Puddister Trading Company Limited v. Canada, docket T-168-92

     T-168-92

Between:

     PUDDISTER TRADING COMPANY LIMITED,

     First Plaintiff

     - and -

     ARTHUR W. PUDDISTER,

     Second Plaintiff,

     - and -

     HER MAJESTY THE QUEEN,

     First Defendant,

     - and -

     THE MINISTER OF FISHERIES

     AND OCEANS,

     Second Defendant.

     REASONS FOR JUDGMENT

SIMPSON, J.

     The Plaintiffs seek compensation from the Government of Canada for the closure of the Atlantic large vessel offshore seal fishery (the "Offshore Seal Hunt") on December 30, 1987.

THE PARTIES

     The First Plaintiff, Puddister Trading Company Limited (hereinafter "Puddister Trading"), is a Newfoundland company which was incorporated in 1968 for the purpose of carrying on the business of shipping and marine transportation. Prior to 1978, Puddister Trading operated dry cargo vessels which transported freight to communities on the south coast of Newfoundland and coastal Labrador. Puddister Trading also provided passenger services to these communities. In 1978, Puddister Trading decided to enter the Offshore Seal Hunt and, in the period between 1978 and 1987, it held licenses that entitled it to engage in that hunt.

     The Second Plaintiff, Arthur Puddister, is a shareholder and the managing director of Puddister Trading. Arthur Puddister's father, Captain Frank Puddister, was the president of Puddister Trading in the period relevant to this litigation.

     At the time the Offshore Seal Hunt was terminated in December of 1987, the Honourable Thomas Siddon was Minister of Fisheries and Oceans (the "Minister"). His successor was the Honourable Bernard Valcourt ("Valcourt"). Valcourt made the decision to deny compensation to the Plaintiffs. His decision was upheld by the Honourable John Crosbie ("Crosbie") when the latter subsequently became Minister of Fisheries and Oceans.

THE OFFSHORE SEAL HUNT

i)      Background

     The Offshore Seal Hunt on the ice packs off the coast of Newfoundland and in the Gulf of St. Lawrence has a long and proud history in Newfoundland. The Offshore Seal Hunt involved vessels over 65 feet in length as defined in the Fisheries Act and Regulations (the "Large Vessels). The Offshore Seal Hunt also primarily involved the harvesting of newborn harp seal pups aged 3 to 10 days ("Whitecoats"). Traditionally, Whitecoat pelts were valued by the fur trade and brought high prices. Arthur Puddister described the Whitecoat hunt as "the foundation and backbone of the sealing industry". Each Large Vessel would annually harvest approximately 10,000 Whitecoats. The pups of hooded seals (known as "Bluebacks") were also taken in smaller numbers. The Offshore Seal Hunt was held in March and April of each year.

     Large Vessels were used in the Offshore Seal Hunt because they were well-suited to negotiating the heavy pack ice far offshore where the harp seals congregated to "whelp" their Whitecoat pups. By comparison, the inshore sealers who used small boats (the "Landsmen") had more difficulty reaching the Whitecoats. Accordingly, although Landsmen also harvested Whitecoats, they traditionally relied more heavily on a hunt for other types of young seals and more mature seals.

     In the 1960's, the Federal Government started to regulate the Offshore Seal Hunt by creating what is known as a "limited entry fishery" and, by 1979, only 10 offshore Large Vessel sealing licenses were available (the "Licenses"). In contrast, there were approximately 9,000 licenses issued to the Landsmen. The limited number of offshore Licenses, together with the federal Department of Fisheries and Oceans' (the "Department") practice of routinely renewing the Licenses and registering their transfer between Large Vessels and owners, created a market for, and a value in, the Licenses.

ii)      Puddister Trading Joined the Offshore Seal Hunt

         In January 1978, Puddister Trading acquired a vessel, the M.V. Gulf Star, for $120,000 for the purpose of joining the Offshore Seal Hunt in the spring of 1978. The Gulf Star held a License, which was transferred to Puddister Trading on March 2, 1978. The Gulf Star participated in the Offshore Seal Hunt in the years 1978 and 1979.

     In the fall of 1978, Puddister Trading purchased a second vessel named the M.V. Sir John Crosbie for $470,000. It was subsequently renamed the M.V. Terra Nova. In the spring of 1980, Puddister Trading transferred the License from the Gulf Star to the Terra Nova, and the Terra Nova participated in the Offshore Seal Hunt that year.

     In the summer of 1980, Puddister Trading acquired a third vessel, the M.V. Theron, for $350,000. The Theron, subsequently renamed the M.V. Polar Explorer, was purchased with an existing License, which was re-issued to Puddister Trading. In 1981, both the Gulf Star and the Polar Explorer participated in the Offshore Seal Hunt. The Terra Nova did not go out because it was under charter to the Department. After the 1981 seal hunt, the Gulf Star was de-commissioned and its License was transferred to the Terra Nova. Thereafter, in 1982, the Terra Nova and the Polar Explorer attended the Offshore Seal Hunt.

     By 1982, Puddister Trading had invested in excess of $1 million in licenses and assets for the Offshore Seal Hunt. It harvested 53,149 seals between 1978 - 1982 and earned revenue of approximately $1.25 million in that period.

iii)      The Demise of the Offshore Seal Hunt

     During the 1970's and early 1980's, animal rights groups and others, including Greenpeace (collectively the "Protesters"), led highly effective protests against the Canadian sealing industry. Their opposition was largely directed to the harvesting of Whitecoats using clubs. In this context, the widely publicized picture of Brigitte Bardot cuddling a Whitecoat will long be remembered.

     At the time of the protests, the primary market for Whitecoat pelts was the European Economic Community (the "E.E.C."), as it was then known. On October 1, 1983, European Community Directive of March 28, 1983 (83/129/EEC) came into force (the "Ban"). The Ban responded to the Protesters by prohibiting the importation of products made from Whitecoats and Bluebacks. Although it was initially to apply for a period of two years, the Ban was later extended and ultimately became permanent.

     The Ban resulted in the collapse of the European market for Whitecoat and Blueback pelts. As a result, the Offshore Seal Hunt became uneconomic and only a few Large Vessels went to the 1983 hunt. In the years from 1984 to and including 1986, neither Puddister Trading nor any other License holders participated in the Offshore Seal Hunt. However, in this period, Puddister Trading renewed its Licenses in the hope of returning to the Offshore Seal Hunt if market conditions improved.

     As the Offshore Seal Hunt was inactive, the only seal hunt conducted during these years was an inshore hunt being undertaken on a limited commercial basis by the Landsmen, and on a subsistence basis by the Inuit. This hunt was tolerated by the Protesters because it was relatively small and because it did not involve Whitecoats or Bluebacks.

iv)      The Closure of the Offshore Seal Hunt

     In June of 1984, after the Ban was imposed, the federal government established the Royal Commission on Seals and the Sealing Industry in Canada (the "Malouf Commission"). The mandate of the Malouf Commission was to review all matters pertaining to seals and the sealing industry and to make recommendations for the development of a coherent sealing policy. Arthur Puddister submitted a brief to the Malouf Commission in his capacity as vice-president of the Newfoundland Shipowners' Association. That brief recommended, among other things, that members of the sealing industry be compensated for the loss of the Whitecoat hunt because the federal government was unwilling to "get tough" with the nations which had imposed the Ban.

     The report of the Malouf Commission was released in December 1986 (the "Malouf Report"). Its recommendations included the permanent closure of the Whitecoat and Blueback inshore and offshore hunts, and compensation for all those affected by the closure. The Malouf Commission did not recommend the termination of the inshore hunt for adult seals. Neither did it ban the Offshore Seal Hunt. However, it recognized that Large Vessels participating in the Offshore Seal Hunt had traditionally focused on the highly profitable harvesting of Whitecoats and Bluebacks, which, if the Malouf Report was accepted, would no longer be possible.

     In response to the Malouf Report, the Department established a committee to make recommendations to Cabinet about a new federal government sealing policy (the "Sealing Policy"). It would be announced one year later, in December of 1987.

     In the spring of 1987, Puddister Trading decided to return to the Offshore Seal Hunt. Its plan was to use speedboats carrying men armed with rifles to harvest seals. The Terra Nova was to serve as a home base for the speedboats and as a processing and storage facility. It was also to be an overnight refuge for the sealers. A second License holder, Karlsen's Shipping of Halifax, also announced that it would return to the Offshore Seal Hunt in the spring of 1987.

     However, when Puddister Trading and Karlsen's Shipping made known their intention to engage in an Offshore Seal Hunt in 1987, the Protesters became active, and the Landsmen, the cod fishermen and the Atlantic provincial governments united to oppose a renewed Offshore Seal Hunt. Even though the Large Vessel owners indicated that they would harvest only mature seals, the opponents of the hunt in the Maritime provinces feared that a renewed Large Vessel hunt of any kind would ignite new protests, which would result in secondary boycotts of Canadian cod and salmon in the United States and Europe, and the collapse of the export markets for those products.

     Accordingly, even though Licenses had already been issued to Puddister Trading for the spring 1987 Offshore Seal Hunt, the Department responded to the Protesters and to the opposition in Atlantic Canada by eliminating Puddister Trading's seal quota on March 20, 1987. However, shortly afterwards, the Minister reversed this position when he was satisfied that only adult seals would be taken, and that the entire animal would be processed for commercial sale. In these circumstances, the Minister was prepared to test the situation to see whether an Offshore Seal Hunt for adult seals could be held without undue repercussions. In the end, Puddister Trading went to the Offshore Seal Hunt and harvested approximately 1,600 adult seals in 1987. This was not a profitable hunt but, nonetheless, Puddister Trading planned to return to the Offshore Seal Hunt in 1988, in the hope that the market for mature seals would improve.

     News of the renewed Offshore Seal Hunt drew protests from animal rights groups, who viewed the Large Vessels as symbols of inhumane practices regardless of whether they harvested pups or adult seals. Brian Davies of the International Fund for Animal Welfare showed the Department a disgusting videotape of worms in Canada's Atlantic cod (the "Video"). His thinly veiled threat to release the Video caused panic in the Department, in political circles, and among cod fishermen. They were concerned that the Video would devastate the market for Canadian fish and cause untold unemployment. It should be understood that, at that time, the cod fishery was of far greater economic significance to Atlantic Canada than the Offshore Seal Hunt.

     It was clear by the fall of 1987 that the federal government was not prepared to issue Licenses for an Offshore Seal Hunt in 1988. The hunt was opposed in Atlantic Canada and the Protesters were ready to encourage fish boycotts and release the Video. The federal government decided that, even though Puddister Trading and the other License holders had done nothing wrong, and even though seal conservation was not an issue, the Offshore Seal Hunt, which by then was uneconomic and involved only a small number of Licenses, had to be sacrificed to remove the danger to the far more important fishing and inshore sealing industries.

     The formal announcement of the permanent closure of the Offshore Seal Hunt (the "Closure") was made on December 30, 1987, as part of the publication of the federal government's new Sealing Policy. The Closure meant that no Licenses would be issued for 1988 or any future years. However, the approximately 9,000 licenses involved in the inshore seal hunt were not affected by the Closure. The inshore hunt continued, but Whitecoats and Bluebacks were not harvested.

COMPENSATION

     The press release which announced the Closure did not refer to compensation but, at a press conference in St. John's on December 30, 1987, Crosbie, who was acting as the Minister's delegate, was reported in the press to have said that the "... government will appoint someone to look into the issue of compensation and whether or not it is warranted". At trial, the Plaintiffs called Crosbie as a witness and he confirmed that he had made the reported announcement.

     The Minister was also a witness for the Plaintiffs at trial. He testified that he had recommended to his Cabinet colleagues that an independent study be commissioned to consider compensation for Large Vessel licensees, and that Cabinet had authorized such a study at the time it approved the Sealing Policy. The Minister noted that the Department had been advised of the requirement of an independent study by way of the handwritten directive he placed on Deputy Minister Peter Meyboom's ("Meyboom") memorandum to him of December 15, 1987. It read, in part:

Giving proper attention to:

-      Study into compensation for previous licensees of big boats (independent study).

...

The Minister and Crosbie both stated in evidence that they were predisposed to the payment of compensation. However, the Minister testified that he wanted an independent study which would provide an analysis of broad issues, including other situations in which compensation had been paid, whether there was legal liability to pay, and whether compensatory payments to Large Vessel License holders would create a precedent for similar payments to inshore sealers. The Minister concluded by saying that he wanted an independent consideration of the case for compensation which would be rooted in economic need and would also deal with matters of law, policy and precedent.

     The Minister also indicated that his request for an independent study was, in part, motivated by the fact that the officials in the Department were opposed to the payment of compensation. This Departmental opposition was confirmed by Pierre Comeau ("Comeau") who was the Atlantic Sealing Coordinator from February 1987 to October 1989. He testified that the general consensus among the Departmental bureaucrats was that the Ban had effectively closed the Offshore Seal Hunt years earlier, and that the Large Vessel holders' losses stemmed from the Ban in 1983 rather than from the Closure in 1987.

     Shortly after the announcement of the Closure, Crosbie met with Arthur Puddister and Captain Puddister to discuss the compensation issue. In a letter dated January 12, 1988 (the "Crosbie Letter"), Crosbie confirmed the discussion in the following terms:

I realize that this is a difficult situation for you and I believe that you should proceed in the manner that I suggested. You and the other holders of licenses will have to make a case for compensation and for the amount of compensation using as a precedent the whaling situation of some years ago. As you know, I will do what I can here to support any reasonable claim that is made.

     Arthur Puddister testified that Crosbie had suggested that all the License holders join together to retain a consultant to assist them in making a case for compensation. Arthur Puddister followed this suggestion and, in January 1988, retained a market research firm called Omnifacts Research Limited ("Omnifacts") for a fee of $25,000. Omnifacts was asked to research the history of the Offshore Seal Hunt and cases in which compensation had been paid on the closure of a fishery. It was also asked to coordinate and present the License holders' case for compensation. This work was to include ensuring that any financial information from the License holders was provided on a consistent basis.

     Although Arthur Puddister contacted eight License holders, only two were willing to help Puddister Trading meet its obligation to pay Omnifacts' fee. It was agreed between the License holders that Puddister Trading would be responsible for $12,500 and Fogo Transport Ltd. ("Fogo") and Johnson Combined Enterprises ("Johnson") would each pay Puddister Trading $6,150. In the end, Fogo and Johnson failed to pay their full shares and Puddister paid $21,000 of the Omnifacts' $25,000 fee.

     Confirmation of the independent study (the "Study") came in a letter to Captain Puddister from the Department dated April 15, 1988. It read, in part:

On the same day, December 30, the Minister announced the new seals policy, including the termination of the offshore hunt using large vessels, and included was the fact that an independent review of the case for compensation for large vessels would be carried out.

     The Minister did not occupy himself with the organization and implementation of the Study. These tasks were left in Comeau's hands under the supervision of Assistant Deputy Minister Rowat William ("Rowat"). The Department decided to retain the accounting firm of Doane Raymond. John Gover of Doane Raymond's St. John's office ("Gover") was to be responsible for the Study. Gover and Comeau first met on March 17, 1988, and at that time, they discussed draft terms of reference (the "Draft Terms of Reference") for the Study which provided that:

To present to the Minister of Fisheries and Oceans an independent assessment of the need for compensation for holders of large vessel sealing licenses for the December 30, 1987 withdrawal of permission to conduct further sealing operations and, if appropriate, of the amount of compensation.

This assessment, to be completed by June 30, 1988, is to include all ten holders of large vessel licences in or since 1982. It is to include an assessment of any investment losses incurred as a result of the decision, or of any future profits foregone as a result, and of any legal liability which the government may have as a result.

     At their meeting, Gover was advised that his Study should include a legal opinion, an economic analysis and an accounting analysis to support any recommendation for compensation. Gover testified that he subsequently met with a law firm in the hope of contracting out the legal work for a fixed fee, but he was unable to make such an arrangement.

     Gover and Comeau met a second time on April 28, 1988. By this time, the Study had been further defined in that it had been split into two phases. Phase One was to deal with whether there was a need for compensation and Phase Two was to consider how much the compensation should be. The legal work no longer formed part of Gover's mandate. It was decided that it would be carried out by the Department's standing legal counsel.

     In a reporting memo dated May 19, 1988, to Meyboom, Rowat recommended that a contract be signed with Doane Raymond to carry out Phase One. With respect to Phase Two, he made the following observations:

When Phase I is completed

(a)      it may either be unnecessary to carry out Phase II, or

(b)      there may be considerable funds left over from Phase I (this is what we expect) - in fact enough to compensate all of Phase II, or

(c)      if not, Phase II (or major elements of it) could be carried out in-house.

     It is noteworthy that, at this early date, the Department's senior officials were considering abandoning the independent nature of the Study as it related to the amount of individual License holders' losses, and that they had already decided that the legal part of the Study would not be conducted on an independent basis. Gover's assignment was spelled out in a confirming letter he wrote to Comeau dated May 25, 1988. Under the heading "Terms of Reference" the letter stated that:

To present to the Minister of Fisheries and Oceans an independent assessment of the need for compensation for holders of large vessel sealing licenses for the December 30, 1987 withdrawal of permission to conduct further sealing operations and, if appropriate, of the amount of compensation.

This assessment, to be completed by June 30, 1988, is to include all ten holders of large vessel licenses in or since 1982. It is to include an assessment of any investment losses incurred as a result of the decision, and of any future profits foregone as a result.

     Under the heading "Methodology" the letter contained a qualification (the "Qualification") which indicated that:

...

Phase One determines the "need"; Phase Two calculates the "compensation". Phase Two is intended only if Phase One defines a need and the Minister (or his officials) so determines; and would be subsequently authorized as a seperate (sic) assignment under an additional expenditure authorization.

     This is the first suggestion in any document that Phase Two of the Study would not proceed automatically if, as a result of Phase One, it was determined that there was a need for compensation. The Crosbie Letter had stated that the Study would examine both the case for compensation and the amount if a case was shown. As well, the Draft Terms of Reference had been written to suggest that, if a case for compensation was made, the amounts due would be calculated.

     On July 27, 1988, Doane Raymond sent a questionnaire (the "Questionnaire") to the License holders that asked them to supply financial information for the "last five open fishing seasons". Comeau and Gover had decided that the five years between 1978 and 1982, which was just prior to the Ban, would be the Study period. Arthur Puddister hired an accounting firm called Sullivan Lewis & White to complete the Questionnaire, and Puddister Trading paid $3,600 for its services.

     On August 17, 1988, Gover met with Arthur Puddister to discuss the work Gover was undertaking. Gover's handwritten notes of the meeting indicate that he discussed with Arthur Puddister the "Methodology" section of his letter to Comeau of May 25, 1988. However, in his testimony, he stated that he did not recall showing Arthur Puddister a copy of the letter, and he could not say whether the discussion included a reference to the Qualification. Arthur Puddister was not asked either in examination-in-chief or in cross-examination whether he ever saw or heard about the Qualification.

     The Defendants asked me to infer, on the balance of probabilities, that Gover drew the Qualification to Arthur Puddister's attention. However, given Gover's inconclusive evidence and the fact that Arthur Puddister was not questioned, I am not prepared to conclude that he ever knew that Phase Two of the Study was to be undertaken only if need were shown and if the Minister or his officials gave a fresh approval.

     The report on Phase One of the Study (the "Report") was dated October 25, 1988. In the Report, Gover concluded that the License holders as a group had suffered annual losses in the range of $800,000. He also concluded that this loss was sufficient to warrant compensation. Finally, he noted that his work was based on unaudited figures and that more precise work would be required to determine the exact amount of the loss sustained by each licensee. Indeed, he suggested that, on closer analysis, some individual licensees might not be entitled to compensation.

     Puddister Trading was never provided with a copy of the Report. However, it clearly knew by August 8, 1989, that the Report had concluded that a case had been made and that compensation was warranted. Puddister Trading ultimately obtained the Report using an access to information request in February of 1991.

     The Minister never read the Report and did not recall ever receiving a memorandum from his Departmental officials which made a recommendation for or against compensation. It may be, however, that his recollection is faulty because a later memorandum from Meyboom to Valcourt of April 3, 1990, indicates that the Department had given the Minister a recommendation against compensation. However, it appears that the Minister knew of the Report's conclusion and that he asked the Department to develop options for the payment of compensation. Those options were provided by Meyboom in a memorandum dated July 7, 1989, but no action was taken.

     Crosbie also knew of the Report and its result, and he wrote to the Minister several weeks later, on July 24, 1989, asking him to proceed to Phase Two of the Study. In his subsequent letter to Captain Puddister dated September 6, 1989, Crosbie spoke of the Study as one into the matter of "possible compensation". This was the first, and rather belated, indication to the Plaintiffs that, even though the Study found that compensation was warranted, nothing might be paid. The Minister did not reply to Crosbie and never made a decision on compensation. During his testimony, the Minister could not explain his inaction. All he could suggest was that the crisis with the Atlantic cod stocks began in late 1988, and that it might explain his failure to address the compensation issue.

     The Minister was replaced by Valcourt in 1990. In a memorandum to Valcourt dated April 3, 1990, Meyboom, who was still the Deputy Minister, advised that he was opposed to the payment of compensation because it was the Ban and not the Closure which had caused the License holders' losses. He also expressed concern that the inshore sealers might seek compensation if anything was paid to the License holders. Valcourt met with Puddister on August 27, 1990, to advise him that no compensation would be paid and, when he was copied with a letter dated January 21, 1991, sent by Valcourt to Mr. Wayne Davis (another Large Vessel owner), Arthur Puddister had a formal answer on the compensation issue. The pertinent parts of the letter read as follows:

I am writing to you concerning the issue of compensation for the ban on large vessel sealing.

After close consultation with my advisors and having reviewed the consultant report by Mr. Gover of Doane Raymond, Chartered Accountants, I have decided that the federal government cannot support your request for financial compensation as a result of the sealing policy announced December 30, 1987, which no longer permitted the large vessel offshore seal hunt in Canadian waters.

At that time, the change in the external market demand for seal pelts and the European Economic Community ban on whitecoats and bluebacks in October, 1983, made large vessel sealing unprofitable long before the Fisheries and Oceans ban. It is my understanding that large vessel operators such as yourself made no profits from the hunt from 1984, the year following the ban, to 1987, the last year large vessels were permitted to engage in the seal hunt. It is unfortunate that some 9000 sealers lost income during the worst years of the anti-seal hunt crisis of the mid-1980's.

THE ISSUE

     The Plaintiffs seek compensation on the basis that the Defendants, by their conduct, offered compensation and the offer was accepted. In spite of the lengthy amended statement of claim filed May 8, 1997, a contractual basis for the claim was the only matter I was asked to consider. Against this background, the issue is whether the Defendants' conduct entitled the Plaintiffs to reasonably believe that, if the Study showed that compensation was warranted, it would be calculated as part of the Study and a reasonable sum would be paid to those licensees who had suffered losses.

DISCUSSION

     I accept Arthur Puddister's evidence that he believed that, if the Study showed that compensation was warranted, the Study would then calculate License holders' losses and, if that exercise showed an amount due to Puddister Trading, that amount would be paid as long as it was reasonable. The Crosbie Letter and the Draft Terms of Reference made it clear that the full Study would be completed and, as mentioned above with reference to the Qualification, there is no evidence that Arthur Puddister was ever told that Phase Two of the Study might not proceed even if Phase One showed a need for compensation. To Arthur Puddister, the Crosbie Letter's reference to Crosbie's future support for compensation related only to the amount of compensation. I am satisfied that, at that time, he presumed that he would be successful in making the case for compensation being warranted. However, Arthur Puddister clearly understood that the amounts claimed for compensation had to be reasonable, and that a ministerial decision about quantum would be made after the completion of the Study.

     It is important to consider the context in which the Study was announced. Firstly, the Offshore Seal Hunt was being closed to protect other fisheries. Secondly, although there was no legal obligation on the federal government to buy back the Licenses or equipment, or provide any compensation to the License holders for their loss of investment or profits, there was a long history of compensation on the closure of fisheries. As well, there appeared to be a willingness, at least on the part of the Minister and Crosbie, to support compensation.

     In all these circumstances, I am satisfied that Arthur Puddister honestly believed that, by agreeing to fund the independent Study, the federal government had made a commitment to pay reasonable compensation. I am also satisfied that this view would have been reinforced by the fact that the Study, as finally structured, was solely an accounting exercise which focused on the last profitable period and did not ask the License holders to make broad policy or historical arguments in support of the "case" for compensation.

     The Plaintiffs rely on Grant v. Province of New Brunswick (1973), 35 D.L.R. (3d) 141 (N.B.S.C.) ("Grant"). In that case, the issue was whether a provincial government program to buy up potatoes applied to all potato farmers who met the program's criteria. In considering the proper interpretation of the information published about the program, the Court relied on a passage from Williston on Contracts, 3rd ed. (1957), vol. 1, s. 94, at page 339, which reads:

It follows that the test of the true interpretation of an offer or acceptance is not what the party making it thought it meant or intended it to mean, but what a reasonable person in the position of the parties would have thought it meant.

     In applying this passage to the facts of this case, I have concluded that Arthur Puddister's honest belief that he had received a binding commitment to pay compensation in an undetermined amount was not a reasonable belief. There was never a public announcement of a compensation program, and Arthur Puddister acknowledged that he never received a commitment to pay compensation. As well, Arthur Puddister knew that there was no liability to pay compensation and that the officials in the Department opposed compensation on the basis that it was the Ban, and not the Closure, which caused the demise of the Offshore Seal Hunt. In all these circumstances, and in spite of the evidence of Crosbie and Comeau in which they indicated they felt that Arthur Puddister's belief was reasonable, I am not satisfied that it was reasonable for him to conclude that the Defendants, by authorizing the Study, had made an enforceable binding commitment to pay reasonable compensation.

     However, I have reached the conclusion that the Defendants did make a binding commitment to a broad independent study which would consider whether compensation was warranted and, if so, the amounts lost by individual License holders. In my opinion, the Minister erred when he trusted the implementation of the Study to his Department's officials without supervision by his personal staff when he knew that those officials opposed compensation. What happened was that Comeau and others did not ultimately arrange the broad independent study that the Minister and Crosbie had foreseen when the Study received Cabinet approval as part of the Sealing Policy, and which was reflected in the Draft Terms of Reference. Instead, the bureaucrats turned the Study into a narrow accounting exercise, compromised its independence and qualified it by introducing a requirement for ministerial or other undefined "official" approval prior to Phase Two.

     Crosbie suggested that the License holders band together to make a "case" on the clear understanding that, if they succeeded, their individual entitlement to compensation would also be assessed. On the strength of the government's undertaking to hold the Study, Arthur Puddister decided that it was in his company's interest to retain Omnifacts to help the License holders demonstrate that compensation was warranted so that Puddister Trading would be entitled to prove its losses. He also retained an accounting firm to work for Puddister Trading to complete Doane Raymond's Questionnaire for the same purpose. In these circumstances, the test in Grant is met. It was entirely reasonable for Arthur Puddister to believe that the government had made a binding commitment to complete a full study of the compensation issue (the "Commitment") if Phase One concluded that compensation was warranted. This was, in fact, the Commitment, and by their failure to conclude such a study, the Defendants breached the Commitment and the First Defendant is responsible in damages for that breach.

CONCLUSION

     A judgment will be issued against the First Defendant awarding Puddister Trading the sum of $21,000 for the amount paid to Omnifacts, and $3,600 for the amount paid for accounting work for the Questionnaire. Both these amounts will bear prejudgment interest from February 1, 1992 pursuant to section 31 of the Crown Liability and Proceedings Act, R.S.C. 1985, c. C-50, as amended S.C. 1990, c. C-8 and pursuant to section 6 of the Judgment Interest Act, R.S.N. 1990, c. J-2. Costs will be payable to Puddister Trading on the scale in Column 5 of Tariff B. Arthur Puddister's action against both Defendants will be dismissed without costs, as the Charter claims were not pursued, and Puddister Trading's action against the Second Defendant will also be dismissed without costs. However, these dismissals will have no bearing on the taxation of costs in favour of Puddister Trading.

                             (Sgd.) "Sandra J. Simpson"

                                     Judge

Vancouver, B.C.

May 28, 1997

     NAMES OF COUNSEL AND SOLICITORS OF RECORD

STYLE OF CAUSE:              PUDDISTER TRADING COMPANY LTD.

     First Plaintiff

                     ARTHUR W. PUDDISTER

     Second Plaintiff

                     - and -

                     HER MAJESTY THE QUEEN

     First Defendant

                     THE MINISTER OF FISHERIES

                     AND OCEANS

     Second Defendant

COURT NO.:                  T-168-92

PLACE OF HEARING:          St. John's, Nfld.

                     Ottawa, Ontario

DATES OF HEARING:          September 19 to 21, 1994

                     April 24 to May 1, 1995

                     May 5 to 7, 1997

REASONS FOR JUDGMENT:          SIMPSON J.

DATED:                  May 28, 1997

APPEARANCES:

     Mr. Cabot Martin                          for Plaintiffs

     Mr. Peter O'Flaherty

     Mr. John J. Ashley                          for Defendants

     Mr. Glen Roebothan

SOLICITORS OF RECORD:

     Cabot Martin                              for Plaintiffs

     Barrister and Solicitor

     St. John's, Nfld.

    

     Martin, Whalen, Hennebury & Stamp

     St. John's, Nfld.

     George Thomson                          for Defendants

     Deputy Attorney General

     of Canada

     Ottawa, Ontario

     Williams, Roebothan, McKay & Marshall

     St. John's, Nfld.