Transworld Shipping Ltd. (Plaintiff)
v.
The Queen (Defendant)
Trial Division, Noël A.C.J.—Quebec, May 21,
22 and 23; Ottawa, November 26, 1973.
Crown—Carriage of goods by water—Tender and accept-
ance—Fixture—Charterparty not executed—Subsequent
requirement re Canadian registry—Whether valid contract—
Breach of contract—Department of Transport Act, R.S.C.
1970, c. T-15, ss. 7, 8, 15.
On May 13, 1970, the defendant, through the Department
of Transport, invited sealed tenders for the chartering of dry
cargo vessels in connection with its 1970 Arctic Resupply
Program. On May 21, 1970, plaintiff submitted a tender in
writing which was accepted on May 28, 1970. The Depart
ment requested the plaintiff to draw up the charterparty and
an identical confirmation of fixture was given to the plain
tiff's banker on June 2, 1970. The plaintiff delivered the
signed charterparty on June 11, 1970 but the defendant
notified the plaintiff on June 22, 1970 that it had cancelled
the fixture because only Canadian flag vessels would be
considered. Plaintiff claimed damages for breach of contract
for actual and anticipated loss of earnings and expenses.
Held, the action is maintained. Upon acceptance of the
tenders the contract was complete and binding even without
the charterparty, and execution is a mere formality. Section
15 of the Department of Transport Act requiring that con
tracts relating to matters under the control or direction of
the Minister must be executed to be binding is not applicable
here since under sections 7 and 8 of the Act there is no
category under which contracts for services in connection
with the Arctic Resupply Program would fall and is there
fore not under the control of the Minister. Rather, such
contracts are handled by the Department under the authority
of Treasury Board Order 676616 (under section 5(3) of the
Financial Administration Act) giving authority to the cargo
superintendent for a term of years to act as agent for the
transportation of supplies. Concerning interdepartmental
regulations governing contract approvals there appears to be
no requirement for written contracts provided procedures
concerning tenders have been complied with and the lowest
tender is accepted. The defendant's decision to demand the
change of registry constitutes a repudiation of the contract.
Heckla v. Cunard (1904) 37 N.S.R. 97 (C.A.): Robert-
son v. Minister of Pensions [1949] 1 K.B. 227, applied;
The Queen v. Henderson 28 S.C.R. 425; Dominion
Building Corporation v. The King [1933] A.C. 533; Rio
Tinto Co. v. The Crown [1921-22] 1 Lloyd's L.R. 821;
Von Hatzfelt-Wildenburg v. Alexander [1912] 1 Ch.
284; Rossdale v. Denny [1921] 1 Ch. 57, referred to.
ACTION.
COUNSEL:
Raynold Langlois and Guy Vaillancourt for
plaintiff.
Robert Cousineau for defendant.
SOLICITORS:
Langlois, Drouin and Laflamme, Quebec,
for plaintiff.
Deputy Attorney General of Canada for
defendant.
NOËL A.C.J.—By this action plaintiff claims
payment of $110,124.24 from defendant as a
result of the cancellation by the Department of
Transport of the fixture of the vessel Theokletos
under the following circumstances.
On May 13, 1970 the defendant, through the
Department of Transport, invited sealed tenders
for the chartering of dry cargo vessels in con
nection with its 1970 Arctic Resupply Program.
On May 21, 1970 plaintiff tendered in writing,
amongst others, the motor vessel Theokletos, a
British built and registered vessel, for the
Hudson Bay and Hudson Strait destination
mentioned in defendant's invitation for tenders.
The rate of hire tendered was $2,750 Canadian
currency per day, exclusive of bunkers and ad
ditional insurance, the charterparty agreement
to be drawn under the New York Produce
Exchange Form with appropriate rider clauses.
Plaintiff's tender provided that the Theokletos
would be delivered during the period of July 12
to 22, 1970. Defendant's invitation for tender
provided that such charter would have a dura
tion of 60 days.
On May 28, 1970, plaintiff was advised by
defendant, through the Department of Transport
that its tender of the Theokletos was accepted
and was requested to draw up the written chart-
erparty and an identical confirmation of fixture
of the Theokletos was given on June 2, 1970 by
the defendant through the Department of Trans
port to plaintiff's bankers.
Plaintiff drew up signed and delivered by
hand the written charterparty on June 11, 1970.
On June 22, 1970, defendant advised that it
cancelled the fixture confirmed earlier because
as alleged then, only Canadian flag vessels
would be considered. At the time of cancella
tion, plaintiff says that it was fully committed
toward the owner of the Theokletos and had no
choice other than to employ the vessel to miti
gate its losses. Despite its efforts to earn hire
for the vessel, it suffered a net loss of $69,479
until re-delivery of the ship to her owners,
instead of earning a profit of $42,721 as, it says,
had been anticipated under the charterparty
agreement with the defendant.
Defendant, according to plaintiff, is in breach
of contract having failed to perform its obliga
tions resulting from its fixture of the Theokletos
and it claims damages therefore as follows:
(a) anticipated gross earnings 60 days at
$2,750 per day $165,000.00
LESS
actual earnings $ 81,027.51
Gross loss $ 83,972.49
PLUS
extra expenses incurred $ 26,151.75
Net loss $110,124.24
The position taken by the defendant in its
defence is that plaintiff was not advised by the
defendant through a duly authorized representa
tive of the Department of Transport that its
tender of the Theokletos had been accepted nor
were plaintiff's bankers given a confirmation of
fixtures by the defendant through a duly author
ized representative of the Department of
Transport.
Defendant also says that its invitation to
tender dated May 13, 1970, for its Arctic Re
supply Program contained the following provi
sion "Canadian owned and registered vessels
may be given preference, having regard to cost
and suitability ..." and that plaintiff was fully
aware, and knew of this provision.
Defendant also says that the charterparty
agreement had not been signed nor duly execu
ted by a duly authorized representative of the
Minister of Transport when plaintiff was
advised that only Canadian flag vessels would
be used for the 1970 Arctic Resupply Program.
Plaintiff, according to the defendant, of its
own accord, decided to withdraw its tender of
the Theokletos on or about June 24, 1972.
Defendant finally contends that no valid con
tract or charterparty was ever entered for the
Theokletos and that, in any event, plaintiff ter
minated any prior negotiations for the execution
of a contract by withdrawing its tender for the
hire of the vessel. The action, therefore, it says,
should be dismissed.
The plaintiff is a corporation specializing in
the chartering and management of cargo ves
sels. The Department of Transport in 1970,
invited sealed tenders for the chartering of tank
ers and dry cargo vessels in connection with its
1970 Arctic Resupply Program. The plaintiff
tendered in writing amongst others, the motor
vessel Theokletos British Registry, as a dry
cargo vessel. The Department then, through an
officer of the Department of Transport en
trusted with the administration of the Arctic
Resupply Program, confirmed the fixture of the
vessel.
The plaintiff was however later notified that
the fixture was cancelled because the vessel
was not of Canadian Registry, the Department
of Transport having decided to modify its chart
ering policy followed over the years and to
charter exclusively Canadian registered vessels.
Mr. Mallot the president of the plaintiff com
pany was told around June 22, 1970 by Dr.
Pierre Camu the administrator of the Depart-
ment of Transport that all ships had been
restricted to Canadian flag vessels only and that
he had the choice of either transferring his
vessels to Canadian flag under the same charter-
party as first tendered with the same prices and
costs or that new tenders would be called for.
Mallot then stated he would withdraw the
Theokletos and would reserve his right to
damages.
I should add here that he had tendered two
other vessels, the Cabatern a tanker and the
Global Envoy a cargo carrier which he however
agreed would be transferred to Canadian flag
under the charterparty but reserving here also
his right to claim for additional expenses.
Dr. Camu at page 50 of Volume I of the
transcript explains what took place with respect
to three of the plaintiff's vessels including the
Theokletos as follows:
[TRANSLATION] So, Mr. Malott [sic] decided to transfer his
two ships to the Canadian flag, and thus to use the same two
charter-parties with the same rates and percentages, and the
same costs.
However, he told me the same day of his decision to
withdraw the Theokletos. That is why we only used two (2)
of the ships under the Canadian flag, instead of three (3).
and at p. 52 of Volume I he gave the following
answer:
[TRANSLATION] Q. Did he reserve his right to seek
compensation?
A. Yes, he reserved it expressly, saying that he would
probably come back to that, or something of that
nature.
and finally at p. 60 of Volume I he stated in
answer to the following question:
[TRANSLATION] Q. That is a summary, but there might be
some points which you ... which perhaps you over
looked: did you discuss the financial implications of
the change of flag?
A. Mr. Malott [sic] reserved the right to make a claim
subsequently on account of the flag requirement, and
said it would mean additional cost, and in the circum
stances he was reserving the right to make a claim
subsequently. That was part of our conversation. I told
him I would not consider any claim at that time.
Mr. Mallot on the other hand explained why
he agreed to go along with the original charter-
party and transfer the two vessels to the
Canadian flag without going to tender again in
that he was "so badly committed, having agreed
to buy two vessels, to convert one, that being a
small company, there was a terrific capital
investment here, and that I could not run the
risk of a second bid. All my competitors at this
point in time, knew my bids, and it was just
impossible to run the risk for a small operator.
And I decided at that point of time to transfer—
let us put it this way: I tried to get a higher rate
to compensate for the added cost that I would
have, and that was impossible:
Q. What was impossible?
A. To get a higher rate.
Dr. Camu said:
I have no authority. All I can do is to request to call new
tenders. So I couldn't take a chance. So I agreed to
transfer the "Cabatern" and the "Global Envoy" to
Canadian flag and I reserved my right to claim for added
expenses.
He could not, however, do the same for the
Theokletos and therefore refrained from trans
ferring this ship to Canadian Registry merely
reserving his right to claim for losses that he
would suffer as a result of what he considered
as a cancellation of his contract.
The defendant on the other hand takes the
position that at the time when the policy of
employing Canadian ships only was adopted by
the Department, there was no valid contract
between the parties.
It is, I believe, helpful at this stage to describe
what took place between the parties and result
ed in what plaintiff claims was a firm commit
ment to charter plaintiff's vessels and particu
larly the Theokletos which is the only vessel
involved in this action.
On May 21, 1970 the plaintiff tendered as a
dry cargo vessel the Theokletos for certain of
the trades specified in the invitation to tender of
the Department (Exhibit P-2). The detail of the
tender can be found in Exhibit P-4 which is a
letter written to the "Chief Purchases and Con-
tracts" of the Department on May 21, 1970 by
the plaintiff. In this letter plaintiff states that the
Theokletos was registered in Cyprus. The letter
also incorporated the charterparty terms men
tioned in the invitation for tender (Exhibit P-2).
The cargo superintendent of the Department of
Transport, Mr. Flynn, then on June 2, 1970
recommended that "the contract be awarded to
Transworld Shipping Ltd. being the lowest ten
derer" and this recommendation covered the
three vessels tendered by the plaintiff including
the Theokletos.
Dr. Camu was asked what his decision was
with regard to these vessels and he stated that
he accepted the recommendation made, which
was that the contract be awarded to that Com
pany which was in that case the lowest bidder.
On the same day, i.e., June 8, 1970, he sent a
memorandum to the Deputy Minister of the
Department informing him of his decision and
telling him that the lowest bidder had been
selected.
The vessels tendered, including the Theok-
letos were accepted without any modification as
to registering or any modification whatsoever as
to the terms of the charterparty as set out in the
invitation and accepted with minor changes in
the tenders themselves. (Cf. Exhibits P-2, P-3
and P-4.)
Dr. Camu stated that probably some action
was then taken by his subordinates following his
decision as to the acceptance of the charterpar-
ties and that probably Transworld was required
to prepare contracts or charterparties for the
three vessels including the Theokletos.
Admiral Storrs confirmed that this had been
done when at p. 73 of Volume I of the transcript
he said:
Again, I don't recollect what actually did take place, but I
would assume that the normal procedure was followed, in
which I passed on my superiors' concurrence to Mr. Flynn
who, in turn, told the bidder in question that the bid had
been accepted, and invited him to send up charter-parties to
complete the process.
Mr. Flynn also confirmed that this had been
done and that notices to successful bidders were
given, either verbally or in writing, but that in
1970 they were given verbally because of the
mail strike. The plaintiff then complied with the
advice received from the Department and sent
the Department the charterparties for the three
vessels under cover of a letter dated June 12,
1970 (Exhibit P-18) which reads as follows:
In accordance with our conversation, we enclose herewith
original and three copies of charter-parties covering fixture
of THEOKLETOS, CABATERN and the GLOBAL ENVOY for your
approval and signature.
In due course, we would appreciate receiving one signed
copy of each charter for our record.
The above charterparties were all dated June
8, 1970 the date at which the verbal advice was
received. This date also coincided with the date
at which Dr. Camu concurred in the recommen
dation made by the cargo superintendent, Mr.
Flynn, as shown on Exhibit P-7 and the vessels
were duly described exactly in the terms set out
in the tenders submitted by plaintiff. (Exhibits
P-3 and P-4.) These charterparties bore the sig
nature and the seal of the plaintiff Company.
If one refers to the word "fixture" which was
used by the plaintiff's representatives as well as
by the Department's officers with respect to
these charters, there was at this stage a fixture
which, according to Mr. Flynn, is an agreement
by both parties as to the terms and conditions as
outlined in the charterparties. (Cf. Flynn
Volume I, p. 98 of the transcript.)
On June 19, 1970 the change of policy
already mentioned was communicated by Dr.
Camu to the Director of Marine operations,
Admiral Storrs, by way of a memorandum
which contains the following statement:
We realize that this ... is going to cost more money but it
is a question of principle that should be followed in connec
tion with the forthcoming mission and very probably in the
coming years as well.
The plaintiff's claim in this action rests on the
following:
(1) there were valid and binding contracts
between the parties for the charter of the
Theokletos as tendered with specific refer
ence to port of Registry as of June 8, 1970;
(2) the defendant's refusal to perform its obli
gations pursuant to this contract as evidenced
by its decision to demand that the plaintiff
change the port of Registry of the vessel
constitutes a breach of that contract and a
frustration of the charters;
(3) should the plaintiff's claim fail on the
basis of breach of contract, the plaintiff must
succeed in tort against the defendant whose
officers, agents and préposés, acting in the
execution of their functions, were guilty of
such gross misrepresentation of authority in
the fact as to amount to gross negligence and
wilful misconduct especially in circumstances'
where they had full knowledge of plaintiff's
circumstances and resulting predicament.
Should this have taken place between subject
and suppliant, there is no question that there
would have been a valid and binding contract
between the parties. One of the parties here,
however, is the Crown whose contractual rela
tions are also governed by statutes and regula
tions which must be carefully examined in order
to determine whether or not there is any binding
effect to the agreements reached by the plaintiff
and the duly authorized officers of the
Department.
Prior to determining whether the Crown's
contractual relations are governed by any stat
ute or regulation it is helpful, I believe, to deter
mine the type of agreement we are dealing with
here.
The present case is, as already mentioned,
one which comprises public invitations for ten
ders by the Department of Transport.
All those interested in submitting tenders
accept the invitations and send in writing ten
ders which are binding documents upon them if
the government accepts them. It is important to
point out that the terms of the invitations and of
the tenders are complete. They, indeed, contain
the full agreement and require no further
negotiations. The invitations for tenders refer to
international forms of contract well known in
the industry such as the New York Produce
Exchange Form for dry cargo vessels and the
standard tanker charterparty for tankers and
there appears to be no requirement in the invita
tion that these terms be spelled out in any
document.
As a matter of fact the officers of the Depart
ment of Transport recognized that these docu
ments are complete in themselves. Mr. Flynn,
the Department's cargo superintendent who had
been administering these contracts for over 15
years stated that this was the situation here
when at p. 109 of Volume I of the transcript he
gave the following answers:
Q. Am I correct in saying that the sequence of events
would be: first, some sort of negotiation; then, a
fixture; and then, the terms of the fixture are imbed
ded in the charter .. .
A. If it is two commercial people, yes. But not the Gov
ernment. There is no negotiation. It is a tendered price,
and that's it.
Subject, of course, to the suitability of the vessel and,
you know, being able to perform.
Q. Are you saying that all the terms of the charter-party
are contained in the request for bid, and the charterer,
all he has to do .. .
A. Well, that exhibit that you showed me there before,
that tendered call, I can't remember whether it was P-2
orP-6...
Q. P-2.
A. This is the terms and conditions of the final
charter-party.
Q. Of the final charter-party?
A. Along with the standard clauses that are in the New
York Produce Exchange Form of Charter-Party.
Q. So, everything is in P-2?
A. Yes.
The evidence of Mr. Flynn and his under
standing of the procedure followed in the
Department were corroborated by earlier evi
dence given by Dr. Camu and Admiral Storrs,
the Department's Director of Operations, when
they both explained the usual procedure fol
lowed in the Department and what was expect
ed of a charterer as soon as he was informed
that he had been selected and asked to send up
his signed charterparty.
Admiral Storrs at p. 78 of Volume I of the
transcript clearly stated what was expected of
the charterer informed that he was the success
ful bidder when he answered the following
questions:
Q. Was the successful bidder expected by your Depart
ment to take any action as a result of being informed
that he was the successful bidder?
A. Oh yes, he was expected to carry out the terms of his
bid.
Q. Which were ...?
A. To provide a ship on a certain date, capable of per
forming the task that it was required to do.
Mr. Flynn, the Department's cargo superin
tendent, corroborated Admiral Storrs at p. 87 of
Volume I of the transcript when he testified as
follows:
A. Well, tenders are called for vessels as required: dry
cargo, tanker vessels; evaluations of the bids are
made; recommendations are forwarded by me to the
appropriate superior; and when these bids are accept
ed or approved, then, the successful tenderer is noti
fied that his bid has been accepted and/or approved—
"please send your charter-party".
And this has been done verbally and in writing, in
different instances.
And later at p. 104 of Volume I of the transcript
he answered as follows these questions:
Q. Now, in this instance of 1970, what was expected—
what did your Department or you expect the owner of
the vessel to do as a result of the confirmation being
given that his charter was accepted?
A. What did I expect him to do?
Q. Yes?
A. Present the ship within the lay day, and load it for the
Arctic.
There is no question that in the light of the
above facts there was, on June 8, 1970, what is
known in the trade, and this was admittedly to
the knowledge of the officers of the Department
of Transport, a fixture when the plaintiff's ten
ders for the vessels were accepted. There was
then an agreement by both parties as to the
terms and conditions of the charterparties and
an acceptance by the Department of the plain
tiff's tenders. It was then the practice to sign
forms of charterparties and that is why, upon
the Department's request, the plaintiff sent in
triplicate the three charterparties (including the
one for the Theokletos) under cover of its letter
of May 12, 1970 (Exhibit P-18). I believe that it
can be said that upon the acceptance of the
tenders the contract was complete even without
the charterparties and that had the agreements
here intervened between subject and subject,
there is no question that the execution of the
charterparties would be considered as a mere
formality.
It is clear that the parties knew and intended
that the contract be binding and fully executed
as of June 8, 1970, date of the verbal confirma
tion given by the Department that the plaintiff
was the successful and accepted lowest bidder.
There is, as a matter of fact, a good practical
reason for the contract to be binding at the time
the bid is accepted. A vessel chartered for any
trade must be made ready by the tenderer and
delivered to the charterer within the lay days
stipulated in the charterparty. This requires
advance notice in order that the vessel may
terminate the trades that it is already performing
and in some cases such as here, in order to
allow required modifications to be made to the
vessel to make it suitable for the Arctic.
Having regard to my view of the binding
effect of the accepted tenders, I reject without
any hesitation the position taken by the defend
ant that (1) the plaintiff was not advised by the
defendant through a duly authorized representa
tive of the Department of Transport that its
tenders were accepted and that (2) no written
charterparty agreement having been signed or
duly executed by a duly authorized representa
tive of the Minister of Transport when plaintiff
was advised that only Canadian flag vessels
would be used for the 1970 Arctic Resupply
Program, there can be no breach of contract
because there was no contract. It is, indeed, my
view that the evidence indicates that plaintiff
was duly advised by duly authorized officers of
the Department that its tenders were accepted
and there was a breach of contract, when plain
tiff was advised that only Canadian flag vessels
would be used for the 1970 Arctic Resupply
Program.
The defendant submitted that the bids
received were subject to the signing of a chart-
erparty and that between the invitation and the
bids, there were differences between the bids
and the charterparties. There were, as a matter
of fact, a few minor changes between the invita
tion to tender and the bids and between the
tender and the charterparties in the case of the
Global Envoy and the Cabatern. These differ
ences consisted in
(1) that the invitation to tender stipulated
30-ton derricks, the tender mentioned 2 der
ricks of a 25-ton capacity and Transworld
stated that they would upgrade them if
required. They were not, however, required to
do so;
(2) the bid quotes a rate of $10 per day per
man for necessaries and accommodation. The
contract specified $10 per day plus $2.50 for
meals. There was no explanation as to how
this came about;
(3) the invitation for tenders asked for 7
clauses to be incorporated in the contract.
The bid stipulated 6 of them. The 7th clause
was omitted. This dealt with non-responsibili
ty for damages due to work stoppages;
(4) the contract mentioned a minimum rate of
$1,000 for demurrage.
The above differences were not, however, of
sufficient importance, as admitted by the offi
cers of the Department, to be of any conse
quence, except for the demurrage rate of $1,000
which might have been, but on which no par
ticular information was given. There does not
appear to have been, at any time, any difficulty
or difference of opinion with regard to these
changes or even refusal on the part of the
Department to accept them. Furthermore, had
the Department not consented to the changes,
there is no evidence to the effect that the ten-
derers would have, or even could have, with
drawn from their obligations under their ten
ders. Admiral Storrs indeed so stated when
referring to prior bids, at p. 85 of the transcript,
in answer to a question by counsel for the
defendant:
Q. Now, in between the time that tenderers were advised
of their success under bids and the time that the
contracts were signed, could it happen that changes
were made from the bid to the former contract?
A. Oh yes, I think it was possible and did take place that
there were minor changes, but they would never be of
sufficient magnitude that an unsuccessful bidder could
ever claim that the terms of the tender call had been
altered; or that an unsuccessful bidder could ask for a
new tender call.
We may, therefore, assume that although the
signing of charterparties was contemplated, and
a copy of same was requested by Mr. Mallot, it
was, as he stated in his covering letter, and in so
far as his company was concerned, for the pur
pose of his records and, therefore, under the
circumstances, a mere confirmation of the fix
ture already agreed to on June 8 when the
plaintiff was advised that his tender had been
accepted.
Defendant's submission that its invitation to
tender contained a provision that "Canadian
owned and registered vessels may be given pref
erence, having regard to cost and suitability"
and that plaintiff was fully aware and knew of
this provision would not, in my view, assist the
defendant here.
This provision, in my view, merely meant that
in the event that Canadian flag vessels were
tendered, they could be preferred to foreign flag
vessels. There was no evidence that any Canadi-
an vessels had been tendered here and, in any
event plaintiff's vessels had been accepted prior
to deciding that Canadian flag vessels would
definitely be used for the Arctic Resupply Pro
gram. The decision of using Canadian flag ves
sels was, indeed, as admitted by the officers of
the Department, a reversal of the policy adopted
to use foreign flag vessels and, therefore, a
breach of the contracts entered into if such is
the proper characterization of what took place
when plaintiff's tenders were accepted by the
officers of the Department.
Having, at this stage, reached a decision that
the parties herein had agreed on June 8, at that
point of time when the plaintiff was advised by
those officers of the Department who had been
dealing with the matter of chartering vessels for
the Arctic Resupply Program, that they were the
successful bidders and that they had the con
tracts, and having acted upon such a decision by
chartering vessels and causing money to be
spent on alterations required for the execution
of these contracts, i.e., the transportation of
goods to the Arctic, the question is whether the
plaintiff could say that it had a binding contract
against the Crown in the light of section 15 of
the Department of Transport Act, R.S.C. 1970,
c. T-15, which reads as follows:
15. No deed, contract, document or writing relating to any
matter under the control or direction of the Minister is
binding upon Her Majesty unless it is signed by the Minis
ter, or unless it is signed by the Deputy Minister, and
countersigned by the Secretary of the Department, or unless
it is signed by some person specially authorized in writing
by the Minister for that purpose; and such authority from
the Minister to any person professing to act for him shall not
be called in question except by the Minister or by some
person acting for him or for Her Majesty.
Counsel for the defendant submits that as no
written charterparty agreement was signed or
duly executed when plaintiff was advised that
only Canadian flag vessels would be used for
the 1970 Arctic Resupply Program, there can be
no breach of contract because he says there was
no contract.
The evidence discloses that the bids were sent
by the plaintiff on May 21, 1970 and the latter
was advised by the officers of the Department,
prior to, or on June 8, that its tenders were
accepted and at this stage the charterparties
were not signed. The charterparties were drawn
up and delivered by hand by the plaintiff on
June 11, 1970 at which time they were signed
by the plaintiff. They were not, however, signed
by the defendant and as the plaintiff was
informed on June 22, 1970, that fixtures con
firmed earlier had been cancelled because the
Department decided that Canadian flag vessels
only would be considered, there was, as a
matter of fact, no charterparties that had been
signed by the Crown at this time.
This appears to be the main point relied on by
the defendant in these actions to sustain its
position that there was up to then no valid
contracts entered into by the Crown.
There is, however, some question as to
whether section 15 applies to this case. It refers
to "contract ... relating to any matter under the
control or direction of the Minister" and if one
looks at the Department of Transport Act, and
sections 7 and 8 thereof, it appears that the
chartering of vessels for the Arctic Resupply
Program is not a subject which can be found to
be a matter under the control or direction of the
Minister of Transport as required by section 15.
The matter under the control and direction of
the Minister appears to be limited to (1) rail
ways and canals, all works and properties
appertaining or incident to such railways and
canals, the collection of tolls on the public
canals and matters incident thereto and the offi
cers and persons employed in that service; (2)
those duties, powers and functions vested
immediately prior to the second day of Novem-
ber 1936 in the Minister of Marine and with
respect to civil aviation in the Minister of
National Defence, by any Act, order or regula
tion; (3) board and other public bodies, subjects,
services and properties of the Crown as may be
designated or assigned to the Minister by the
Governor in Council; and (4) certain powers of
the Minister of Public Works as stipulated in
section 8 of the Act.
From a reading of the above, there appears to
be no category under which contracts for ser
vices in connection with the Arctic Resupply
Program would fall and, therefore, such con
tracts would not fall under any of the matters
under the control of the Minister as set out in
the Department of Transport Act unless it
comes under "services and properties of the
Crown as may be designated or assigned to the
Minister by the Governor in Council" as con
templated in subsection (3) of section 7 of the
Act.
As a matter of fact, such contracts are han
dled by the Department of Transport apparently
under the authority of a Treasury Board Order
No. 676616 (Exhibit P-19) which reads as
follows:
T.B. Minute 636718 dated March 25, 1965 granted gener
al authority to the Department of Transport and to the
Cargo Superintendent of the Department to act as co
ordinating agency and agent for the assembly, transportation
and delivery of supplies on behalf of Canadian Government
Departments, United States Government, commercial and
private concerns for Arctic shipments on departmental ves
sels. The authority also to include chartered vessels and
where arrangements have been made for shipments on ves
sels operated by commercial shipping companies and to
recover such expenditures through charges to the said con
cerns during the period 1965, 1966 and 1967.
That authority be granted for the Cargo Superintendent to
continue to act as co-ordinator for the Department for the
three ensuing years 1968, 1969, 1970.
It appears from the above that the Depart
ment of Transport and specifically its cargo
superintendent, and not the Minister, is to act as
coordinating agency and agent for the transpor
tation of supplies and not only on behalf of the
Canadian Government departments, but also on
behalf of the United States Government and
commercial and private concerns.
We are, therefore, dealing here with a special
type of responsibility which does not seem to be
covered by any of the ordinary obligations of
the Minister of Transport under the statute nor
even with a matter which could fall strictly
within subsection (3) of section 7 of the Act,
i.e., service and properties of the Crown.
Furthermore, a letter of February 19, 1965
(Exhibit P-19) addressed to John R. Baldwin,
Deputy Minister of the Department at the time,
gave the Department greater delegation of auth
ority for contract approvals provided the fol
lowing criteria are met (as set down in a letter to
Mr. Baldwin from the Treasury Board dated
March 28, 1966, attached to and part of Exhibit
P-19):
(1) the established procedures for program
clearance of the work or equipment covered
by the contract have been complied with;
(2) set procedures concerning tendering have
been followed;
(3) the lowest tender is accepted.
These, of course, are interdepartmental regula
tions but it is, however, interesting to note that
there appears to be no requirement of a written
contract provided the set procedures concerning
tenders have been complied with and the lowest
tender is accepted. As such a procedure was
followed here, it may well be that the coordinat
ing duties of the Department's cargo superin
tendent may be confined to doing precisely
what was done when plaintiff's tenders were
accepted by the Crown's authorized officers.
General authority, however, is also given to the
Department of Transport and as under section
3, subsection (2) of the Department of Trans
port Act, the Minister has the management and
direction of the Department, it may be argued
that he was, therefore, assigned such services
by the Governor in Council.
There is, however, a further difficulty here in
that if he was assigned such services, they were
not assigned by the Governor in Council but by
the Treasury Board probably under the author
ity of section 5, subsection (3) of the Financial
Administration Act, R.S.C. 1970, c. F-10, which
section reads as follows:
5. (3) The Governor in Council may, by order, authorize
the Treasury Board to exercise all or any of the powers of
the Governor in Council under section 34, subsection 70(2)
and section 73.
Section 34 deals with the making of regulations
with respect to the conditions under which con
tracts may be entered into and it may be
assumed that the "Government Contract Regu
lations" referred to in Exhibit P-19 were made
under the authority of this section. These regu
lations were made on September 23, 1964, by
the Governor in Council by P.C. 1964-1467
when the regulations made under P.C. 1954-
1971, of December 16, 1954, were revoked and
the above regulations were substituted therefor.
The question really is here whether the proce
dures set forth by or pursuant to the Financial
Administration Act for Government contracts
or contracts entered into for the United States
Government, or commercial and private con
cerns, which it covers, require anything more
than an agreement based on accepted tenders
and dispense with the necessity of complying
with section 15 of the Department of Transport
Act.
Section 15 has been the subject of a number
of judgments by this Court and by the Supreme
Court and the Privy Council. It is interesting to
see how this section was then dealt with.
In The Queen v. Henderson 28 S.C.R. 425,
where orders for additional lumber from Crown
officers beyond the terms of the invitation for
tenders as accepted and for which the Crown
later refused to pay, although the wood had
been delivered and used by it, the Court held
that although these orders were not covered by
a written contract, an enactment identical to
section 15 did not apply. Taschereau J. at pp.
432 and 433 said:
We are of opinion with the Exchequer Court, that this
enactment has no application. The word "contract" therein
means a written contract. Here the lumber claimed for was
delivered under verbal orders from the Crown officers and
the statute does not apply to goods actually sold, delivered
and accepted by the officers of the Crown, for the
Crown ... .
There is no statute here imperatively requiring that all
contracts by the Crown should be evidenced by a writing,
and in the absence of such a special statute, the Crown
cannot refuse to pay for materials bought by its officers in
the performance of their duties and delivered to them for
public works.
I believe that one can draw from this decision
that when, in the ordinary course of business, it
is the practice of the trade to deal on a verbal
basis or on a basis which makes the strict
application of section 15 incompatible with
standard practice, then the officers of the
Crown should be able to legally bind the Crown
if they have followed fundamental procedures
which here, of course, are the calling for tenders
and acceptance of the lowest bidder.
The construction of the enactment in the Hen-
derson case (supra) was followed by the Privy
Council in a later decision in Dominion Building
Corporation Ltd. v. The King [1933] A.C. 533.
The appellants had offered to purchase land
owned by the Crown and were also negotiating
for the purchase of adjacent land formerly pos
sessed by the Crown for the benefit of the
Department of Railways and Canals. The issue
here was whether or not there was a contract
between the appellants and the Crown despite
the fact that the offer to purchase made by the
appellants had never been made the subject
matter of a formal written acceptance by the
Department of Railways and Canals. The
Department contended that section 15 of the
Department of Railways and Canals Act, R.S.C.
1906, c. 35 (to the same effect as section 15 of
the present Department of Transport Act sec
tion) required that a contract be in writing and
signed by duly authorized persons to be binding
on the Crown.
Lord Tomlin dealt with the question as to
whether there could be a contract without fol
lowing the provisions of section 15 and what he
felt was the true construction of section 15
when at pp. 544 and 545 he said:
Their Lordships think that if any notification of accept
ance of the offer was necessary, the only possible inference
upon the evidence is that there was a notification of accept
ance by the sending to the appellant Forgie of a certified
copy of the Order in Council. But in fact, in their Lordships'
opinion, there was not upon the true construction of the
contract any need for a notification of acceptance. The
language of the offer is: "This offer of purchase, if accepted
by Order of His Excellency the Governor-General in Coun
cil shall constitute a binding contract of purchase and sale
subject to all the terms and provisions thereof." This lan
guage is not the language of precision, but the meaning
which can most naturally be and ought, in their Lordships'
opinion, to be attributed to it, is that the offer shall be
deemed to have been accepted when the necessary Order in
Council has been made.
Upon this view of the matter, there was a contract with
out any intimation of acceptance so soon as the Order in
Council was made.
And later at p. 546:
In these circumstances, did s. 15 apply to the contract in
question? Their Lordships are of opinion that it did not. It is
to be observed that the section does not say that every
contract in order to be binding must be in writing but only
that no deed, contract, document or writing relating to any
matter under the control or direction of the Minister shall be
binding unless it is signed and countersigned by certain
specified persons. Of the four things mentioned each one
except "contract" must necessarily be something in writing.
So long ago as in 1898, the Supreme Court of Canada in
Reg. v. Henderson (28 Can. S.C.R. 425) held that the section
did not apply where the contract was not a written one.
Their Lordships think that that conclusion was correct.
They think that so far as "contract" is concerned, the
section has no application except where the contract is
embodied in an instrument or instruments in writing intend
ed to be signed by someone on behalf of the Crown. Here,
there was no such intention. On the construction of the offer
which their Lordships adopt nothing further in writing
signed by any of the parties was required. The making of the
Order in Council was of itself sufficient to convert the offer
into a binding contract.
In line with the above decision, I can see no
difficulty in accepting that where there are writ
ten instruments exchanged, such as an invitation
to tender and an offer or bid, and where both
instruments contain the full terms of the agree
ment which, in addition has been confirmed and
accepted by the parties or their authorized offi
cers, there is a valid and binding agreement. Full
compliance as we have seen with the procedure
set down by the Treasury Board minutes
(Exhibit P-19), i.e., proper tendering, the accept
ance of the lowest bidder, was, in my view,
sufficient to complete the agreement and the
signing by the parties of a charterparty in these
circumstances becomes a mere formality.
From the above decisions, it would seem that
section 15 does not bar verbal agreements nor
agreements entered into and effective by means
of a certain procedure involving the making of
certain documents which effectively establish a
valid and complete contract. In such a case, the
making of a further document is merely to con
firm the agreement already reached between the
parties in order to ensure that rules for authenti
cation are available when a written contract is
made by the Crown or where one is required. In
so far as the Crown is concerned, all contracts
with the Department of Transport are signed by
an officer authorized by the Minister, which at
the time was a Mr. Fortier, the legal adviser of
the Department, and we may assume from the
choice of Mr. Fortier, and his duties, that he
was merely to review the contract documents,
check their legality and then sign them in
accordance with the approval given by officers
of the Department authorized to approve the
chartering of the vessels and the conditions of
such charterparties.
Verbal contracts have been recognized in
Quebec as well as under the common law as
appears from the following: (Cf. Traité de droit
civil de la province de Québec, Trudel, volume
VII, pp. 103 and 104)
[TRANSLATION] Accordingly consent may be indicated
without written or spoken statements. A verbal contract is a
manifestation of formal intent ... This is not necessary,
tacit consent makes oral acquiescence unnecessary, and is
sufficient under Art. 988.
and then at p. 63 of the same volume it is stated
that:
[TRANSLATION] In these matters the facts and surrounding
circumstances are always of great importance. The princi
ples are clear: as a general rule writing is only proof of the
contract, not its substance. The complications arise from the
tangle of facts to which these principles must be applied.
In Rio Tinto Company v. The Crown [1921-
22] 1 Lloyd's L.R. 821 at p. 823, a citation from
the case of Von Hatzfelt-Wildenburg v. Alex-
ander [1912] 1 Ch. 284 at p. 288 by Mr. Justice
Parker is made which, in my view sets down in
a rather concise form the principles that govern
the manner in which contracts may become
effective:
It appears to be well settled by the authorities that if the
documents or letters relied on as constituting a contract
contemplate the execution of a further contract between the
parties, it is a question of construction whether the execu
tion of the further contract is a condition or term of the
bargain or whether it is a mere expression of the desire of
the parties as to the manner in which the transaction already
agreed to will in fact go through. In the former case there is
no enforceable contract either because the condition is
unfulfilled or because the law does not recognize a contract
to enter into a contract.
A reference in the Rio Tinto Company v. The
Crown case (supra) is made at p. 823 to a
passage by Russell J. in Rossdale v. Denny
[1921] 1 Ch. 57 at p. 59 as follows:
The result of them [he is referring to the authorities] may, I
think, be fairly stated in this way: they are unanimous in
this, that the question is one entirely depending upon the
true construction of the documents. If upon the true con
struction of the documents, the reference to a formal con
tract amounts to an expression of a desire on the part of one
or other of the parties, or both that their already complete
contract should be reduced into a more formal shape, then
the fact that no such contract has been executed is no
defence to the action, but the original and complete contract
survives and may be enforced. If on the other hand, the true
construction of the documents is this that either the offer or
the acceptance was conditional only, then the non-execution
of a formal contract affords a defence to the action upon the
ground that the parties really did not intend to be bound
until a formal document had in fact been executed.
With respect to the charterparties, the ques
tion as to whether the binding contract was
concluded by correspondence or orally regard
ing its terms or whether the execution of a
formal charterparty is a condition precedent to
liability between the parties is also a matter of
construction. Cf. Carver—Carriage by Sea—
British Shipping Laws, vol. II, paragraph 326;
Zarati Steamship Co. v. Frames Tours Ltd.
[1955] 2 Lloyd's L.R. 278; Sociedade Por-
tuguesa de Navios Tangues Limitada v. Polaris
[1952] 1 Lloyd's L.R. 407.
There is also a rather apposite decision of the
Nova Scotia Court of Appeal in Heckla v.
Cunard (1904) 37 N.S.R. 97 (C.A.) by Wea-
therbe J. at p. 104:
To hold, as we are asked to do, that, because the charter-
ers found their position changed on the 22nd, they could, by
continuing the correspondence and raising questions, per
petuate the negotiations, and thus escape the effect of the
mutual terms previously agreed on, however badly stated,
would be subversive of the principles of commercial
contracts.
In the present case it appears to me clear that
the parties had agreed on all points, and that the
charterparty agreement although prepared, was
in no way required to complete the agreement.
It, therefore, became a formality for the pur
pose of incorporating in one document all the
clauses already agreed to. The parties had
indeed agreed on all the terms of the contract
contained in the N.Y.P.E. Form referred to in
the invitation for tenders as well as the rider
clauses also spelled out in detail in the invitation
to tender.
There remains one further aspect of this case
which was not dealt with by the parties and
which appears to me of some considerable
impact in this case. The facts disclose that the
officers of the Department who were authorized
to proceed and accept tenders confirmed same
on behalf of the Crown prior to the signing of
the charterparties by the Crown and as such
assurances were intended to be binding, intend
ed to be acted upon and were in fact acted
upon, the question is whether the Crown can
now take the position that the requirements of
section 15 were not complied with (assuming
that the section applies here) and, therefore, any
agreement reached between the parties cannot
be enforced.
I am of the view, in the light of the circum
stances disclosed by the evidence in this case,
that the Crown cannot invoke non-compliance
with section 15 of the Department of Transport
Act to reject the obligations entered into at the
time the tenders were accepted by the duly
authorized officers of the Crown.
The decision of Denning J. in Robertson v.
Minister of Pensions [1949] 1 K.B. 227 is, in my
view, particularly apposite here and parts of it
should be and shall be reproduced hereafter.
This was a case where a serving army officer
wrote to the War Office regarding a disability of
his and received a reply that this disability had
been accepted as attributable to military service.
Relying on that assurance he forbore to obtain
an independent medical opinion on his own
behalf. The Minister of Pensions later decided
that the appellant's disability was not attribut
able to war service. The Court held that the
assurance given the appellant was binding on
the Crown and at p. 230, Denning J. said:
What then is the result in law? If this was a question
between subjects, a person who gave such an assurance as
that contained in the War Office letter would be held bound
by it unless he could show that it was made under the
influence of a mistake or induced by a misrepresentation or
the like. No such defence is made here. There are many
cases in the books which establish that an unequivocal
acceptance of liability will be enforced if it is intended to be
binding, intended to be acted on, and is in fact acted on.
and then at p. 231, he continues:
The next question is whether the assurance in the War
Office letter is binding on the Crown. The Crown cannot
escape by saying that estoppels do not bind the Crown, for
that doctrine has long been exploded. Nor can the Crown
escape by praying in aid the doctrine of executive necessity,
that is the doctrine that the Crown cannot bind itself so as to
fetter its future executive action. That doctrine was pro
pounded by Rowlatt J. in Rederiaktiebolaget Amphitrite v.
The King ([1921] 3 K.B. 500, 503, 504) but it was unnecess
ary for the decision because the statement there was not a
promise which was intended to be binding but only an
expression of intention. Rowlatt J. seems to have been
influenced by the cases on the right of the Crown to dismiss
its servants at pleasure, but those cases must now all be read
in the light of the judgment of Lord Atkin in Reilly v. The
King ([1934] A.C. 176, 179). That judgment shows that, in
regard to contracts of service, the Crown is bound by its
express promises as much as any subject. The cases where
it has been held entitled to dismiss at pleasure are based on
an implied term which cannot, of course, exist where there
is an express term dealing with the matter. In my opinion the
defence of executive necessity is of limited scope. It only
avails the Crown where there is an implied term to that
effect or that is the true meaning of the contract. It certainly
has no application in this case. The War Office letter is clear
and explicit and I see no room for implying a term that the
Crown is to be at liberty to revoke the decision at its
pleasure and without cause.
and then at p. 232:
I come therefore to the most difficult question in the case.
Is the Minister of Pensions bound by the War Office letter?
I think he is. The appellant thought, no doubt, that, as he
was serving in the army, his claim to attributability would be
dealt with by or through the War Office. So he wrote to the
War Office. The War Office did not refer him to the
Minister of Pensions. They assumed authority over the
matter and assured the appellant that his disability had been
accepted as attributable to military service. He was entitled
to assume that they had consulted any other departments
that might be concerned, such as the Ministry of Pensions,
before they gave him the assurance. He was entitled to
assume that the board of medical officers who examined
him were recognized by the Minister of Pensions for the
purpose of giving certificates as to attributability. Can it be
seriously suggested that having got that assurance, he was
not entitled to rely on it? In my opinion if a government
department in its dealings with a subject takes it upon itself
to assume authority upon a matter with which he is con
cerned, he is entitled to rely upon it having the authority
which it assumes. He does not know and cannot be expected
to know, the limits of its authority. The department itself is
clearly bound, and as it is but an agent for the Crown, it
binds the Crown also; and as the Crown is bound, so are the
other departments, for they also are but agents of the
Crown. The War Office letter therefore binds the Crown,
and, through the Crown, it binds the Minister of Pensions.
The function of the Minister of Pensions is to administer the
Royal Warrant issued by the Crown, and he must so admin
ister it as to honour all assurances given by or on behalf of
the Crown.
Denning J. in the above case merely applied
the principle he had defined in the case of
Central London Property Trust Ltd. v. High
Trees House Ltd. [1947] K.B. 130 that if a man
gives a promise or assurance which he intends
to be binding on him, and to be acted upon, he is
bound by it. This is what is called the doctrine
of promissory estoppel. This principle has been
applied since by this Court as well as by the
Supreme Court of Canada in Curtiss-Wright
Corp. v. The Queen [1969] S.C.R. 527; Conwest
v. Letain [1964] S.C.R. 20; John Burrows Ltd.
v. Subsurface Surveys Ltd. [1968] S.C.R. 607
and finally Canadian Superior Oil Ltd. v.
Hambly [1970] S.C.R. 932.
Having decided that prior to the change of
policy of the Crown in requiring Canadian flag
vessels there was a contract between the par
ties, the question now is whether the above
change of flag can be considered as a breach of
contract. There is, in my mind, no question that
the defendant's refusal to comply with the terms
of the contract and its decision to demand the
change of registry of the vessel constitutes a
repudiation of the contract thus rendering it
liable in damages to the plaintiff.
The registry of a vessel determines its nation
al character. A change of registry has the effect
of changing the body of law governing the oper
ation and control of the vessel as well as the
liability of its owner. Cf. Singh and Colinvaux,
Shipowners, British Shipping Laws, vol. 13,
paragraph 3:
... The legal regime of merchant shipping in the realm of
public international law is thus based on the "national
ownership" concept which may be said to exist on top of
individual ownership.
Some States have low standards in connection
with the manning, equipping and inspection of
vessels. Others, such as Great Britain, the
United States and Canada impose rigid controls
over vessels. Canada, conscious of the risks of
Arctic navigation and pollution has adopted
strict legislation concerning the requirements to
be met by vessels navigating those areas.
A change in registry of a vessel is not a mere
formality. It changes, as we have seen, the legal
system under which the ship will operate and
imposes upon the owner the responsibility of
assuming additional costs to meet the require
ments of the new registry.
Dr. Camu was aware of the consequences of
a change in registry policy when he stated in
Exhibit P-10, a memorandum to the Director of
Marine Operations of June 19, 1970, the
following:
We realize that this restriction of bids to Canadian flag
vessels only is going to cost more money but this is a
question of principle that should be followed in connnection
with the forthcoming mission and very probably in the
coming years as well.
Dr. Camu indeed agreed that vessels operated
under the Canadian flag would cost more both
from an operating point of view as well as a
capital investment point of view. Admiral Storrs
stated that a change in registry was not a minor
change. In the case of a charterparty, I am
satisfied that the ship's name and national char
acter is considered as one of the representations
inducing the signing of a charter. Such represen
tations are conditions and conditions are regard
ed as essential parts of a contract and their truth
or performance are relied on. Their breach enti
tles the other party to repudiate the charter as
well as to recover any damages resulting from
the breach. Cf. Scrutton on Charterparties, 17th
ed., p.71 and pp. 77 and 78.
In Brown and Root Ltd. v. Chimo Shipping
Ltd. [1967] S.C.R. 642 the Court recognized
that, under Canadian law, a breach of a condi
tion in a charter constitutes a breach of
contract.
Counsel for the plaintiff took the position that
should this action fail on the basis of a breach
of contract, it should succeed in tort against the
defendant whose officers, agents and préposés,
acting in the performance of their duties, were,
he said, guilty of such gross misrepresentation
of authority and of fact as to amount to gross
negligence and wilful misconduct, especially, he
added, in circumstances where they had full
knowledge of plaintiff's circumstances and
resulting predicament and that these officers
and préposés were guilty of deficient and
wrongful discharge of their duties.
I cannot accept that the Crown should be held
liable here for any fault or tort committed by its
officers or employees. Firstly, I fail to see what
fault they committed by merely proceeding as
usual and confirming the fixtures of the vessel
prior to a change in policy for which they were
not responsible and which came from a policy
decision of the Minister. There is, however, a
more peremptory reason for rejecting any claim
on the basis of tort or delict or quasi-delict in
that the actions were taken more than two years
after the facts complained of were brought in by
way of amendments to the statement of claim at
the opening of the trial.
There remains to be determined the amount
of damages which the plaintiff is entitled to
receive as a result of the breach of its contract.
The plaintiff claims here in the case of the
Theokletos damages amounting to $110,124.24
with interest as of the date of the anticipated
charter hire payment and for costs.
Plaintiff's claim is founded on the anticipated
gross earnings of the vessel had the charter
been performed by the defendant less actual
earnings earned through various charters con
cluded by the plaintiff in order to mitigate dam
ages. To this, it has added expenses incurred
during that period which were not recovered
during the chartering performed to mitigate
damages.
I find that such a basis is in accord with what
the plaintiff is entitled to recover as damages in
this case. Article 1073 of the Civil Code states
that:
1073. The damages due to the creditor are in general the
amount of the loss that he has sustained and of the profit of
which he has been deprived; ... .
and 1074 says that:
1074. The debtor is liable only for the damages which
have been foreseen or might have been foreseen at the time
of contracting the obligation, when his breach of it is not
accompanied by fraud.
In British Westinghouse Electric and Manu
facturing Company Limited v. Underground
Electric Railways Company of London Limited
[1912] A.C. 673 Viscount Haldane, at pp. 688
and 689, setting down what he considers as
settled broad principles in the assessment of
damages, said:
... The first is that, as far as possible, he who has proved a
breach of a bargain to supply what he contracted to get is to
be placed, as far as money can do it, in as good a situation
as if the contract has been performed.
This point of view was quoted with approval
by the Supreme Court in Sunshine Exploration
v. Dolly Varden Mines [1970] S.C.R. 2 at p. 17
by Martland J.
There appears to be no difference between
the common law on this matter and articles
1073 et seq. of the Civil Code. See Ritchie J. at
p. 648 in Brown and Root Ltd. v. Chimo Ship
ping Ltd. (supra).
In Remer Bros. Investment Corporation v.
Robin [1966] S.C.R. 506 Fauteux J., as he then
was, pointed out clearly the rule to be applied in
determining what the parties are deemed to
have contemplated as a proximate result of a
breach. He indeed said at p. 512:
[TRANSLATION] We must now consider whether these earn
ings or damages of $47,750 as established by the evidence
were foreseeable when the contract was made in June 1953.
The foreseeability of damage, during the course of the
contract, must be determined in abstracto. What must be
determined is not what the debtor was able to foresee, but
what might have been foreseen, according to Art. 1074 of
the Civil Code, and this means what the abstraction known
as the reasonable man, the prudent and well-advised person
might have foreseen . . .
The facts to be considered in determining
what the parties are deemed to have contem
plated, and this flows from the evidence, are
obviously that the contract related to the chart
ering of vessels; that such chartering is done
under market conditions, which makes the value
of vessels vary depending on their competitive
position and the effects of the general rule of
supply and demand; that the defendant, through
its officers, was experienced in the chartering
trade and well aware of those market condi
tions; that the defendant, through its authorized
officers, was well aware of the commitments of
the plaintiff and its financial responsibilities.
The breakdown of the amount claimed by the
plaintiff as mentioned at the outset of these
reasons is rather short and can be reproduced
here:
(a) anticipated gross earnings 60 days at
$2,750 per day . .. $165,000.00
LESS
actual earnings . $ 81,027.51
Gloss loss .... $ 83,972.49
PLUS
extra expenses incurred $ 26,151.75
Net loss $110,124.24
Counsel for the defendant, at p. 346, accepted
the breakdown of the amounts claimed when he
stated
... My Lord, we have looked at the invoice dealing with
the "Theokletos" and since we have no alterations to make
that would in any way alter the exhibit already in, I don't
think it is necessary to file them, unless my confrère insists.
Counsel for the plaintiff then said:
... I understand my friend is saying for the record that he
has examined the detailed invoices, and that they support
the breakdown which has been submitted.
Counsel for the defendant agreed.
This is the extent of the contestation by the
defendant of the damages claimed. As the
amount claimed has not been seriously contest
ed and is supported by proper invoices and
established by the testimony of Mr. Mallot, the
president, and as it appears to be what the
plaintiff is entitled to receive as damages for the
breach of the contract, this amount is what the
plaintiff is entitled to receive from the
defendant.
The plaintiff shall therefore be entitled to
receive payment from the defendant in the
amount of $110,124.24 with interest from the
date of judgment at the rate of 5% per annum
with one-half (2) of its costs as this case pro
ceeded on common evidence with the case of
the Global Envoy and the Cabatern.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.