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Does the Duty to Inform Apply Solely to the Contracting Parties?

Posted in Case Comments, Contracts
Gabrielle BaracatPaul Blanchard

In Camions Daimler Canada ltée v. Camions Sterling de Lévis inc., 2017 QCCA 798, the Quebec Court of Appeal confirmed that the duty to inform that exists between contracting parties, which has been recognized as a general principle of Quebec contractual law since the early 1980s, may also apply to third parties, insofar as they might be impacted by the contractual relationship.

Background

A dispute arose from the unilateral termination of a dealership contract by the Appellant, Camions Daimler Trucks Canada Ltée (“Daimler”). The dealer, the respondent Camions Sterling de Lévis Inc. (“Lévis”), operated a dealership for Sterling brand trucks, which were manufactured by Daimler. In October 2008, Daimler informed all North American Sterling truck dealerships that they would cease manufacturing Sterling trucks. Daimler offered to a number of dealerships the opportunity to convert their business into a parts and services business for Sterling brand trucks, which Lévis did.  A new Service Agreement was signed in October 2009 by Daimler and Lévis. This new Service Agreement had an indefinite term, but provided that Daimler could unilaterally terminate it at any time, on a 30 days written notice.

In June 2010, respondent Pierre Corriveau (“Corriveau”), the sole shareholder of the third respondent, Centre de l’Auto St-Nicolas Inc. (“St-Nicolas”), signed a letter of intent for the purchase of all shares of Lévis. Corriveau had been involved, for many years, in the management of Lévis, and as such, was well aware of the business. To finalize this transaction, Corriveau contacted a representative of Daimler, as the Service Agreement required the dealership approval for any change in the share ownership of Lévis. Upon Daimler’s approval, St-Nicolas became the sole shareholder of Lévis, and a new Service agreement, identical to the one signed in 2009, was signed in November 2010 between Lévis and Daimler. In December 2011, however, Daimler sent a written notice of termination to Lévis. The Service agreement was officially terminated in July 2012.

St-Nicolas, Lévis and Corriveau filed a recourse in damages against Daimler. St-Nicolas claimed damages for the loss on its investment, whereas Corriveau claimed damages for trouble and inconvenience. Alternatively, Lévis was claimed for the loss of profit.

The Quebec Superior Court granted St-Nicolas and Corriveau’s claims and awarded damages to both . The Court found that Daimler failed to inform Lévis and Corriveau of material information that would have had crucial impact on their decision to complete the transaction for the purchase of Lévis’ shares. In fact, the evidence showed that Daimler knew as soon as 2009 that they would be reducing the number of dealerships over time. They also did not inform any of the respondents that a new monitoring program, recently put in place, made the termination of the agreement more than probable in the near future. Even if there was no contractual relationship between Daimler, St-Nicolas and Corriveau, a duty to inform still arose and Daimler had the obligation to give them relevant and accurate information in order for them to make an informed decision.

Court of Appeal Decision

The Court of Appeal affirmed the Superior Court decision and confirmed that a duty to inform may arise independently of a contractual relationship. The Court reiterated that the duty to inform exists when:

  1. There is crucial information that would play a role in a party’s decision;
  2. The information is known or presumed to be known by the debtor of the duty to inform;
  3. The creditor of the duty to inform does not and cannot know the information;
  4. The information is not one that the creditor of the duty to inform could have access to by exercising care and due diligence.

The Court of Appeal stated that the duty to inform is not limited to the contracting parties as it is a component of the duty of good faith, which applies in contract law pursuant to article 1375 of the Civil Code of Quebec (“CCQ”), and is also a guiding principle of Quebec civil law in general under articles 6, 7 and 1457 CCQ. The Court of Appeal cited the Supreme Court of Canada decision in Bank of Montreal v. Bail Ltée [1992] 2 S.C.R. 554 as authority. This duty applies every time a contractual relationship could have an important impact on a third party.

The Court of Appeal held that in allowing the transaction to go forward and by not informing the respondents of crucial information that was and could only be known by them, Daimler breached its duty. Daimler had the obligation to provide the respondents with all of the relevant information to enable them to make an informed decision, which they failed to do. As such, Daimler was found liable for any damages suffered by the respondents as a result of the termination of the contractual relationship.

Implications

This decision confirms that the duty to inform can apply in a wide range of situations and relationships. Businesses in Quebec must keep in mind that even outside of  a contractual relationship, they owe a duty to act with good faith, care and diligence in the exercise of their rights.

Case information

Camions Daimler Canada ltée c. Camions Sterling de Lévis inc., 2017 QCCA 798

Docket : 200-09-009151-157

Date of Decision : May 15, 2017