland Presentation and his version of the Supply Arrangement. The Judge found that Mr. Walsh failed in this effort. The Judge’s findings in this regard disclose no palpable and overriding errors. The Evidence of Mr. Tiller [ 96 ] Mr. Tiller was a management employee with TRA in 1983 and 1984. He left TRA at Mr. Green’s request. Mr.

Tiller was present at the Foodland Presentation meeting and provided the Foodland Brochure to Mr. Walsh. The Judge noted: [112] Tiller had good recall of the Foodland presentation and was familiar with the Foodland Program, having presented it to others on many occasions. I find his evidence was balanced. He had previously given Discovery testimony and Mr. Walsh had also secretly taped his conversation with him.

[ 97 ] It was in part Mr. Tiller’s evidence that supported the Judge’s conclusion that the Walshes were not guaranteed Sobeys equivalent costing: [92] When I turn to consideration of Green’s and Tiller’s evidence on the Foodland presentation, I find no support for the contention that the Defendants made the ‘all trade deals’ representation to the Walshes or that the Defendants represented the Walshes’ Corporations were to receive Sobeys’ costs. … [116] Tiller’s understanding of the “Trade Deals are Passed On”

section of the Foodland brochure was that it was confined to the off- invoice deals. [ 98 ] The Judge accepted Mr. Tiller’s evidence that Sobeys internal costing, merchandising and trade deals were not the subject of the Foodland Presentation (para. 117). [ 99 ] The Judge was aware of Mr. Tiller’s testimony regarding the ambiguity imparted to Mr.

Walsh’s understanding of the Supply Arrangement, through the use of the word “costs” without further explanation: [119] Tiller confirmed he did not dwell on cost that much because “it's like opening a can of worms” and “someone's definition of cost was different than somebody else’s.” He wanted to avoid the part on cost.

He “went by as quickly as possible” knowing it could not “be avoided forever.” He confirmed whatever cost meant he understood it could not mean “TRA's net cost” for supplying product to Foodland operators. … [127] My conclusion on the Foodland presentation evidence is that TRA, through Green and Tiller, promised the Walshes the Off- Invoice Allowance deals and some portion of monies from By-cheques and Rebates on Directs. Tiller and Green could have done better explaining to the Walshes what was in their contemplation, so Mr.

Walsh would not have had the confusion and unrealistic commercial expectation about the Supply Arrangement. [ 100 ] Mr. Tiller was also recorded in secret by Mr. Walsh (Trial Decision, at para. 265). The Evidence of Mr. Walsh [ 101 ] Mr. Walsh was the directing mind of the Walshes’ corporations and the driving force behind the present litigation. The Judge described him as an “honest man”, though with a “misguided understanding of the Supply Arrangement” (para. 51). Mr. Walsh’s recollections were challenged by the witnesses for the respondents, Mr. Rushton, Mr. Green, and Mr. Gardiner, as well as Mr.

Tiller, a witness for the Walshes (Trial Decision, at para. 80). [ 102 ] The Judge found that Mr. Walsh perceived that the representations that were made were untrue, inaccurate and misleading. The Judge found: “the weight of the evidence refutes the assertions and perception that the Walshes erroneously held” (para. 77). [ 103 ] The Judge also found what Mr. Walsh claimed he was promised was commercially unreasonable (para. 128). The Judge noted “Mr.

Walsh’s evidence is somewhat confusing as to the timing of meetings with Rushton” and that “[Mr.] Walsh gave no testimony to support Rushton made the ‘all trade deals off’ or ‘Sobeys equivalent cost’ representations” (paras. 132-133). [ 104 ] The Judge noted Mr. Walsh “simply heard what he wanted to hear and believe that he was getting all the deals and same pricing treatment as Sobeys stores” (underlining in original) (para. 137). The Judge found that there was no “Ponzi scam” and that “[t]he Walshes have failed to prove deceitful conduct…” (para. 147). [ 105 ] The Judge reviewed how Mr.

Walsh acknowledged he received many benefits not provided to Sobeys through the Foodland Program: [203] Mr. Walsh acknowledged in his cross-examination that the Walshes’ Corporations were receiving additional price supports and other services from TRA beyond the standard Off-Invoice Allowance.

He recognized various forms of price support “on a daily basis” by way of the EDLP Program, the Weekly Flyer Program, Store Credits, and other discretionary price support. [204] He confirmed TRA provided the Foodland operators, including the Walshes’ Corporations, with extensive retail counselling services, at the store department level, at no charge. TRA provided retail accounting services at a modest cost. TRA provided monthly budgeting services, seminars and semiannual meetings for Foodland operators.

TRA had a Foodland Advisory Committee that provided guidance on store-level profitability, store-level costs, and other aspects relating to store sales. [205] Mr. Walsh also acknowledged TRA provided Walsh’s Foodland with financing for the development of the new store in Bay Bulls, and at no charge, budgeting and engineering consulting services for the design and construction of the store. The Evidence of Mr. Vokey [ 106 ] Mr. Vokey joined TRA in 1988 and “was directly involved and oversaw the pricing as provided to the Walshes’ Corporations and other Foodland stores” (Trial Decision, at para. 174). [ 107 ] Mr.

Vokey’s testimony was largely relied on in exploring what benefits the Walshes’ corporations did and did not receive under the Foodland Program. This included not only discussion of different types of deals and allowances, but different commercial realities, for instance between Sobeys and the Walshes’ corporations (Trial Decision, at paras. 175-200). The Judge accepted Mr. Vokey’s evidence and found that:

[181] In addition to the benefit of Foodland and Sobeys having the lowest upcharge of any of TRA’s customers, TRA provided additional price support to Foodland operators, in which the Walshes’ Corporations participated. TRA did not provide this additional price [support] to the Sobeys stores. The Evidence of Mr. Gardiner [ 108 ] Mr. Gardiner joined TRA in 1986 as Vice-President of Operations and succeeded Mr. Green as President of TRA. [ 109 ] His testimony was to the effect that what Mr.

Walsh thought he had secured was commercially unreasonable and beyond any deal that TRA had with any company (Trial Decision, at para. 129) and that Mr. Walsh never asked him whether he was receiving all trade deals or “inside monies” (para. 140). Mr. Gardiner confirmed he showed Mr. Walsh the price books which showed he was receiving the same costs as Sobeys (para. 152), and other details of TRA operations. The Evidence of Mr. Rushton [ 110 ] Mr. Rushton was 83 years old when he gave evidence at the trial, having retired in 2000 as President of Wholesale Operations of Sobeys.

He worked for Sobeys for 43 years and was a Sobeys Vice-President in 1983. Mr. Rushton was not present at the Foodland Presentation. [ 111 ] The Judge noted Mr. Rushton was articulate and had reasonable recall of his interactions with Mr. Walsh. He testified to the fact that the deal as perceived by Mr. Walsh would not have been commercially viable (paras. 128, 130). Mr. Walsh provided no testimony confirming that Mr. Rushton “made the ‘all trade deals off’ or ‘Sobeys equivalent cost’ representations. Mr. Rushton confirmed he had no discussions with Mr.

Walsh about trade deals other than the capability of buying at container-load prices” (para. 133). Mr. Rushton had no involvement with Sobeys stores operations (para. 160). [ 112 ] Mr. Walsh testified that on some unknown date, he gave Mr. Rushton a ride to the airport and Mr. Rushton told him that he was doing the “right thing” joining the Foodland Program (para. 132).

The Findings of the Judge [ 113 ] The Judge dealt clearly and cogently with the many issues raised by the Walshes on appeal, including: (1) what the Walshes’ corporations were or were not promised with respect to the “Sobeys equivalent costing issue”; (2) the nature and statements within the Foodland Brochure relating to the deals that would be passed on; (3) the issues of by-cheques and trade deals generally; and (4) the commercial (un)reasonability of the deal the Walshes claimed their corporations were offered. [ 114 ] The testimony and exhibits drawn to the attention of this Court by the Walshes were fully reviewed.

The Judge’s reasons demonstrate that he considered all of the evidence thoroughly and balanced it with a great deal of sympathy for the situation in which the Walshes had found themselves. [ 115 ] The Judge made findings of fact which are entitled to deference and do not establish that the Judge made a palpable and overriding error in respect of his conclusions as to the terms of the Supply Arrangement. Issue 3: Did the Judge err in accepting the evidence of Mr.

Vokey that all Rebates and Allowances were passed on to the Walshes’ Corporations as Price Supports [ 116 ] The Walshes argue that “Karl Vokey’s testimony that all allowances and rebates were refunded to Foodland operators through price supports or reductions should have been rejected as it is not supported by the evidence” (Walshes’ Factum, at para. 91). [ 117 ] The Judge made a number of findings of fact based on the evidence about what price supports were provided to the Walshes’ corporations at paragraphs 169, 172, 181, 188, 192, 193, 200, 203, 219, and 230. [ 118 ] In reviewing the Judge’s findings, it is clear the Judge did not rely on the testimony of Mr.

Vokey to conclude that “all allowances and rebates were refunded to Foodland operators”. Rather, the Judge concluded Foodland operators received “substantial” benefits, and other discretionary benefits and price supports. The Judge explicitly rejected the idea that all the additional allowances were passed along during his review of the experts’ valuation reports (para. 420). [ 119 ] Furthermore, the Judge did not accept Mr. Walsh’s testimony that he was entitled to receive all allowances and rebates. [ 120 ] The Judge did not commit a palpable and overriding error by drawing the conclusions he did from Mr.

Vokey’s testimony.

Issue 4: Discoverability and the Limitations Period Did the Judge err in holding that the Walshes ought to have known that they had a Cause of Action by December 1998 and that their claims were out of time [ 121 ] The Judge found that there was a two-year limitation period for negligence, negligent misrepresentation and personal losses for fraudulent misrepresentation arising from the sale of the Bay Bulls store in February 1995 and the Merrymeeting Road store in July 1996 ( Limitations Act , at ss. 5 (a), 5 (b)). [ 122 ] The Judge also noted, at paragraph 235, that section 14(1) of the Limitations Act allows the postponement of the running of the

limitation period for actions, including an action “for personal injury.” Section 13(1) expressly provides that the common law rulesrespecting the time at which a cause of action arises continue to apply. The common law rules of discoverability also apply for actionsthat do not fall within section 14(1). [123] Under the common law rule, “a cause of action arises for purposes of a limitation period when the material facts on which it isbased have been discovered or ought to have been discovered by the plaintiff by the exercise of reasonable diligence” (Central Trust Co.v.

Rafuse, (SCC), [1986] 2 S.C.R. 147, application for variation allowed (SCC), [1988] 1 S.C.R. 1206,at 224; and Ryan v. Moore, 2005 SCC 38, [2005] 2 S.C.R. 53, at paras. 2, 22). [124] Section 14(1) of the Limitations Act reads: “the limitation period fixed by this Act does not begin to run against a person until heor she knows or, considering all the circumstances of the matter, ought to know that he or she has a cause of action” (emphasis added). [125] The most recent statement of the law is found in the decision of the Supreme Court of Canada in Grant Thornton LLP v. NewBrunswick, 2021 SCC 31.

The Court makes clear the particular degree of knowledge required to discover a claim. [126] The Court in Grant Thornton held that the discoverability provision of the New Brunswick Limitation of Actions Act, SNB 2009,c. L-8.5, codifies the common law rule of discoverability. That is similar to what this Court held on the statutory discoverabilityprovision of the Limitations Act (WEH Enterprises Ltd. v. Squires et al., 2010 NLCA 41, 300 Nfld. & P.E.I.R. 98; and Rogers v.

Morganet al., 2011 NLCA 27, 307 Nfld. & P.E.I.R. 292. [127] The Court in Grant Thornton provides the following guidance: [40] … the limitation period is triggered when the plaintiff discovers or ought to have discovered through the exercise of reasonablediligence the material facts on which the claim is based. ... … [42] … a claim is discovered when a plaintiff has knowledge, actual or constructive, of the material facts upon which a plausibleinference of liability on the defendant’s

part can be drawn. [128] The Court goes on to explain, at paragraph 46, that: “[t]he plausible inference of liability requirement ensures that the degree ofknowledge needed to discover a claim is more than mere suspicion or speculation”. The standard does not require “certainty of liability”,“perfect knowledge”, or “perfect certainty”. A plaintiff does not need to know the exact extent or type of harm they have suffered. [129] In the present case, the Judge carefully and thoroughly reviewed the law and then directed himself to consider and make factualfindings on the requisite degree of Mr.

Walsh’s knowledge by asking himself “when did he know or, considering all the circumstances ofthe matter, ought to [have] known that he had a cause of action?” (underlining in original, para. 252). [130] Applying these principles of discoverability, the Judge concluded that Mr. Walsh had knowledge of his claim by December 1998(paras. 272-273), and that in the alternative, “Mr.

Walsh had ample knowledge of the material facts by at least January 1999 to draw aplausible inference of liability on TRA’s part” (para. 256), and specifically, January 29, 1999 (para. 274). [131] In reaching this conclusion, the Judge reviewed a series of events, involving Mr. Tiller, Mr. O’Leary, Mr. Green, Bill Moulton,and Gerald O’Brien K.C., occurring from 1983-1999. [132] The Judge found based on the evidence of Mr. Tiller and Mr. O’Leary, that Mr. Walsh was aware of the existence of by-chequesas early as 1983 and at the latest 1992 (despite his claiming he was not) (paras. 257-260). Mr.

Walsh was also made aware of by-chequesby Mr. Green at a lunch meeting in December of 1998. The Judge concluded: [262] Mr. Walsh’s apparent explanation for not commencing his claim in December 1998 when he knew he was not getting By-cheques directly credited to Off-Invoice deals is that Green told him “the By-cheques were so small that you're worrying about nothing”. [263] I cannot accept Mr.

Walsh’s explanation (and lack of requisite knowledge) for not commencing the action until April 2001 inlight of the other pertinent testimony on discoverability. [133] The Judge reviewed a phone call from July 1, 2000, recorded by Mr. Walsh, between himself and Mr. Tiller, where Mr. Tillerconfirmed (and Mr. Walsh acknowledged) that Mr. Tiller had told him three years earlier, in 1997, that he was not receiving net-net costpricing from TRA (paras. 264-267). [134] The Judge then reviewed a series of lunch meetings. On September 29, 1998, Mr. Walsh had lunch at the Albatross Hotel inGander with Mr. Green, Mr.

O'Keefe and others. The Judge explored Mr. Walsh’s comments regarding this conversation: [270] Mr. Walsh discussed the Albatross Hotel lunch comments with TRA’s head buyer, Brian Forristall on October 12, 2002. Thetranscript of the call was entered as an exhibit through Mr. Walsh. Mr. Walsh is recorded as saying: “Now, I knew the difference then,right, because I was after finding. Sure he (Green) never passed the deals on.” Mr. Walsh stated at Trial, in this conversation withForristall, he was pretending he knew more than he did. I find Mr.

Walsh’s perception of his memory from that call is misinformed. [135] On October 28, 1998, there was another lunch with Mr. Green at the Avalon Mall. Mr. Walsh confirmed that by December 1998,he was aware of the 1984 Sobeys Supply Agreement and that by-cheques were not being passed along (paras. 271-272). The Judgeconcluded: [273] Mr. Walsh therefore knew by December 1998 that the Walshes’ Corporations were not receiving all the deals in the same manneras Sobeys, but he was working to “complete the puzzle.” The legal requirement for commencement of the action is not completion of thepuzzle. Mr.

Walsh had the ‘pieces of the puzzle’ or so-called material facts he needed to frame the action. Completion of the puzzle can

wait for the tendering of the evidentiary pieces to prove the elements of the causes of action. [ 136 ] The Judge determined that Mr. Walsh had the requisite knowledge necessary for the commencement of an action by December of 1998. He went further and determined that at the very latest by January 29, 1999 (the date of Mr. Walsh’s meeting with Mr. Moulton (who worked for Newfoundland Margarine and Red Rose Tea) and Mr. Walsh’s lawyer, Mr.

O’Brien K.C.), the Walshes had sufficient notice of their claim under the discoverability principles for the purposes of commencing the action (paras. 256, 274-276, 281). [ 137 ] The Judge also emphasized that Mr. Walsh, by his own admission while testifying, stated that it was proven that something was wrong with the pricing that TRA was providing his corporations by January 29, 1999, when he spoke with Mr. Moulton and Mr. O’Brien K.C. (paras. 274-276). [ 138 ] As noted above, the statement of claim was filed April 6, 2001. The applicable limitations periods are not at issue.

It is the Judge’s conclusions on discoverability that are at issue. [ 139 ] The Walshes argued the Judge erred in finding that (1) their actions for negligent misrepresentation and personal losses for fraudulent misrepresentation were outside the 2-year limitation period, (2) they had not established their claim for economic losses arising from fraudulent misrepresentation entitling them to the 6-year limitation period, and (3) the doctrine of fraudulent concealment did not extend their limitation period. [ 140 ] On the first issue, the Walshes contend that the Judge erred in not finding that the limitation period did not begin to run until June 18, 1999. [ 141 ] They argue it was on June 18, 1999 that Mr.

Walsh, in a conversation with Mr. Green, was made aware that he was not getting net cost pricing (Walshes’ Factum, at paras. 105-106). [ 142 ] However, the Walshes fail to address the fact that the Judge also relied on the evidence of Mr. Tiller in respect of his not receiving net costing, and the evidence of Mr. Tiller and Mr. O’Leary that Mr. Walsh was aware of the issues concerning by-cheques.

This, in addition to the meetings in the fall of 1998 and the January 1999 meeting, were sufficient to support the Judge’s conclusion on discoverability. [ 143 ] No palpable and overriding error is established in the Judge’s reasoning that the Walshes had knowledge of the material facts to plead and support the claim against the respondents. [ 144 ] The Walshes submit, on the second and third issues, that the Judge erred in finding that the Walshes had not established their claim for economic losses arising from fraudulent misrepresentation entitling them to the 6-year limitation period and that the doctrine of fraudulent concealment did not extend their limitation period. [ 145 ] The Judge did not conclude that the Walshes could not benefit from the 6-year limitations period in respect of economic losses arising from fraudulent misrepresentation (if the claim was made out) under section 6(1) (

c) of the Limitations Act . He specifically concluded they could (para. 282). [ 146 ] The third issue regarding fraudulent concealment is dealt with below under Issue 5. Issue 5: The Respondents’ alleged Fraudulent Behaviour [ 147 ] The Walshes assert that the Judge erred in law in finding that the respondents had not acted fraudulently (Walshes’ Factum, at para. 120). [ 148 ] The Judge relied in large measure on the evidence of Mr. Green and Mr. Tiller to find that there had not been fraudulent concealment (paras. 277-282). [ 149 ] The Judge also relied on the fact that Mr.

Green did not conceal any information or lie to Mr. Walsh when he (unbeknownst to himself) was being recorded on various phone conversations on May 28, and 30, 1999 and June 18, 1999, (para. 280; and Walshes’ Appeal Book, vol. 3, tabs 43, 44, 45). [ 150 ] The Judge’s conclusion on the issue of fraudulent concealment is reproduced below: [279] I have determined that the Defendants did not conceal the material facts that would trigger the running of the limitation period from the Walshes. When Mr.

Walsh confronted Green and Tiller, they revealed to him that he was not receiving the alleged entitlements and what he believed TRA had promised the Walshes. [280] The relationship the Walshes built with Green over the years, through their association with TRA and time thereafter, was unquestionably one of mutual friendship and trust. [Mr. Green], not knowing he was being taped, had the opportunity to mislead and conceal the truth, but he never lied to or gave Mr. Walsh the ammunition he was attempting to marshal against the Defendants. [281] I am satisfied that Mr.

Walsh knew or, considering all the circumstances of the matter, ought to have known he had a cause of action against the Defendants on or before January 29, 1999. [ 151 ] The Walshes submit that TRA/Sobeys falsely asserted that their corporations were receiving the “same Trade Deals and rebates provided to TRA/Sobeys”. The Walshes argue that TRA “arranged their invoicing to conceal their true costs”, and that this was proved by the 1984 Sobeys Supply Agreement and “[TRA’s] failure to account for the rebates on directs to their Foodland customers”.

The Walshes argue that TRA was taking possession of such concealed funds to “unjustly enrich” themselves. The Walshes submit the Judge’s failure to consider that Mr. Walsh’s evidence was supported by the Debert Supply proposal dated April 29, 1994 that noted that “costs are the same for the entire group”, noting that TRA failed to explain how “if it were commercially unreasonable to provide the

same costs in 1983, it became commercially reasonable in 1994” (Walshes’ Factum, at paras. 121-123). [ 152 ] As outlined above, the Judge dealt exhaustively with the evidence regarding what was promised to the Walshes’ corporations and determined that Mr. Walsh was not promised the Supply Arrangement he thought he was securing for the Walshes’ corporations. [ 153 ] The Judge stated that the “Walshes led no evidence to establish the creation of false invoices, nor any evidence of fraudulent concealment, nor any abuse of trust on the part of the Defendants” (para. 149).

He was entitled to make these findings based on the evidence. [ 154 ] The relevance of a document, the Debert Supply Proposal, dated 11 years after the Supply Arrangement was put in place, which related to only a small sub-set of supplied goods, does not provide support for the Walshes’ allegations of fraudulent concealment. [ 155 ] The Judge reviewed all of the evidence and made findings of fact supported by the evidence. [ 156 ] The Walshes have failed to establish any error in the Judge’s finding that the doctrine of fraudulent concealment did not assist the Walshes in their attempt to extend the limitations period.

Issue 6: The Rule in Foss v. Harbottle [ 157 ] Foss v. Harbottle was decided in 1843 and established that shareholders have no cause of action for wrongs done to their corporation and cannot recover damages sustained by the corporation. The Judge described this principle at paragraphs 36 and 37. [ 158 ] The Judge summarized the prerequisites to an individual, personal claim by a shareholder with reference to judicial authority, including the most recent affirmation of the principle by the Supreme Court of Canada in Brunette v.

Legault Joly Thiffault , S.E.N.C.R.L. , 2018 SCC 55 , [2018] 3 S.C.R. 481: [292] The well-settled law is that: (

i) a shareholder cannot advance a cause of action in respect of a wrong to a corporation. There must be an independent wrong done to the shareholder; and, (ii) a shareholder cannot recover damages which were sustained by a corporation.

A shareholder’s damage must be direct and independent from the injury suffered by the corporation. (Underlining in original.) [ 159 ] The Judge found that the Walshes had failed to establish either of these two necessary prerequisites and that the failure of either one of them would have resulted in a dismissal of the claim (paras. 292-370). [ 160 ] The Judge found that the Walshes’ allegations and evidence did not concern alleged wrongs to the Walshes as individuals, and accordingly, failed to satisfy the first condition in Brunette to avoid the barring of the claim under the rule in Foss v.

Harbottle (para. 312). [ 161 ] The Judge also found that the Walshes did not otherwise establish any other direct personal losses (para. 351). [ 162 ] The Judge described the following as “irrefutable facts” at paragraph 330 of his decision: [330] [The Walshes] cannot establish an independent wrong to them as individuals because of these irrefutable facts: i. There was no contractual relationship with the Walshes; ii. The Walshes were never a Foodland affiliate; iii. They, as individuals, had no entitlement to trade deals; iv.

Any benefits of the alleged contractual arrangement between TRA and the Walshes’ Corporations would have been for the Corporations, not the Walshes; and v. The Walshes did not purchase any goods from TRA or any of the Defendants. [ 163 ] The Judge similarly found as a fact, after hearing evidence as to the entirety of the alleged misrepresentations, that “[a]ll of the misrepresentations alleged concern the asserted rights of the Corporations, not the Walshes personally. They are all representations as to what the Corporations were expecting to receive” (para. 331). Alleged errors in the Judge’s

Interpretation of the Jurisprudence [ 164 ] The Walshes argue that the Judge failed to properly consider four cases that had determined that the rule in Foss v. Harbottle did not apply. [ 165 ] The Walshes submit that the Ontario Court of Appeal’s decision in Tran v. Bloorston Farms Ltd. , 2020 ONCA 440 , allows them to advance their claim for loss of share value. This argument fails to recognize the key distinguishing facts in Tran . In Tran , the claim was founded on the personal right of the plaintiff arising from a lease in her name of premises in which her company was operating a restaurant.

The corporation had no cause of action against the defendant as it was not a party to the lease. [ 166 ] The Court held that the defendant had wrongfully terminated the lease and, as a result, Ms. Tran’s shares in her company became

worthless. The damages incurred by Ms. Tran, including her loss of share value, were recoverable. [167] The Court in Tran found that the rule in Foss v. Harbottle had no application as “the wrong in this case was not done to thecorporation, but to the shareholder personally.” The Court held that “where the wrong was not committed against the corporation and thecorporation therefore has no cause of action, the rule in Foss v.

Harbottle does not prevent a shareholder who has her own cause ofaction from suing for any damages properly recoverable under that cause of action, including, in appropriate cases, loss or diminution ofshare value”.

The Court in Tran found, as a fact, that the corporation in that case had “no cause of action whatsoever” (Tran, at paras. 1,3, 32, 41, 63). [168] The Judge in the present case found that the alleged wrong was to the Walshes’ corporations, that all of the allegedmisrepresentations concerned the asserted rights of the Walshes’ corporations, and that any benefits of the alleged contractualarrangement would have been for the Walshes’ corporations and not the Walshes personally (paras. 330-331). [169] The Judge’s findings that “[t]he distinguishing aspect of the Walshes’ claim is that the alleged wrong was to the Walshes’Corporations” and “[t]he plaintiff’s corporation in Tran had no cause of action and could not bring the action” were supported by thefacts of the case (para. 323). [170] Contrary to the Walshes’ submission, the situation in Tran is not “precisely the circumstances in which the Walshes foundthemselves” (Walshes’ factum, at para. 134).

Tran is simply too different on the facts to support the Walshes’ position. [171] The Walshes argue that the Judge failed to apply the second proposition outlined in Johnson v. Gore Wood & Co, [2000] UKHL65, [2001] 1 All ER 481, cited at paragraph 45 of Tran: 2. Where a company suffers loss but has no cause of action to sue to recover that loss, the shareholder in the company may sue inrespect of it (if the shareholder has a cause of action to do so), even though the loss is a diminution in the value of the shareholding . . . (Emphasis added.) [172] It is repeated that here the Walshes must es

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