Supreme Court of Canada
Farah v. Barki, [1955] S.C.R. 107
Date: 1955-01-25
Brian Farah (Defendant)
Appellant;
and
Mayer A. Barki (Plaintiff)
Respondent.
1954: December 15; 1955: January 25.
ON APPEAL FROM THE COURT OF APPEAL FOR
ONTARIO.
Contract—Action to enforce written agreement
dismissed—Whether trial judge’s finding one of fraud and supported by the
evidence—Duty of appellate court in dealing with finding.
The appellant signed a document in the belief
that as drafted by the respondent it was in accordance with a prior discussion
between the parties whereby the appellant had agreed to act for the respondent
in the sale of certain stock. The document in fact recorded the sale of the
stock by the respondent to the appellant. An action to recover the purchase
price set out in the agreement was dismissed on the ground that it appeared to
have been obtained by a trick on the part
[Page 108]
of the respondent. The decision was reversed
by the court of appeal who found that the trial judge had not made a finding of
fraud and, in any event, that there was no evidence of fraud.
Held: that the
finding of the trial judge was to be interpreted as a finding of fraudulent
misrepresentation which warranted the repudiation of the agreement by the
appellant. Max v. Platt [1900] 1 Ch. 616 at 623; Blay v. Pollard [1930]
1 K.B. 628 at 633, referred to.
Judgment of the Court of Appeal for Ontario
reversed and judgment at trial restored.
APPEAL by the defendant from the judgment of
the Court of Appeal for Ontario which reversed the judgment at trial of Wilson
J. who dismissed the respondent’s action to recover the sum of $6,500 he
alleged due him under a written agreement signed by the appellant.
J.J. Robinette, Q.C. for the appellant.
G.T. Walsh, Q.C. and D.R. Walkinshaw,
Q.C. for the respondent.
The CHIEF JUSTICE:—The Court of Appeal for
Ontario reversed the judgment at the trial which had dismissed the action of
the respondent to recover the sum of $6,500 alleged to be due by the appellant
to the respondent under a written document dated March 8th, 1951, for the
purchase of six hundred and fifty (650) shares of Joy Heating and Equipment Co.
Ltd. The judgment at the trial also ordered the appellant to assign to the
respondent that contract.
The duty of an Appellate Court in dealing with
the finding of a trial judge was considered by this Court in Lawrence v. Tew. The principles set forth by Lord Sumner in
the opinion of the House of Lords in SS. Hontestroom (Owners) v. SS. Sagaporack
(Owners), had
been reiterated by Lord Wright in Powell v. Streatham Manor Nursing Home, and were adopted by this Court in the Lawrence case. A reference was there made to a decision of the Privy Council
in Caldeira v. Gray. In
effect, the same views were subsequently expressed by the House of Lords in Watt
or Thomas v. Thomas. The
principles stated by Lord Sumner are as follows:
(1) Does it appear from the President’s
judgment that he made full judicial use of the opportunity given him by hearing
the viva voce evidence?
[Page 109]
(2) Was there evidence before him,
affecting the relative credibility of the witnesses, which would make the
exercise of his critical faculties in judging the demeanour of the witnesses a
useful and necessary operation?
(3) Is there any glaring improbability
about the story accepted, sufficient in itself to constitute “a governing fact,
which in relation to others has created a wrong impression”, or any specific
misunderstanding or disregard of a material fact, or any “extreme and
overwhelming pressure” that has had the same effect?
In the present case the Court of Appeal
concluded that the trial judge had not made a finding of fraud on the part of
the respondent. With respect, I am unable to agree, in view of the tenor of his
reasons and particularly his statement:
This contract of March the 8th looks to me
to be very much like a smart trick by which he endeavoured to recompense
himself for a bad investment.
and his further remarks that the appellant’s
“friendship and the service which he has voluntarily rendered to the plaintiff
should not be taken advantage of if there is a legal ground upon which he can
be excused”. If, as I consider, these are findings of fraud, then none of the
other questions raised in argument need be considered because I am also unable
to agree with the Court of Appeal that there was no evidence of fraud.
The subsequent actions of the appellant are
explained by the evidence and referred to in the reasons for judgment of the
trial judge. He accepted, as he was entitled to do, that explanation. Certainly
he accepted the evidence of the appellant rather than that of the respondent,
and his following comment as to the latter is revealing:
In the witness box the plaintiff had to be
asked simple questions a number of times before he would give a direct answer;
such a question, for example, as to who called the meeting of March 8. On
perfectly simple questions his answers were evasive. Only the persistence of
counsel finally elicited the answer that he had called the meeting. His answers
indicated that he is a man who dominates a conversation and talks other people
down, rather than answering what is asked of him.
His judgment meets the tests set out above and
the appeal should be allowed with costs here and in the Court of Appeal and the
judgment at the trial restored.
[Page 110]
RAND J.:—The key to the explanation of the
conduct of Farah is contained in the language of Wilson J. at the trial when he
remarks upon personal characteristics of the plaintiff Barki:
In the witness box the plaintiff had to be
asked simple questions a number of times before he would give a direct answer;
such a question, for example, as to who called the meeting on March 8. On
perfectly simple questions his answers were evasive. Only the persistence of
counsel finally elicited the answer that he had called the meeting. His answers
indicated that he is a man who dominates the conversation and talks other
people down, rather than answering what is asked of him.
This contract of March the 8th looks to me
to be very much like a smart trick by which he endeavoured to recompense
himself for a bad investment.
On the other hand he indicates his conclusion
that Farah was, as a friend, voluntarily undertaking services for Barki in
relation to which he was induced to sign a document which meant to him
something entirely different from that now asserted by Barki.
Notwithstanding that Laidlaw J.A., speaking for
the Court of Appeal, declined to treat the language I have quoted, read with
the rest of the reasons, and the judgment rendered, as a finding of fraud, I am
unable to give them any other interpretation; and a perusal of the material
evidence shows that it was amply justified. Barki’s conduct implied an
assurance that the document prepared and handed over by him to be signed by
Farah was merely to put the latter in a position to act as his substitute,
while he was out of Canada, in
disposing of his shares. Both of them, for some time, had been trying to do
that. But Barki knew there was no intention on the part of Farah to enter into
a contract such as the document on its face purports to set out. It was the not
uncommon situation of a cunning coercive personality, presuming on another’s
friendship, “tricking him”, in the language of the court, into believing that
the document related to what the other had in mind. Protesting the unique
confidence between “Eastern peoples”, he resorted to characteristic
persuasiveness for an act seemingly innocent which the more susceptible person,
vaguely hesitant and doubtful, was rushed into doing before he could bring
himself to introduce the discordant note of asking for a clear understanding of
what was meant. Once this deceit became evident, the way to a remedy became
unobstructed.
[Page 111]
I would allow the appeal and restore the
judgment at trial with costs in this Court and in the Court of Appeal.
The judgment of Kellock, Cartwright and Fauteux
JJ. was delivered by:
KELLOCK J.:—In these proceedings the respondent
brought action against the appellant to recover the price of certain shares of
stock pursuant to an agreement in writing between the parties dated the 8th of
March, 1951.
The appellant and the respondent were friends of
some years’ standing. The latter had desired to assist a son-in-law to get into
business and, to that end, having been introduced by the appellant to one Joy,
who carried on a furnace business, arranged with Joy in December, 1949, for the
latter to turn over the business to a company which the respondent caused to be
incorporated, in consideration of the issue to Joy of 350 shares of a par value
of $10 each. The respondent received 650 shares in consideration of his
investing $6,500 in cash.
Joy carried on the active management of the
business, but it did not prosper. By August, 1950, the company’s funds had
dwindled to some $200, whereupon the respondent refused to allow Joy to draw
further salary. As a result, relations between the respondent and Joy became
strained and the appellant, at the respondent’s request, became the means of
communication between them.
The respondent, in carrying on his own business
of an importer, had to be abroad frequently for long periods and in the
condition in which the business found itself, he desired to salvage what he
could of his interest. Joy appears to have been the only prospective purchaser
but had little or no funds. In February, 1951, however, he had arranged
financing with one Petico and an agreement of sale of the respondent’s shares
to Joy and Petico was drawn up for $6,500, of which $3,000 was payable on the
signing of the agreement but the balance was made payable out of dividends.
This sale fell through.
Joy then endeavoured to make other arrangements
but had not succeeded in doing so by the early part of March. The respondent
was leaving on an extended trip to the Far
[Page 112]
East on the 10th of March and he proposed to the
appellant, as the latter testified, that the shares should be transferred to
the appellant and that the appellant should act for him in controlling the
company and carrying out a sale to Joy if that should prove possible. This was
the position of matters as found by the learned trial Judge when the appellant,
at the respondent’s request, went to the latter’s office with Joy on the 8th of
March.
The respondent testified that on that occasion
Joy was still unable to buy. The respondent’s proposal to the appellant, as
outlined above, was discussed and the respondent then wrote out a document
which he passed over to the appellant, which the latter read and signed. This
document, Exhibit I, is the document sued on and is as follows:
8th March, 1951
I hereby declare having sold today to Mr.
Bryan Farah 650 shares of Joy Heat and Equipment Company for the price of
$6,500 payable by Mr. Farah on the 15th of December, 1951.
M.
BARKI
The appellant testified, and his evidence throughout
was accepted by the learned trial judge in preference to that of the
respondent, that while he read the document, he did not appreciate that he was
thereby personally becoming the purchaser of the shares but had it in mind that
it was in accordance with the previous discussion, by which he was to be agent
for the respondent. He considered that the document was a short form agreement
in the nature of a power of attorney to sell the shares on the terms mentioned
and that a subsequent formal document would have to be drawn. The appellant
says there was no discussion with the respondent whatever in accord with the
document as it was in fact drawn. The evidence of the respondent that the
appellant had agreed to purchase the shares was not supported by Joy and was
expressly rejected by the learned trial judge.
As the appellant was aware of the financial
straits of the company itself and of Joy’s lack of funds and his difficulty in
securing finances, it would have been a matter of surprise if the appellant, a
builder, who had also had an unfortunate experience as a purchaser of one of
the furnaces, was willing to purchase the shares at any figure and, more
especially,
[Page 113]
at their full par value in cash. The future of
the company depended entirely upon Joy and the appellant had no cause at the
time to consider that the future would be any better than his experience of the
past.
The respondent also testified that while the
appellant and Joy were in his office, the appellant had telephoned Mr. Kilgour,
his solicitor, who was also acting for the respondent in connection with the
company, telling him that he had purchased the shares from the respondent and
instructing him to draw minutes of a meeting covering the respondent’s
resignation as president and the transfer of the shares. This was denied by the
appellant.
Mr. Kilgour was called on behalf of the
appellant and he testified that it was the respondent who had telephoned him
advising him that the respondent “had agreed to transfer his shares to the
appellant” upon terms “which they had apparently agreed upon”, and that the
respondent instructed him to prepare the resignation, the endorsement of the
share certificates and the minutes. Mr. Kilgour’s letter of the 14th of March, 1951, to the respondent’s solicitor
expressly so states. It also states that
I also suggested to him that it would be
necessary to have a formal agreement regarding the transfer of the shares. He
said that this was unnecessary at the present time as he and Farah were in
agreement and they could settle the terms between them.
Following the meeting of the 8th of March, the
appellant became concerned as to the nature of the document he had signed and
on the evening of the following day, he telephoned the respondent telling him
he wanted the matter clarified and a “proper” agreement drawn. The respondent
agreed to attend a meeting in Mr. Kilgour’s office the following morning. When
that time arrived, however, the respondent did not appear but instructed his
solicitor to telephone Mr. Kilgour stating that he “was taking” the stand that
the appellant was the purchaser of the shares.
The learned trial judge expressly found that the
shares were worthless at the time, although Joy seemed to think they were worth
$2,500 and perhaps more in his hands. He was also of the view that “this
contract of March 8th looks to me to be very much like a smart trick by which
he (the
[Page 114]
respondent) endeavoured to recompense himself
for a bad investment.” Without further elaborating the legal considerations
involved, he dismissed the action. The judgment at trial was, however, set
aside in the Court of Appeal upon the view that the findings of the learned
trial judge did not amount to fraud and that, in any event, there was no
evidence of fraud.
The appellant expressly pleaded that he was
induced to sign the agreement as the result of fraudulent misrepresentation on
the part of the respondent as to the true nature of the document. It is quite
clear that this was the issue at the trial as counsel for the respondent stated
to the learned trial judge in opening that
my friend alleges he signed an agreement
under the fraudulent misrepresentation that it was some other document. The
whole question at issue is whether it is a good contract or not.
In my view, there was no escape on the evidence
from this issue.
In these circumstances, I think the finding of
the learned trial judge is to be interpreted as a finding of fraudulent
misrepresentation on the part of the respondent as to the nature of the
document which he asked the appellant to sign, and which he trusted he would
sign, as he did, under the influence of the previous discussion without
appreciating the real nature of the document, understanding that it was to be
followed by a more formal document. The question therefore arises as to whether
or not in such circumstances the appellant can successfully resist an action
upon the document.
Winfield in his 13th Edition of Pollock on
Contracts, at 384, quotes the language of Lord Chelmsford, Lord Chancellor
in Wythes v. Labouchere at 601,
namely:
It may be said generally that a man of
business who executes “an instrument of a short and intelligible description”
cannot be permitted to allege that he executed it in blind ignorance of its
real character.
Winfield goes on to state that
Strictly this may be an inference of
fact rather than a rule of law; but under such conditions the inference is
irresistible.
[Page 115]
This puts the point too rigidly. As stated by
Farwell J. in May v. Platt, fraud
“unravels everything.” The cases, however, such as that presently before the
court, in which a man may escape from a short and clear document, which he
admits reading before signing, must be few. But that is not impossible. Farwell
J. refers, inter alia, to Garrard v. Frankel, which case he considers is to be supported
only on the ground of fraud. In that case the defendant signed an agreement to
take from the plaintiff a lease of a house at a rent of £230 on the terms of a
lease on which the agreement was written, which, however, erroneously stated
the rental to be £130. A lease was afterwards executed, in which the rent was
stated to be £130. That this was due to error on the part of the lessor was
proved and the court considered that the lessee must have perceived the discrepancy
between the amount of rent previously stated by the plaintiff and specified in
the agreement, and that reserved by the lease. It was held that the proper
relief was to give to the lessee the option of taking the reformed lease or of
rejecting it, paying, in the latter case, occupation rent.
In Blay v. Pollard, where fraud was not pleaded, Scrutton
L.J., in the course of his judgment, said p. 633:
As a general rule mistake as to the legal
effect of what you are signing, when you have read the document, does not
avail: see per Lord Romilly M.R., in Powell v. Smith. It would be very dangerous to allow a man
over the age of legal infancy to escape from the legal effect of a document he
has, after reading it, signed, in the absence of an express misrepresentation
by the other party of that legal effect.
The learned Lord Justice continued, however,
quoting from Fry on Specific Performance as follows:
It equally follows that the mistake of one
party to a contract can never be a ground for compulsory rectification, so as
to impose on the second party the erroneous conception of the first. The error
of the plaintiff alone may, however, where (but, it is conceived, only where)
there has been fraud or conduct equivalent to fraud on the part of the
defendant, be a ground for putting the defendant to elect between having the
transaction annulled altogether or submitting to the rectification of the deed
in accordance with the plaintiff’s intention. See also per Farwell J. in May
v. Platt. This
rests on unilateral mistake in one party, fraud or conduct equivalent to fraud
in the other party.
[Page 116]
I think, therefore, that the judgment of the
learned judge on the facts as he found them is to be supported upon the
authorities. That the appellant subsequently carried out a sale of the shares
to Joy which proved as abortive as the projected sale to Joy and Petico does
not, in the circumstances, affect the appellant’s right to have the action
dismissed. Its evidentiary effect upon the question as to whether or not the writing
of March 8th represented the real agreement between the parties was not
overlooked by the learned trial judge.
I would therefore allow the appeal with costs
here and below.
Appeal allowed with costs.
Solicitors for the appellant: Arnoldi,
Parry & Campbell.
Solicitors for the respondent: Roebuck,
Walkinshaw & Trotter.
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