Queen v. Cognos Inc.,  1 SCR 87 was an interesting case involving negligent statements.
This is important because fraud is very difficult to prove, and the courts will impose financial penalties upon a litigant who alleges fraud yet fails to prove fraud at trial.
It is noteworthy that although fraud may offer the ultimate remedy in law, it is far from a “win-win” situation. The successful plaintiff may find that there are no funds available to satisfy his Judgment. It is not possible to obtain insurance to protect oneself against fraud. Without insurance, the Judgment may go unpaid.
It would be a much better strategy from the plaintiff’s perspective to merely allege “negligence” in the making of a statement. This is a step down from fraud, and if successful, the defendant’s insurer will have to pay the claim.
The Court applied the following test for the plaintiff to meet and be successful in a claim for negligent misrepresentation:
• the Defendant owes the plaintiff a duty of care based on a “special relationship”;
• the Defendant made statement(s) to plaintiff that were untrue, inaccurate or misleading;
• the Defendant acted negligently in making the statement(s);
• the Plaintiff reasonably relied on the statement(s); and
• the Plaintiff sustained damages as a result.”
In essence, that’s the law of negligent misrepresentation. It is a doctrine based in tort not contract.
The doctrine was first established in England in Hedley Byrne v. Heller and Partners (1964) and has been adopted by our Courts.
There are numerous cases dealing with the effect and implications of a contract dealing with or arising out of the same fact situation. The contract may certainly have a bearing on the tort remedies, although the Supreme Court of Canada has confirmed that an action can be framed in both tort and contract, and the plaintiff is only put to his election in terms of the case at the conclusion of the trial.
Brian Madigan LL.B., Broker