Supreme Court of Canada
Morrow Cereal Co. v. Ogilvie Flour Mills Co., (1918) 57 S.C.R. 403
Date: 1918-10-09
Frederick K. Morrow, Carrying on Business as the Morrow Cereal Company (Defendant) Appellant;
and
The Ogilvie Flour Mills Company (Plaintiffs) Respondents.
1918: June 13, 14; 1918: October 9.
Present: Davies, Idington, Anglin and Brodeur JJ. and Falconbridge C.J. ad hoc.
ON APPEAL FROM THE APPELLATE DIVISION OF THE SUPRME COURT OF ONTARIO.
Contract—Evidence—Non-jury trial—Findings of judge—Interference with on appeal— Measure of damages.
In an action claiming damages for breach of contract alleged to be made through the medium of telegrams and letters confirming a verbal agreement, the defence was that there was no completed contract or if there was that it had been terminated by laches of the plaintiff. The trial judge held that there was an existing contract and awarded the plaintiff the damages claimed but his judgment was varied by the Appellate Division which set aside the assessment of damages and directed a reference therefor.
Held, per Davies and Anglin JJ. and Falconbridge C.J. that, though an appeal lies from the judgment of a judge at the trial on questions of fact as well as of law, on the former an appellate court should not interfere with such decision of the judge who has seen and heard the witnesses unless there is some good and special reason for doubting its soundness. In this case there was no such reason and the judgment at the trial should stand.
Held also, that as the damages were assessed by the trial judge on the principle laid down in Roth v. Taysen (12 Times L.R. 211) and the evidence justified the assessment the judgment should not have been varied.
Brodeur J. also held that the judgment on the trial should be restored. Idington J. dissented on the ground that the evidence did not prove the existence of any contract between the parties.
Judgment of the Appellate Division (41 Ont. L.R. 58; 39 D.L.R. 463) reversed in part.
APPEAL and CROSS-APPEAL from a decision of the Appellate Division of the Supreme Court of Ontario, varying the judgment at the trial in favour of the plaintiffs (respondents).
[Page 404]
The matters to be decided are indicated in the above head-note and the facts are fully stated in the judgments published herewith.
Harcourt Ferguson for the appellant.
Tilley K.C. for the respondents.
DAVIES J. concurred with Anglin J.
IDINGTON J. (dissenting)—The appellant’s place of business was Toronto, where he carried it on under the name of Morrow Cereal Company. The respondent’s was in Montreal. One Weeks, a sales’ agent so called of the latter, and appellant travelled on a train from Montreal to Toronto and being engaged in the like business of dealing in flour had naturally a conversation relative to prices of a certain brand of flour which went so far as the appellant naming a price he was likely to agree to for sale to respondent of a large quantity thereof for future delivery.
They parted at Toronto on the morning of the 13th Oct., 1916; appellant stopping there and Weeks going on to London.
On the afternoon and evening of same day they had phone conversations which led to the appellant sending Weeks the following telegrams:—
Toronto, Ont., Oct. 13/16
140 rn bn 30 rush
J.E. Weeks, Esq.,
Tecumseh House, London, Ont.
We confirm sale six thousand bags October shipment four thousand November seven five bulk Montreal also your giving us until to-night on ten thousand more at seven dollars Montreal thanks.
MORROW CEREAL COMPANY.
Toronto, Ont., Oct. 13th, 1916.
J.E. Weeks,
Tecumseh House, London, Ont.
Book ten thousand bags seven dollars bulk Montreal October November shipment our option.
MORROW CEREAL CO.
[Page 405]
He further sent respondent on same and next day respectively the following:
Confirmation of sale.
Morrow Cereal Company.
Toronto, Oct. 13th, 1916.
No. 1552.
To: The Ogilvie Flour Mills Co., Ltd.
Address: Montreal, Quebec.
Date wanted, see below.
Price Per
10,000 98’s-90% Patent Ontario Winter Wheat Flour...$7.05 Bbl.
Bulk Basis Montreal.
Date of Shipment:
6,000 bags—October,
4,000 bags—November,
10,000 bags.
MORROW CEREAL COMPANY.
Per “Morrow.”
Confirmation of sale.
Morrow Cereal Company.
Toronto, Oct. 14th, 1916, No. 1553.
To: The Ogilvie Flour Mills Co., Ltd.
Address: Montreal Que.
Date of shipment (November)
10,000 bags 90% Patent Ontario Winter Wheat Flour,
$7.00 Bbl.
Bulk Basis Montreal.
MORROW CEREAL COMPANY,
Per “Morrow.”
The respondent sent on 23rd Oct., 1916, the following letter:—
October 23rd, 1916.
Messrs. Morrow Cereal Co.
Toronto, Ont.
Dear Sirs:—We attach herewith copy of bill of lading covering 20,000 empty bags which we forwarded to you on the 19th inst., to cover our orders 279 and 280 which are being mailed to you to-day under separate cover.
Yours truly,
The OGILVIE FLOUR MILLS CO., LTD.
and on same day wrote the following letter with the enclosures which follow it as hereunder:—
[Page 406]
The Ogilvie Flour Mills Co., Ltd.
Oct. 23rd, 1916.
The Morrow Cereal Co.,
Toronto, Ont.
Gentlemen:—We beg to confirm exchange of wires:—Received: “Kindly confirm sale of Oatmeal Feed quick.” Sent: “Sorry too late to confirm. Very best could do would be one car at twenty-three. Heavily oversold.”
Also we herewith attach our confirmations of our recent purchase of flour from you. We are pleased to advise the empty bags in which to make shipment of this flour went forward to you last Friday per S.S.J.H. Plummer, and we would caution you to be very careful to number these different bags from the different mills as outlined during the writer’s recent interview with you.
We are sorry you did not wire us on Saturday with reference to the Oatmeal Feed as promised, as we only concluded a sale of Oatmeal Feed at $24 a ton on Saturday afternoon, believing you were not going to be able to handle same.
We are now asking everybody $24.00 and confining our sales to small lots in mixed cars, as we are so heavily oversold we cannot take care of any more straight cars, neither do we hope to be able to do so much before the 1st January.
Yours truly,
The OGILVIE FLOUR MILLS CO., LTD.
J.E. Weeks,
General Sales Agent.
Enclosed in letter of 23rd October, 1916.
Order No. 279.
Original Oct. 14th, 1916.
The Ogilvie Flour Mills Co. Limited,
Purchasing Department, Montreal, Que.
To Morrow Cereal Co., Toronto.
We beg to confirm purchase of the following goods:—
Quantity 10,000 bags
of 90% Patent Ont. Winter Wheat Flour, at seven dollars cents per barrel of 196 pounds.
Inspection usual.
Delivery November.
Basis of purchase f.o.b. Mill Montreal Bulk.
Ship to Ogilvie’s City Mill Sdg., Montreal.
Per Grand Trunk delivery.
Terms cash on acceptance of goods.
Payment in....................funds.
Special terms (if any).
Buyers to have privilege of inspecting cars before paying draft.
Your confirmation of sale No. 1553.
The OGILVIE FLOUR MILLS CO. LIMITED.
Per……………………………................................
[Page 407]
Please quote above Order No. on your invoice. Goods bought on grade, or sample, not accompanied by official inspection certificate, must be subject to our examination before payment of draft.
Enclosed in letter of 23rd October, 1916.
Order No. 280.
Original Oct. 13th, 1916.
The Ogilvie Flour Mills Co., Limited.
Purchasing Dept., Montreal, Que.
To Morrow Cereal Co., Toronto.
We beg to confirm purchase of the following goods:—
Quantity 10,000 bags
of 90% Patent Ont. Winter Wheat Flour at seven dollars and five cents per barrel of 196 pounds. Inspection usual. Delivery 6,000 bags in Oct. 4,000 bags in Nov. Basis of purchase f.o.b. Mill Montreal Bulk.
Ship to Ogilvie’s City Mill Sdg., Montreal.
Per Grand Trunk delivery.
Terms cash on acceptance of goods.
Payment in........................funds.
Special terms (if any).
Buyers to have privilege of inspecting cars before paying draft.
Your confirmation of sale No. 1552.
The OGILVIE FLOUR MILLS CO. LIMITED.
Per.........................................................
Please quote above order No. on your invoice. Goods bought on grade, or sample, not accompanied by official inspection certificate, must be subject to our examination before payment of draft.
On receipt of the foregoing the appellant wired as follows:—
Toronto, Ont., Oct. 24, 1916.
The Ogilvie Flour Mills Co. Ltd.
Montreal, Que.
Your acceptance of flour received this morning twelve days after our offer sorry too late heavily oversold.
MORROW CEREAL CO.
To this respondent same day replied as follows:—
Montreal, Que., Oct. 24, 1916.
Morrow Cereal Co.,
Toronto, Ont.
What does your telegram of even date mean? We do not understand it.
The OGILVIE FLOUR MILLS.
The respondent brought this action on the 7th November, 1916, founded upon part or whole of the foregoing if applicable.
[Page 408]
The respondent contends that the appellant’s messages from Toronto to Weeks form the contract, when read in light of the conversations had between him and Weeks.
Obviously it would have some difficulty in making thereout alone a contract complying with the Statute of Frauds and it falls back upon the confirmation of the contract sent by appellant directly to the respondent at Montreal. If there were nothing more in the case, as the courts below evidently have held, there might not be much difficulty in respondent’s way. But there are a number of things in the conversations leading up thereto in regard to which the appellant and Weeks differ.
I shall not dwell thereon for I cannot, in my view of the whole case, get rid of the opinion I have formed that the letter of the respondent and the enclosures therein which are specificially referred to as
our confirmation of our recent purchase of flour from you
were intended to form part of the contract from respondent’s point of view as originally conceived.
It was clearly the result of the well understood mode of doing business between them that each party should so express its understanding in writing otherwise no such communications would have been resorted to or have existed.
But for some such system the obvious result would be, that he, sending a telegram or letter merely as result of a prior oral bargain, would be bound in law, whilst the other would not.
It is idle to argue that such contracts are possible and that such a one-sided method of bargaining often does occur.
It is not a method, I imagine, of very extensive use.
[Page 409]
It is too absurd for business men dealing in commodities of daily fluctuating value to act upon as a rule.
However all that may be with others, I am clearly of the opinion that such loose methods of business formed no part of the daily method followed by those litigants.
The appellant, in compliance with the sane and safe way, did not treat his telegram to Weeks as ending the business, but sent the confirmatory and explicit statement of the contract to the respondent’s head office in Montreal, and its replies thereto set forth in the enclosures of 13th and 14th October respectively were doubtless framed on the days they bear date for the purpose of being despatched to the appellant but by some oversight were delayed until Weeks had returned to Montreal and happened to observe the omission when attending to another proposal which takes up a great part of his letter but has no bearing on that in question herein.
By that time it was too late, but none the less it was so begotten of their common understanding or system adopted to express a part of an intended contract that they were sent forward as a matter of course.
It is stoutly argued that they neither formed a part of the contract now in question nor even were so intended.
I cannot agree therewith; or rather, I should say, they ought to have formed part thereof if properly framed and sent in due time.
It is not pretended that the respondent can insist on the maintenance of such contracts if their confirmations such as I indicate were respectively a necessary part thereof. The fluctuating market did not permit of any such suspense or delay.
[Page 410]
Moreover, there is a clear departure from the express terms of the appellant’s confirmatory expression of the contract as he understood it.
These points I need not elaborate. They are self-evident to any one closely analyzing each party’s confirmations and comparing same.
The result is, in my view, there never was a contract and many other points made and argued at length need not be considered.
The appeal should be allowed with costs.
ANGLIN J.—The evidence of the two witnesses who gave oral testimony about the contracts sued upon is so contradictory that, unless the documents in the record are decisive, the truth of one story or the other must be determined by their respective inherent probabilities or by the comparative credibility of the witnesses. The defendant’s witness—he is in fact the defendant—asks us to believe that two writings, each headed “confirmation of sale” and otherwise in the form of a sale note, were merely offers and were sent pursuant to an understanding with the plaintiff’s witness that they should be so treated by the plaintiff. This ex facie improbable story is denied by the plaintiff’s witness, who, in turn, asks us to accept his statement that two other writings, which he calls in his letter
our confirmations of recent purchase,
and on their face purport to be such—giving the full particulars of bought notes—were sent not to complete the contracts which they evidence but merely to give the defendant the number by which those contracts would be designated in the plaintiff’s records—a story perhaps not quite so improbable as that of the defendant’s witness, but undoubtedly not free from difficulty.
[Page 411]
On the whole, with Mr. Justice Riddell, I cannot say that the trial judge was wrong in accepting the plaintiff’s version that two contracts had been concluded between Weeks and Morrow as a result of conversations on the train and by telephone and telegrams, of which the documents above referred to were, as they purport to be, merely confirmations.
I think the trial judge must have thought Weeks’ testimony more credible than Morrow’s. One or two incidents in the course of the trial indicate that Morrow’s manner of giving evidence and the unsatisfactory character of his answers impressed the learned judge unfavourably.
I think it might well be regarded as “a rash proceeding” on our part, under the circumstances of this case, to reverse the finding of the judge who tried it and saw the witnesses who are in conflict in the witness-box, affirmed as it is by the majority of the judges of the appellate court. Nocton v. Ashburton. While I fully appreciate the right of appeal from the finding of a trial judge on fact as well as law so much insisted upon by Meredith C.J.C.P. in his dissenting judgment, his views seem scarcely in accord with very recent statements by their Lordships of the Judicial Committee of the duties of an appellate court in dealing with such an appeal. In Ruddy v. Toronto Eastern Ry. Co, speaking of the judgment of a trial judge their Lordships say:—
From such a judgment an appeal is always open, both upon fact and law. But upon questions of fact an appeal court will not interfere with the decision of the judge who has seen the witnesses and has been able, with the impression thus formed fresh in his mind, to decide between their contending evidence, unless there is some good and special reason to throw doubt upon the soundness of his conclusions.
In Wood v. Haines, their Lordships said at page 586:—
[Page 412]
It must be an extraordinary case in which the appellate tribunal can accept the responsibility of differing as to the credibility of witnesses from the trial judge who has seen and watched them whereas the appellate judge has no such advantage.
There remains to be considered the cross-appeal by which the plaintiffs seek a restoration of the assessment of damages made by the learned trial judge which was set aside by the Appellate Division. The learned appellate judges hold that the sum allowed was excessive but do not state the error in which the trial judge, in their opinion, fell and advisedly refrain from indicating the measure of damages to be applied on the reference which they direct. I am, with respect, of the opinion that the award of damages by the trial judge should not have been disturbed and I cannot but think it unwise, to say the least, and calculated unduly to prolong litigation, to leave a referee without any guide as to the proper basis on which to assess the damages when, as here, an appellate court holds that the trial judge was in error as to the principle upon which they should be assessed and that principle is so clear as the learned judges of the Appellate Division apparently thought it.
The trial judge allowed the plaintiffs the difference between what it actually cost them to procure flour to replace what the defendants had failed to deliver and what it would have cost at the contract prices. The latter was $7.05 per barrel for 6,000 bags to be delivered before the 1st of November, and for 4,000 bags, $7.05, and for 10,000 bags, $7 per barrel, to be delivered before the 1st of December. The defendants repudiated their contracts on the 24th of October. The first evidence of any election by the plaintiffs to accept this repudiation and put an end to the contracts is furnished by the commencement of this action on the 7th of November.
I agree with the statement made by counsel for the
[Page 413]
defendants in their factum that the correct rule as to the measure of damages under these circumstances is stated, by Lord Esher M.R. in Roth & Co. v. Taysen, in these terms:—
When there was a repudiation of a contract for the purchase and sale of goods treated as a breach the difference between the contract price and the market price of the goods on the date of the breach was the measure of damages, subject to this, that if the date of the breach was not the day of delivery another rule applied. In this latter case repudiation when accepted was treated as a breach of the contract before the day of delivery, and the damages would not be the difference between the contract price and market price on the day of breach, but must be assessed by the jury having regard to the future day of delivery. But this latter rule was qualified by this, that the plaintiff who had treated the repudiation as a breach was bound to do what was reasonable to decrease the damages.
See also Mayne on Damages, 7th ed., p. 212.
The plaintiffs bought 7,000 bags of flour at $8.10 and 13,000 bags at $8.40 per barrel to replace the flour which the defendants had refused to deliver. As to the 6,000 bags deliverable before the 1st of November, the defendants themselves say in their factum that the Toronto price of flour of the quality contracted for in bags was $8 per barrel at the end of October, to which must be added 15 or 16 cents a barrel for freight to Montreal. They, therefore, can have no cause of complaint as to the purchase made to cover the 6,000 bags then due at $8.10 a barrel.
But they complain of the $8.40 paid for the remaining 13,000 bags. The only evidence of market prices at the end of November is given by John Kennedy and Alex. McLeod. Kennedy says the Toronto Board of Trade quotation at the end of November was $7.65-$7.75 a barrel, to which he would add 15 cents for freight to Montreal. His last transaction, however, was on the 28th of November when he paid $7.90 in Montreal. But McLeod tells us that the prevailing
[Page 414]
price at the end of November was $8.45 a barrel and, giving reasons for the statement, he says that the Toronto Board of Trade quotations are not a fair indication of current prices of flour. The learned trial judge may have preferred to be guided by Mr. McLeod rather than by Mr. Kennedy. If so, it is impossible to say that this was an error on his part. There is nothing to indicate that Mr. McLeod is not a trustworthy and reliable witness. The learned judge saw and heard both witnesses and was in the best position to determine upon which of them he could most safely rely. If, therefore, the damages in respect of the 14,000 bags then deliverable should be fixed as of the 30th of November, the $8.40 a barrel paid for the 13,000 bags now under consideration was five cents less than the market price. In respect of the other 1,000 bags the defendants have the benefit of the earlier purchase of 7,000 bags at $8.10.
There is no evidence that the plaintiffs could have obtained a contract in the interval between the 7th and the 30th of November on any better terms. The burden was upon the defendants to shew that they could, if that were possible. The plaintiffs had all the inconvenience of having to find flour to replace what the defendants failed to deliver, and it is by no means clear that during that period 20,000 bags of flour could be easily picked up on the market. At all events, I know of no principle on which the plaintiffs could have been required to take the risk of purchasing before the 30th of November at a price higher than those named in the contracts thus exposing themselves to loss should the price decline between the dates of such replacing purchases and the 30th of November.
Applying the rule laid down in Roth v. Taysen,
[Page 415]
I think the trial judge, under these circumstances, did right in taking as the measure of the damages sustained by the plaintiffs the amount by which the cost of the flour procured by them exceeded what would have been the cost to them of the like quantity of flour of same quality if delivered by the defendants pursuant to their contracts.
I would, therefore, dismiss the main appeal and allow the cross-appeal, both with costs, and would restore the judgment of the learned trial judge.
BRODEUR J.—The question is whether the appellant undertook to supply the respondent with 20,000 bags of flour. The negotiations were carried out by the appellant himself and Weeks, the sales’ agent of the respondent. They met together on a train going from Montreal to Toronto. After a great deal of talk, it was stated by Weeks that his company would purchase 20,000 bags of flour, 10,000 at $7.05 and the balance at $7, and that with such a quantity they would stay out of the market for a while. Morrow is a large flour merchant in Toronto, and the respondents are likely the most important dealers in that commodity in the country.
The appellant and the respondent are therefore serious competitors and the idea of seeing the Ogilvie company out of the market, and the price of $7.05, were very attractive to the appellant, and he was ready to close at $7.05 for the 10,000 bags, but as the contract had to be made for the whole quantity of 20,000 he would consider the matter and would communicate during the day with Weeks who was going to London, Ontario.
There is some divergence between those two men as to what was their conversation, and if the case had
[Page 416]
to be decided on the oral evidence of those two witnesses the respondent company, being plaintiff and having the onus, must fail. But the trial judge, who saw them both in the box, evidently accepted the statements made by Weeks in preference to those of Morrow. Besides, the written evidence we have shews conclusively that Weeks’ story should be accepted.
During the day, on the 13th of October, 1916, Morrow called Weeks on the telephone and said that he was ready to contract for the 10,000 bags at $7.05, but could not give a definite answer as to the other 10,000 bags. He was asked to put that in writing and sent the following telegram:—
Toronto, Ont., Oct. 13/16.
J.E. Weeks, Esq.,
Tecumseh House, London, Ont.
We confirm sale six thousand bags October shipment four thousand November seven five bulk Montreal also your giving us until to-night on ten thousand more at seven dollars Montreal thanks.
MORROW CEREAL CO.
4.05 p.m.
and the same day he sent a confirmation note of the sale of 10,000 bags to the respondent company itself at Montreal:—
Confirmation of Sale.
Morrow Cereal Company.
Toronto, Oct. 13, 1916.
To Ogilvie Flour Mills, Ltd.
Address: Montreal, Que., via date wanted.
Subject to our terms and conditions—see below:—
Quantity Description Price per bbl.
10,000 98’s 90% Patent $7.05
Ontario Winter Wheat
Flour.
Bulk Basis Montreal.
Date of shipment.
6,000 bags October.
4,000 bags November
10,000 bags.
MORROW CEREAL COMPANY.
Per Morrow.
[Page 417]
In the evening of the same day, Morrow sent to Weeks another telegram closing the sale for the other 10,000 bags in the following words:—
Toronto, Ont., Oct. 13th, 1916.
J.E. Weeks,
Tecumseh House, London, Ont.
Book ten thousand bags seven dollars bulk Montreal October November shipment our option.
MORROW CEREAL CO.
8.17 p.m.
and the next day he sent to the respondent company a confirmation note for that last sale. There again the document is called “confirmation of sale.” Now the defendant, appellant, claims that those sales were made with the condition that the respondents would stay out of the market.
We. do not find that condition in his telegrams and in his confirmation notes. The offer, I understand, made by Weeks to purchase those 20,000 bags of flour was made with that condition and, as a matter of fact, he has stated that they were willing to stay out of the market.
However, the condition, as far as the respondents are concerned, has been fulfilled and there is no necessity for laying any stress upon it. It seems to me, with the evidence we have before us, and especially with the telegrams sent by Morrow and his confirmation notes, that there is no doubt about a contract having been entered into by which Morrow, doing business under the name of Morrow Cereal Company, undertook to ship during October and November 20,000 bags of flour, of which 10,000 was to be at $7 and 10,000 at $7.05.
I understand that it is a custom of trade with those dealers that when they make verbal contracts or agreements by telephone or by telegrams, to exchange confirmation notes. But those confirmation notes do not
[Page 418]
prevent the contract from being made from the time and date at which the agreement has been entered into. They are simply evidence of the contract but do not constitute the agreement itself.
The appellant claimed at first that the contract was at an end because the confirmation note on the part of the Ogilvie Flour Mills Company reached him only the week after. If, of course, those confirmation notes constituted the contract itself, the appellant might be right because on account of the market being so fluctuating an acceptance should be made without unreasonable delay. But then it would have been his duty to state in his telegram or confirmation notes the period during which the acceptance should take place. But no such time limit is to be found in the telegram or in the notes.
Now he says that the acceptance of his alleged offer was not made because the confirmation note of the respondent company instructed to ship to Ogilvie’s City Mill Siding, Montreal, and because the word delivery instead of shipment was used with regard to the months in which it should take place.
There is evidence that with regard to the words delivery and shipment they should be considered as synonomous in the trade; and besides I see that no objection was taken to them when the notes of the respondent company reached Morrow, In fact, the only reason he gave in the telegram of the 24th of October was
Your acceptance of flour received this morning, twelve days after our offer sorry too late heavily oversold.
No objection then as to the word delivery having a different meaning from the word shipment. I am sure that this point is the result of an afterthought.
As to the instructions to ship to the Ogilvie’s City
[Page 419]
Mill Siding, of course that would be a very serious objection if it would incur on the part of the appellant heavier responsibility. But it appears by the evidence that in shipping to that siding it would not cost him one cent more. That should be treated then simply as instructions as to delivery which would not affect the nature of the obligation of the vendor and would not increase his work.
The trial judge maintained the action and gave judgment for a fixed sum of money. His judgment was confirmed by the Appellate Division, but a reference was ordered to ascertain the amount of damages suffered by the plaintiff. In that regard there is a cross-appeal by the respondents. I would be of opinion to maintain this cross-appeal for the reasons given by my brother Anglin.
The appeal is dismissed with costs and the cross-appeal maintained with costs and the judgment of the trial judge restored.
Falconbridge C.J. concurs with Mr. Justice Anglin.
Appeal dismissed with costs;
cross-appeal allowed with costs.
Solicitors for the appellant: Miller, Ferguson & Hunter.
Solicitors for the respondents: Thomson, Tilley & Johnston.
41 Ont. L.R. 58; 39 D.L.R. 463.
116 L.T. 257, 258; 33 D.L.R. 193.
38 Ont. L.R. 583; 33 D.L.R. 166, 169.
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