A review of the test for a negligent misrepresentation claim may be read here.

Cognos & Disclaimer Clause

Queen v Cognos is the well-known 1993 Supreme Court of Canada decision which allowed the tort claim of negligent misrepresentation based on oral statements as to the terms of employment. The tort claim was allowed, notwithstanding an employment contract which had limited the notice period.

The issue arises as to what impact a disclaimer clause denying such representations may have upon this tort claim. This issue was reviewed by the Ontario Court of Justice by Warren, J. in Horton v Rio Algom, a 1995 decision of the Ontario Court of Justice.

Horton had alleged that the employer had verbally promised employment until his date of retirement, some 36 years into the future. The court reviewed this issue and considered the consequence of a disclaimer clause upon such a claim.

It concluded that where the disclaimer clause denies oral representations that led to its creation, no claim could be made on pre-employment representations. Such was the case in Steele v SNC, 41 CCEL 257. ¹ A representation cannot be actionable where the written agreement contradicts the oral statement upon which the misrepresentation action is based.

In Horton, the court concluded that the existence of an employment contract was not a bar to the tort claim where the pre-contractual representations did not become an express term of the contract itself. This was the case in Queen v Cognos where the pre-contractual representations, such as funding for the new software project for which Queen was hired, were not addressed in the employment contract.

The contract, however, even where it does not speak to the subject of the alleged misrepresentation, may still offer a general disclaimer. In Queen v Cognos, McLachlin J. noted that a court would need to review a disclaimer clause to determine if it adequately negated a duty of care. The alleged disclaimers in Cognos did not do so. It was noted in Cognos that the leading case on negligent misrepresentation, Hedley Byrne v Heller, the defence of the disclaimer clause ruled the day.

The differing impacts that an employment contract may have on such a tort claim were described in Cognos. The employment contract limiting the severance sum payable likely is of no consequence, however, the disclaimer clause may have legs:

 The trial judge found, as a fact, that misrepresentations -- both express and implied -- were made to the appellant and that he relied upon them, reasonably I might add, to his eventual detriment.  In all the circumstances of this case, I agree with the trial judge that these misrepresentations were made by Mr. Johnston in a negligent manner.  While a subsequent contract may, in appropriate cases, affect a Hedley Byrne claim relying on pre-contractual representations, the employment agreement signed by the appellant is irrelevant to this action.  In particular, clauses 13 and 14 of the contract are not valid disclaimers of responsibility for the representations made during the interview.

The Supreme Court in Cognos found that the severance term in the agreement was of no consequence to the claim. The Ontario Court of Appeal had found that the misrepresentation was not actionable and in any event, the contract term effectively negated the tort claim.

The Supreme Court concluded that the severance term in the employment contract went to the issue of the security of employment and in the action the misrepresentation focused on the nature of the position which had been offered. For this reason, the contractual provision had no impact on the tort action:

Had the appellant's action been based on pre‑contractual representations concerning the length of his involvement on the Multiview project or his "job security", as characterized by the Court of Appeal, the concurrency question might be resolved differently in light of the termination and reassignment provisions of the contract.  However, it is clear that the appellant's claim was not that Mr. Johnston negligently misrepresented the amount of time he would be working on Multiview or the conditions under which his employment could be terminated.  In other words, he did not argue that the respondent, through its representative, breached a common law duty of care by negligently misrepresenting his security of employment with Cognos. Rather, the appellant argued that Mr. Johnston negligently misrepresented the nature and existence of the employment opportunity being offered.  It is the existence, or reality, of the job being interviewed for, not the extent of the appellant's involvement therein, which is at the heart of this tort action.  A close reading of the employment agreement reveals that it contains no express provisions dealing with the respondent's obligations with respect to the nature and existence of the Multiview project.

Presumably had the employment contract stated that there was no guarantee that the Multiview project was funded and ready to proceed, the tort action would have failed.

The relevant clauses of the employment agreement in Cognos read as follows:

TRANSFER

13.Quasar Systems reserves the right to reassign you to another position with the Company without reduction of your salary or benefits and upon one month's notice to you.  Should such reassignment require your permanent relocation to another city, the Company will reimburse you for your expenses in accordance with the then current relocation policy.

TERMINATION NOTICE ‑‑ ONE MONTH

14.This Agreement may be terminated at any time and without cause by Quasar Systems Ltd. or by you.  In the event of termination, Quasar Systems Ltd. will give you one month's notice of termination plus any additional notice that may be required by any applicable legislation.  Similarly, you shall give Quasar Systems Ltd. one month's notice if you voluntarily terminate this Agreement.  Quasar Systems Ltd. may pay you one month's salary in lieu of the aforesaid notice in which event this Agreement and your employment will be terminated on the date such payment in lieu of notice is made.

Contemporaneously with the Cognos decision, the Supreme Court released its decision in BG Checo v BC Hydro.

This case involved an issue as to concurrent liability in tort and contract. On the issue of the impact of a contractual term on a tort claim when the subject matter of the tort action is referenced in the contract, the Court stated that the wording of the contractual term may limit or disclaim the right to sue in tort. The tort claim is not eliminated simply by the subject matter of the tort claim being addressed in the contract, but rather the contractual term may limit the ambit of the tort duty or waive the right to sue in tort.

Had the Cognos agreement specifically stated that there was no guarantee of funding for the Multiview project, this would have fallen into the protection of these words. A specific disclaimer clause would, nonetheless, appear to be the draftsman’s objective:

  Iacobucci J. concludes that a contract between the parties may preclude the possibility of suing in tort for a given wrong where there is an express term in the contract dealing with the matter.  We would phrase the applicable principle somewhat more narrowly.  As we see it, the right to sue in tort is not taken away by the contract in such a case, although the contract, by limiting the scope of the tort duty or waiving the right to sue in tort, may limit or negate tort liability.