McKay Career Training Inc. v Baker, 2018 SKCA 83

Court of Appeal for Saskatchewan Docket: CACV2931 Citation: McKay Career Training Inc. v Baker , 2018 SKCA 83 Date: 2018-10-24 Between: McKay Career Training Inc. Appellant (Plaintiff) And Bob Baker and 613791 Saskatchewan Ltd. Respondents (Defendants) And The City of Saskatoon Non-Party (Third Party) Before: Jackson, Caldwell and Whitmore JJ.A. Disposition: Appeal allowed Written reasons by: The Court On Appeal From: 2016 SKQB 215 , Saskatoon Appeal Heard: June 6, 2018 Counsel: Jessie Buydens for the Appellant Deryk Kendall for the Respondent The Court I.

Introduction [ 1 ] McKay Career Training Inc. [McKay Career] appeals against a decision of the Court of Queen’s Bench dismissing its claims of negligent misrepresentation and breach of contract against Bob Baker, a commercial realtor: see McKay Career Training Inc. v Baker , 2016 SKQB 215 , 50 MPLR (5th) 271 [ QB Decision ]. [ 2 ] For the reasons that follow, we set aside the dismissal of the claim in contract against Mr. Baker and enter judgment against Mr. Baker in favour of McKay Career. It follows that we set aside the award of costs made against McKay Career after trial at the Court Queen’s Bench.

The matters of damages and costs of trial shall be remitted to the trial judge for determination. II. Background [ 3 ] McKay Career owns and operates a private vocational school in Saskatoon, Saskatchewan. Keith Parker manages that school. Mr. Baker has been a commercial realtor for over 30 years. He practices through a brokerage owned by 613791 Saskatchewan Ltd. [613791]. Mr. Parker and Mr. Baker had been friends for a number of years. [ 4 ] Sometime in 2008, McKay Career began looking for new premises to acquire partly because the term of the lease of its existing premises was expiring at the end of 2010. Mr.

Parker had no prior experience with commercial real estate purchasing or leasing. So, at some point between 2008 and 2010, Mr. Parker engaged Mr. Baker to act on behalf of McKay Career and to assist it with finding new premises to purchase. To this end, Mr. Parker and Mr. Baker discussed McKay Career’s goals. McKay Career’s budget was $12,000 to $20,000 per month in mortgage or lease payments, with $50,000 earmarked for moving costs and for some contemplated renovations. [ 5 ] Mr. Parker and Mr.

Baker viewed several properties, with two being identified as possible premises for the vocational school, namely, a location on Idylwyld Drive [Idylwyld Drive property] and one at 133-3rd Avenue North [3rd Avenue property]. McKay Career initially focused on purchasing the Idylwyld Drive property; however, Mr. Baker suggested that it consider leasing the 3rd Avenue property.

And, on March 10, 2010, McKay Career offered to lease the 3rd Avenue property subject to certain conditions precedent, including verification by the City of Saskatoon that the building on the property [Building] was suitable for McKay Career’s intended use as a vocational school. The offer expired without acceptance by the landlord and McKay Career refocused itself on purchasing the Idylwyld Drive property. [ 6 ] After a contamination issue arose with the Idylwyld Drive property, McKay Career again considered leasing the 3rd Avenue property. Mr.

Parker assessed the Idylwyld Drive property purchase as the better financial deal but saw the 3rd Avenue property as being the better location. In the end, McKay Career decided to lease the 3rd Avenue property. Its rental rate was $11,000 per month plus $2,000 to $2,500 in monthly occupancy costs and it would require about $300,000 in renovations to suit McKay Career’s intended use (the Idylwyld Drive property would have required $400,000 in renovations). [ 7 ] In furtherance of a lease, Mr. Baker arranged for Randy Slater, an experienced contractor, to meet with Mr. Parker. In discussions among Mr. Parker, Mr.

Baker and Mr. Slater, a question arose as to whether a sprinkler system might be required for the Building. Mr. Baker agreed to approach the City of Saskatoon [City] about the suitability of the Building for McKay Career’s intended

use, including asking about whether a sprinkler system would be required. [8] Mr. Baker spoke to someone in the building department at the City, who pulled the plans for the Building and went throughthem with Mr. Baker. Mr. Baker told the person the number of people who would attend the school. On this basis, the person checkedthe plans and said, “It looks like sprinklers would not be required” (QB Decision at para 120). Mr. Baker made no mention ofrenovations. Mr. Baker did not take notes or get the person’s name. He later conveyed the substance of his discussion with the City toMr. Parker. Mr.

Parker sought no further verification from Mr. Baker, Mr. Slater or the City as to whether sprinklers would be requiredin the Building. Mr. Baker was not asked to and he did not look into the matter further. [9] On June 22, 2010, McKay Career entered into negotiations with the owner of the 3rd Avenue property. McKay Careersigned a lease that September, following which Mr. Slater began renovations to the Building. Mr. Slater did not obtain a building permit,even though the City had told him not to start renovations without one. On September 29, 2010, the City wrote to Mr.

Slater advisingthat it had not issued a building permit and requesting that he address certain issues, including sprinklers. As it turned out, the Buildingrequired a sprinkler system. [10] Mr. Slater completed renovations to the Building in December of 2010. Around that time, McKay Career became aware theBuilding required a sprinkler system. By the summer of 2011, McKay Career had begun installing a sprinkler system. The City issued abuilding permit in October of 2011.

The sprinkler installation was completed in early 2012 at a cost of $111,690.60. [11] Given the circumstances, McKay Career commenced an action for the recovery of the cost of installing sprinklers after therenovations, alleging Mr. Baker had breached his agreement to provide correct information regarding the need for a sprinkler systemand, further or in the alternative, that Mr. Baker had made a false and negligent representation to McKay Career about the need for asprinkler system in the Building. Mr. Baker also sued the City, but neither McKay Career nor Mr. Baker brought claims against Mr.Slater. III.

Trial Decision [12] The trial judge interpreted McKay Career’s claims against Mr. Baker and 613791 as alleging that Mr. Baker had negligentlymisrepresented critical information he had received from the City and that this circumstance had also constituted a breach of theunwritten contract between McKay Career and Mr.

Baker. [13] Addressing the first of these allegations, the trial judge relied on the test set out in Queen v Cognos Inc., (SCC), [1993] 1 SCR 87 at 110 [Cognos], where the Supreme Court of Canada summarised the elements of a claim in negligentmisrepresentation: 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.

In the case at bar, the trial judge found that all elements were present and allowed the appellant’s claim. [14] After reviewing the evidence, the trial judge found McKay Career’s claims against Mr. Baker were supported by his findingsunder four of the five criteria set forth in Cognos: (

a) First Criterion—Mr. Baker owed a duty of care to McKay Career based on a special relationship; (

b) Second Criterion—Mr. Baker’s representation to McKay Career about the need for a sprinkler system was inaccurate; (

c) Third Criterion—Mr. Baker had “in essence acted negligently in making the representation” (at para 193) because he hadnot made notes, had not obtained the name of the City employee with whom he had spoken, and had not sought to obtain the informationin writing; further, Mr. Baker ought to have known it was important to obtain and convey accurate and correct information and his failureto ensure the information was “clear and concise and unequivocal, also serve[d] to demonstrate negligence on his part” (at para 193); and (

d) Fifth Criterion—McKay Career had suffered damages of $111,690.60. [15] However, in dealing with the fourth criterion articulated in Cognos, the trial judge found McKay Career had failed to establishit had relied in a reasonable manner on the negligent misrepresentation on the basis that (

a) it was not reasonable to rely on therepresentation, (

b) McKay Career ought to have sought to ascertain a more formal answer from the City, and (

c) a prudent party wouldhave requested specific confirmation that sprinklers were not required in the Building. As such, the trial judge rejected McKay Career’sclaim under negligent misrepresentation. [16] The trial judge then turned to consider whether the same circumstances had amounted to a breach of the unwritten contractbetween Mr. Baker and McKay Career. In that regard, the trial judge found McKay Career was entitled to assume that Mr.

Baker would“act in the best interests of [McKay Career] using the reasonable skill and care of an experienced commercial realtor” (at para 202). [17] Taking this to the specific, the trial judge found Mr. Baker had undertaken to attend at the City to raise the issue of thesuitability of the Building for a vocational school, including whether sprinklers would be required. In that regard, the trial judgeconcluded Mr.

Baker had satisfied that term of the contract and so he dismissed this claim, stating: [202] … Further, I find on a balance of probability that Baker has proven that he received information from the City employee and thathe conveyed that information in the same terms in which he received it, to McKay through Parker. I have earlier commented on the moreprecise nature of the comments made by Baker to Parker and/or Slater, and my conclusion that there was a qualifying aspect to those

comments. [203] No implied term of the contract required Baker to be the guarantor as to the accuracy of the information. What he was simply asked in that aspect of his representation of McKay was to make the inquiry and return with the information. This I am satisfied he did. While I have expressed the view that Baker ought to have done more to ascertain a more formal answer to the question, he was not asked to do so by McKay. In essence, Baker did what the implied term of the contract required him to do.

In the absence of being a guarantor for the accuracy of that information, I am unable to find that Baker, through the misrepresentation (albeit unintentional), breached his contract with McKay. To that end, the plaintiff has not demonstrated on a balance of probabilities this cause of action. In short, the plaintiff’s claim also fails on the assertion of breach of contract (by reason of negligent misrepresentation). [ 18 ] In the result, the trial judge dismissed McKay Career’s claims against Mr. Baker and 613791 as well as a third party claim brought by Mr. Baker against the City.

McKay Career appeals all aspects of the QB Decision related to its claims against Mr. Baker. The claims against 613791 and the City are no longer at issue. As noted earlier, no claims had been brought against Mr. Slater. IV. Analysis [ 19 ] In this appeal, McKay Career raises three arguments seeking to set aside the trial decision. The first argument addresses its claim under contract. The second addresses its claim in negligent misrepresentation. Under the third, McKay Career alleges the trial judge failed to address an issue raised at trial.

However, having reviewed the trial decision, the court record and the facta, and having heard the oral arguments of the parties, we find the appeal turns on the first error alleged, namely, the way in which the trial judge addressed McKay Career’s claim in contract. [ 20 ] We find no reason to disturb the trial judge’s ultimate conclusion on the claim framed under negligent misrepresentation.

In simple terms, a plaintiff must prove each of the five criteria identified in Cognos to establish a claim of negligent misrepresentation: Lucien Groulx & Son Planing & Saw Mill Ltd. v Nipissing Forest Resource Management Inc. , 2007 ONCA 801 at para 4 . The issue under the fourth criterion is whether the plaintiff has relied, in a reasonable manner, on a negligent misrepresentation.

This is a question of fact subject to the palpable and overriding error standard of appellate review: Manufacturers Life Insurance Company v Pitblado & Hoskin , 2009 MBCA 83 , [2009] 12 WWR 638 (leave to appeal to the SCC refused, Winnipeg (City) v Manufacturers Life Insurance Company , [2009] SCCA No 441 (QL)). However, given the nature of the standard, we find no palpable error in the trial judge’s findings of fact and we conclude the facts he found (and listed in detail at paragraph 199 of the QB Decision ) amply support his conclusion that McKay Career had relied, but not in a reasonable manner, on Mr.

Baker’s negligent representation. [ 21 ] Given the foregoing, we find no merit to McKay Career’s secondary allegation under negligent misrepresentation, namely, that the trial judge erred by failing to deal with its assertion the negligent misrepresentation had wrongfully induced it to enter into a lease of the 3rd Avenue property. McKay Career raised this point with the trial judge when speaking to the question of its reliance on the negligent misrepresentation and also with respect to the quantification of damages flowing therefrom.

However, as noted, the trial judge found McKay Career had in fact relied on the negligent misrepresentation but nonetheless dismissed the claim because it had not done so in a reasonable manner. That is, given the trial judge’s findings and conclusions, the question of inducement properly fell by the wayside. [ 22 ] We also dismiss the third ground under which McKay Career alleges the trial judge erred by failing to find Mr.

Baker had agreed to provide the service of checking with the City “in a competent manner commensurate with his level of expertise in the area and pursuant to the standards outlined in the Realtor Code and the Saskatchewan real estate Commission Bylaws”. Frankly, we are hard pressed to see the difference between this claim and the claim McKay Career had made under contract, where McKay Career asserted a breach of the standard of care. This breach of “competency” claim first arose during McKay Career’s closing arguments at trial, where it argued Mr.

Baker had undertaken to provide “the appropriate service in a competent manner commensurate with his level of expertise as a commercial realtor with over 30 years of experience” ( QB Decision at para 151). Put in those terms, the claim is merely a reiteration of the allegation Mr. Baker had breached the standard of care imposed on him under the contract and is best addressed under that ground of appeal. [ 23 ] Turning now to the claim in contract, McKay Career first points out the trial judge found an unwritten agreement existed between McKay Career and Mr.

Baker that contained a contractual standard of care, namely, Mr. Baker had undertaken to “act in the best interests of [McKay Career] using the reasonable skill and care of an experienced commercial realtor” (at para 202). In fact, the trial judge noted Mr. Baker had not suggested any different framework for the unwritten agreement. What is more, the trial judge found Mr.

Baker had undertaken to attend at the City to raise the issue of suitability of the 3rd Avenue property for a business school, including the issue of whether a sprinkler system would be required in the Building. [ 24 ] When it came to the question of breach of these terms, the trial judge found Mr. Baker had received information from the City and had conveyed it to McKay Career “in the same terms in which he received it”, and that there was a “qualifying aspect to those comments” (at para 202). That is, the trial judge found Mr.

Baker had fulfilled his undertaking to raise the suitability of the 3rd Avenue property with the City and to report on that discussion. However, the trial judge also found that Mr. Baker had not guaranteed the accuracy of his report to McKay Career. Given this, the trial judge concluded McKay Career had failed to establish a breach of contract: [203] No implied term of the contract required Baker to be a guarantor as to the accuracy of the information. What he was simply asked in that aspect of his representation of McKay was to make the inquiry and return with the information. This I am satisfied he did.

While I have expressed the view that Baker ought to have done more to ascertain a more formal answer to the question, he was not asked to do so by McKay. In essence, Baker did what the implied term of the contract required him to do. In the absence of being a guarantor for the accuracy of that information, I am unable to find that Baker, through the misrepresentation (albeit unintentional), breached his contract with McKay. To that end, the plaintiff has not demonstrated on a balance of probabilities this cause of action.

In short, the plaintiff’s claim also fails on the assertion of breach of contract (by reason of negligent misrepresentation). [Emphasis added]

[ 25 ] McKay Career asserts the trial judge erred in law by failing to find a breach of contract in the circumstances of this case. To be clear, McKay Career acknowledges the trial judge found that Mr. Baker owed McKay Career a duty of care under the contract for the purposes of the negligent misrepresentation claim (at para 181). However, McKay Career says the trial judge failed to answer the question under the claim in contract as to whether Mr.

Baker had breached the standard of care. [ 26 ] In simple terms, a finding of negligence is a finding that the defendant failed to use such care and skill as a reasonably prudent person would use under similar circumstances. In that regard and in support of its claim in contract, McKay Career points to the facts supporting its unsuccessful claim under negligent misrepresentation, where the trial judge found Mr. Baker had: (

a) known the question of whether the Building required a sprinkler system was an important consideration for McKay Career; (

b) made representations to McKay Career that were untrue and misleading in respect of the need for a sprinkler system; and (c) “in essence acted negligently” when making the misrepresentation by failing to make notes, failing to obtain the name of the City employee with whom he had spoken, failing to obtain the information in writing and failing to ensure the information he received from the City was clear and concise and unequivocal (at paras 193 and 194). That is, McKay Career says the trial judge’s findings of a duty of care and negligence on the part of Mr.

Baker cannot be reconciled with his conclusion that Mr. Baker had met the standard of care imposed on him under the contract. There is merit to this allegation. [ 27 ] The contractual standard of care in this case is defined in the trial judge’s reasons as “the reasonable skill and care of an experienced commercial realtor”. The question of whether a standard of care, once defined, has been met is a question of fact. Here, in the context of negligent misrepresentation, the trial judge found as fact that Mr. Baker had acted negligently and he identified the specific ways in which Mr.

Baker had been negligent, writing: [193] The representor, that is Baker, I am satisfied in essence acted negligently in making the representation in question (as I have earlier delineated) in the sense that he did not make notes of the conversation in question, did not ascertain the name of the individual from whom he received the information, did not seek to obtain the information in writing on a critical issue, and that this all contributed to his negligence on the seminal issue of the sprinkler system.

It can fairly be said that he ought to have known that the information was significant to McKay and that it was important to obtain accurate and correct information.

Failure to ensure that the information he received was clear and concise and unequivocal, also serves to demonstrate negligence on his part. [194] In considering this third criterion, that being that Baker must have acted negligently in making the representation, I again note that Baker made no notes of the conversation with the clerk at the Building Department and more importantly, did not seek to obtain anything more concrete in writing from the City before conveying information to the plaintiff through Parker.

I am of the view that it would have been highly prudent to both make notes of the conversation to be in a position to recall the name of the person to whom he made the inquiries and with whom he had the conversation, and further, that it would also have been highly prudent to request something in writing to ensure that an unintended mistake did not cause future problems.

In addition, Baker knew that he lacked the personal knowledge to address the question and his lack of such personal knowledge ought to have prompted him to have been more thorough in the manner in which he made the inquiry and thereafter the manner in which he received the information and then conveyed it to Parker. [ 28 ] Having reviewed these findings, we are unable to ascertain how the trial judge could have concluded that Mr. Baker had met the standard of care imposed on him in the circumstances.

In our assessment, the trial judge made findings of fact that undoubtedly amount to a breach of the contractual standard of care in this case. Indeed, the trial judge himself concluded Mr. Baker had acted negligently. However, as we interpret his reasons, the trial judge seems not to have turned his mind to the nexus between Mr. Baker’s negligent acts and breach of the contractually-imposed standard of care, focusing instead on whether Mr. Baker had breached his undertaking to check with the City and report back what he found out.

As such, we must respectfully find that the trial judge erred in law by failing to address this issue in the trial decision and in terms of the cause of action pled by McKay Career. If he can be taken to have addressed it, we would say that these findings can lead to one conclusion only, which is that Mr. Baker breached his contract with McKay Career. [ 29 ] In the circumstances, the dismissal of McKay Career’s claim in contract against Mr. Baker must be set aside. As there are no undetermined but necessary facts to find, we find Mr.

Baker liable to McKay Career for breach of contract and we enter judgment against him in that regard. [ 30 ] However, the question of the quantum of damages arising from the breach of contract is not so readily addressed as was Mr. Baker’s liability in contract to McKay Career. In his written reasons, the trial judge acknowledged McKay Career has “suffered the damages which it has claimed, $111,690.60” (at para 197) and has “proven damages in the amount sought in the statement of claim”, i.e., $111,690.60 (at para 220). Standing alone, these statements are certain: McKay Career’s damages are $111,690.60.

However, the matter is not so straightforward. The trial judge also said McKay Career had not “demonstrated a basis for liability on the part of the defendants for these actual expenses ” (at para 220, emphasis added).

Moreover, in his findings under the fourth criterion in Cognos , the trial judge wrote: [201] Ultimately, in considering all the relevant facts in relation to the fourth criterion or element for negligent misrepresentations, I have concluded on a balance of probabilities that in my respectful view, the plaintiff, of its own accord and/or through its contractor, is solely responsible for the losses as a consequence of the requirement of fire sprinklers.

As noted, McKay was aware that the potential requirement for sprinklers was outside the expertise of Baker, and to that end, Baker could only report what the City said. McKay accepted a simple oral answer, did not request confirmation, and never requested a formal or official written answer. I am of the view that a prudent knowledgeable party ought to have done so.

Accordingly, the plaintiff’s claim fails on this cause of action. [ 31 ] While we have found there is a basis for liability, we are not persuaded the trial judge made all of the findings necessary for us to conclude that the quantum of McKay Career’s damage is the full amount of its claim. We do not fault the trial judge for this. To be fair, as the trial judge had found no basis for liability, he was not put to quantify the effect of his findings under the fourth criterion in Cognos or to determine whether the full cost of installing the sprinklers was otherwise recoverable as damages under breach of contract.

As we see it, the trial judge’s reasons leave open issues of causation, contributory fault, remoteness and mitigation that only he can resolve. Furthermore, having reviewed the transcript and exhibits at trial, we conclude there are also issues with the reliability of certain evidence and with whether the burden of proof had been met on the question of damages, which the trial judge alone is in a position to resolve or reconcile. Therefore, we find we must remit the matter of quantification of damages to the trial judge. V.

Conclusion [ 32 ] We allow the appeal, set aside the dismissal of the contract claim against Mr. Baker, find Mr. Baker liable to McKay Career in that regard and enter judgment accordingly. However, as we are unable to quantify McKay Career’s damages, we remit that issue to the trial judge. We also set aside the costs awarded to Mr. Baker at trial and remit that question to the trial judge. McKay Career shall have its costs in this appeal paid by Mr. Baker. “Jackson J.A.” Jackson J.A. “Caldwell J.A.” Caldwell J.A. “Whitmore J.A.” Whitmore J.A.