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CITATION: National Logistics v.

American Eagle Outfitters Canada, 2012 ONSC 384


COURT FILE NO.: 6868/08
DATE: 20120119

RE:

NATIONAL LOGISTICS SERVICES (2006) INC., FORMERLY KNOWN AS


6510965 CANADA INC., Plaintiff
AND:
AMERICAN EAGLE OUTFITTERS CANADA CORPORATION and
AMERICAN EAGLE OUTFITTERS, INC., Defendants

BEFORE:

HOURIGAN J.

COUNSEL: Cameron D. Neil, Counsel for the Plaintiff


Evan Thomas, Counsel for the Defendants
HEARD:

JANUARY 16, 2012


ENDORSEMENT

Introduction
[1]

The defendants American Eagle Outfitters Canada Corporation (AE Canada) and

American Eagle Outfitters, Inc. (AEO) bring this motion for summary judgment. The plaintiff
National Logistics Services (2006) Inc. (NLS) asserts three distinct claims against the
defendants. First, it brings a claim for contractual shortfall penalties as a result of reduced
shipping volumes through NLSs distribution centre during the last six months of a logistics
contract. Second, it makes a claim for misrepresentation. Third, it brings a claim for breach of a
duty of good faith, communication and fair dealing.
[2]

The motion for summary judgment was brought on March 6, 2009. This motion was

not returnable until January 10, 2012, almost three years after the commencement of the motion.
Factual Background
[3]

AE Canada is a Nova Scotia corporation registered in Ontario and is a wholly owned

2012 ONSC 384 (CanLII)

SUPERIOR COURT OF JUSTICE - ONTARIO

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subsidiary of AEO. AE Canada owns and operates retail clothing stores throughout Canada
under certain brands owned by AEO.

AEO is a Delaware corporation headquartered in

Pittsburgh, Pennsylvania. NLS is a federal corporation carrying on business as a third party

[4]

On February 28, 2006, AE Canada sold to the plaintiff the assets used in its national

logistics services division, including a distribution warehouse facility located at 3105 Dixie
Road, Mississauga, Ontario (the Dixie Facility). At the time of the asset sale, the plaintiff was
known as 6510965 Canada Inc. It subsequently changed its name to NLS.
[5]

As part of the asset sale, AE Canada entered into a Logistic Services Agreement with

NLS effective February 8, 2006 (the Logistics Agreement).

The Logistics Agreement

provided that NLS would supply warehouse distribution and transportation services to AE
Canada throughout all of the provinces of Canada.
[6]

The initial term of the Logistics Agreement was 23 months, commencing February 28,

2006 and running to January 31, 2008. AE Canada had an option to renew the Logistics
Agreement for two further six month terms at its sole discretion. NLS did not enjoy the option
of a renewal under the Logistics Agreement. The agreement was terminable by either party at
any time on 180 days prior written notice, but the termination clause could not be invoked by
either party within the first 18 months of the contract.
[7]

The Logistics Agreement contained an entire agreement clause as follows at article

11.4:
This Agreement constitutes the entire agreement between the parties with respect to its
subject matter and cancels and supercedes any prior understandings and agreements
between the parties with respect to such subject matter. There are no representations,
warranties, terms, conditions, undertakings or collateral agreements express, implied or
statutory, between the parties other than as expressly set forth in this Agreement.

[8]

In article 11.5 it was expressly provided that no amendments or modifications of the

Logistics Agreement were binding unless they were made in writing and duly executed by both
parties:

2012 ONSC 384 (CanLII)

logistics supplier.

[9]

Also important for the purposes of this motion is Schedule C to the Logistics

Agreement. Pursuant to that schedule, NLS had a right to charge a shortfall penalty to AE
Canada on the following terms:
In the event that unit volumes are less than 10,400,000 units shipped by the end of each
full Client fiscal year, the Provider reserves the right to charge the Client on the
shortfall difference at the rate of 37.5 cents per unit, provided, however, that no
shortfall penalty may be charged by the Provider in respect of any time period less than
a full Client fiscal year.

[10]

On or about April 12, 2007, the plaintiff received confirmation from Steve Lyman,

AEOs Vice-President, Retail Distribution, that it would be transitioning out of the Dixie Facility
in favour of its own in-house distribution centre. Mr. Lyman informed NLS that AE Canada
would renew the Logistics Agreement for one six month term and that by July 31, 2008, at the
latest, it would no longer be requiring logistic services from the plaintiff.
[11]

On June 30, 2008, NLS issued an invoice to AE Canada for shortfall penalties under the

Logistics Agreement totalling $738,963.23, inclusive of taxes. The invoice was based on a six
month period from March 1, 2008 to August 31, 2008. During the course of this motion NLS
conceded that the shortfall calculation should have ended on July 31, 2008, being the date of
termination of the Logistics Agreement.
[12]

AE Canada has taken the position that it is not required to pay the shortfall penalty

because NLS had no right to charge a shortfall penalty for a period less than AE Canadas full
fiscal year. There is no dispute between the parties that AE Canada has paid all other amounts
validly invoiced by NLS.
[13]

In addition to its contractual claim, NLS has also asserted a claim in this proceeding

alleging negligent misrepresentation. The plaintiff alleges that the first misrepresentation was
made by the defendants while they were negotiating the sale of the Dixie Facility when they

2012 ONSC 384 (CanLII)

No modification of or amendment to this Agreement shall be valid or binding unless in


writing and duly executed by both of the parties and no waiver of any breach of any
term or provision of this Agreement shall be effective or binding unless made in
writing and signed by the party purporting to give the same and, unless otherwise
provided, shall be limited to the specific breach waived.

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represented that they had no intention of in-sourcing a distribution centre in the Canadian
marketplace (the Pre-contractual Representation).

The plaintiff alleges that a similar

misrepresentation was made in December of 2006 when they received information that AE

defendants advised them that they had no intention of in-sourcing a distribution facility in
Canada and were simply investigating, as part of their ongoing due diligence, to be able to satisfy
themselves that the rates being charged by NLS were reasonable (the December 2006
Representation). Finally, the plaintiff alleges that in March of 2007, AEO again denied that it
was working towards establishing an alternative distribution centre (the March 2007
Representation).
[14]

The plaintiff submits that had they known that AEO had not ruled out transitioning out

of the Dixie Facility in a relatively short time frame, they would most likely not have purchased
the business. Moreover, they note that on January 27, 2007, the Dixie Facility was sold to a third
party and NLS entered into a two year lease for the facility with the new owner. NLS argues that
had they known that AEO was actively looking elsewhere for a distribution centre and taking
steps to in-source its logistics services, they would not have entered into a two year lease for the
premises.
[15]

The defendants submit that the claim regarding the December 2006 Representation was

not asserted in the original statement of claim but was added in an amended claim in August
2009 subsequent to the commencement of this motion. The defendants argue that given that the
plaintiffs knew as of the middle of April 2007 that the defendants were going to be opening their
own Canadian distribution centre, that claim for misrepresentation is statute barred given that it
was made more than two years after the cause of action arose. They also assert, as described
below, that the representations are not actionable.
[16]

The plaintiff also makes a claim for breach of duty of good faith communication and

fair dealing. The plaintiff submits that there were representations during negotiations with
respect to AEOs long-term commitment to the Dixie Facility and NLS, which were repeated at
pivotal points in NLSs business planning. The plaintiff alleges that AEO knew that NLS was
expecting and depending on there being a long-term relationship and alleges that AEO fostered

2012 ONSC 384 (CanLII)

Canada was looking to establish its own distribution centre. Specifically, they allege that the

5
that expectation. The plaintiff submits that AEO deliberately undermined those reasonable
expectations.

(a) Summary Judgment Test


[17]

In Combined Air Mechanical Services Inc. v. Flesch, 2011 ONCA 764, our Court of

Appeal developed the Full Appreciation Test. This case was the first comprehensive review of
the changes made to the summary judgment rule effective January 1, 2010.
[18]

The court identified the following classes of cases as generally appropriate for the

utilization of the summary judgment rule: (i) where the parties agree it is appropriate to
determine an action by way of a motion for summary judgment; (ii) where a claim or defence is
without merit; and (iii) where the trial process is not required in the interests of justice (See
paragraphs 40-44 of Combined Air).
[19]

The test is enunciated by the court is as follows (at paragraph 50):


Housen, at paras. 14 and 18, such as total familiarity with the evidence, extensive exposure to
the evidence, and familiarity with the case as a whole, provide guidance as to when it is
appropriate for the motion judge to exercise the powers in rule 20.04(2.1). In deciding if these
powers should be used to weed out a claim as having no chance of success or be used to resolve
all or part of an action, the motion judge must ask the following question: can the full
appreciation of the evidence and issues that is required to make dispositive findings be achieved
by way of summary judgment, or can this full appreciation only be achieved by way of a trial?

[20]

The court provided examples of when summary judgment should generally be utilized

(e.g. document-driven cases with limited testimonial evidence, limited contentious factual issues,
and/or a record that can be supplemented, at the motion judges direction, by hearing oral
evidence). It also provided examples of when the summary judgment should generally not be
granted (e.g. cases involving multiple findings of fact, conflicting evidence, numerous witnesses,
and/or a voluminous record) (See Combined Air paragraphs 51-52).
[21]

The court cautions that being knowledgeable of the entirety of the motion record does

not necessarily equate with fully appreciating the evidence and issues, at paragraphs 53-55:
The full appreciation test requires motion judges to do more than simply assess if they are capable

2012 ONSC 384 (CanLII)

Analysis

... a motion judge is required to assess whether the attributes of the trial process are necessary to
enable him or her to fully appreciate the evidence and the issues posed by the case. In making this
determination, the motion judge is to consider, for example, whether he or she can accurately
weigh and draw inferences from the evidence without the benefit of the trial narrative, without the
ability to hear the witnesses speak in their own words, and without the assistance of counsel as
the judge examines the record in chambers
... Unless full appreciation of the evidence and issues that is required to make dispositive findings
is attainable on the motion record as may be supplemented by the presentation of oral evidence
under rule 20.04(2.2) the judge cannot be satisfied that the issues are appropriately resolved
on a motion for summary judgment.

[22]

This is the test which I must utilize in determining whether this is an appropriate case to

grant summary judgment in whole or in part.


(b)
[23]

Contract Claim

As noted above, the plaintiff asserts a claim for shortfall penalties under the Logistics

Agreement.
[24]

The plaintiff urges that I imply a term into the agreement that would provide for a

short-fall penalty in a stub year. It submits that the defendants interpretation of the contract is
invalid as it is contrary to the intentions of the parties and contrary to commercial reason and
common sense.
[25]

As Justice Iacobucci made clear in MJB Enterprises Ltd. v. Defence Construction

(1951) Ltd. [1999] 1 S.C.R. 619, the court should only intervene to find implied contractual
terms in very limited circumstances (at paragraph 29):
As mentioned, LeDain J. stated in Canadian Pacific Hotels Ltd., supra, that a contractual term
may be implied on the basis of presumed intentions of the parties where necessary to give
business efficacy to the contract or where it meets the officious bystander test. It is unclear
whether these are to be understood as two separate tests but I need not determine that here. What
is important in both formulations is a focus on the intentions of the actual parties. A court, when
dealing with terms implied in fact, must be careful not to slide into determining the intentions of
reasonable parties. This is why the implication of the term must have a certain degree of
obviousness to it, and why, if there is evidence of a contrary intention, on the part of either party,
an implied term may not be found on this basis. As G. H. L. Fridman states in The Law of
Contract in Canada (3rd ed. 1994), at p. 476:

2012 ONSC 384 (CanLII)

of reading and interpreting all of the evidence that has been put before them

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In determining the intention of the parties, attention must be paid to the express terms of
the contract in order to see whether the suggested implication is necessary and fits in with
what has clearly been agreed upon, and the precise nature of what, if anything, should be
implied.

In the case at bar the intentions of the parties are crystal clear. The contract specifically

provides that there can be no shortfall penalty for a stub year. This provision does not strike me
as commercially unreasonable. Where the parties have turned their minds' to an issue and
specifically provided for it in their contract, it is folly for a court to intercede and rewrite the
bargain. In any event, in a commercial transaction it is hardly remarkable that one side or the
other gets the better bargain. It is not the role of the courts to level-out an agreement so that both
parties obtain equal benefit.
[27]

This is precisely the type of case indentified by the Court of Appeal in Combined Air

which can and should be resolved at the summary judgment stage. I am satisfied that there is no
genuine issue on the contract claim which requires a trial. To the contrary, the claim is clearly
without merit and a trial is not necessary for me to have a full appreciation of the evidence and
issues such that I can make a dispositive finding. Accordingly, the summary judgment motion is
granted with respect to the contract claim.
(c) Misrepresentation Claim
[28]

There are three alleged misrepresentation claims which must be analyzed separately

being, the Pre-contractual Representation, the December 2006 Representation and the March
2007 Representation. Before conducting that analysis it is first necessary to consider the
defendants argument that all or part of the misrepresentation claim is statute barred.
[29]

The law is plain that where a claim is asserted against an existing defendant after the

expiry of a limitation period the court must determine whether what is being asserted is in reality
a new claim and thus statute barred or whether the claim relies on facts already pleaded or is a
different legal conclusion drawn from the same set of facts and not statute barred (see Bank of
Nova Scotia v. PCL Constructors Canada Inc, [2009] O.J. 4347 (Master)).
[30]

In the case at bar the original statement of claim contained a claim for general damages.

At paragraph 16 of the claim the plaintiff pleaded American Eagle represented to NLS that the

2012 ONSC 384 (CanLII)

[26]

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distribution Centre at 3105 Dixie Road would be part of its long term strategy, and that
American Eagle would remain for 10 years or more. There is no issue, therefore, that the Precontractual Representation claim was asserted in the original statement of claim and is not statute

[31]

At paragraphs 26, 27 and 28 of the original statement of claim, the plaintiff made

reference to the March 2007 Representation. Again there can be no issue that this claim is
statute barred.
[32]

At paragraph 47 of the original statement of claim the plaintiff pleaded:


NLS pleads that American Eagle owed NLS a duty of care, that it misrepresented its intention to
deal with NLS on a long term basis, essentially leading NLS on, and that NLS relied on such
misrepresentations to its detriment and that NLS suffered damages as a result

[33]

The statement of claim was amended on consent in August of 2009. The amendments

include detailed pleadings with respect to the circumstances surrounding the Pre-contractual
Representation. The facts surrounding the December 2006 Representation were also added to the
claim, as were the details regarding the decision of the plaintiff to enter into the lease on the
Dixie Facility.
[34]

The defendants argue that the December 2006 Representation was added in the

amendments and is thus statute barred. I believe that this is an issue which can be determined on
a motion for summary judgment as it essentially a matter of law and involves a review of both
versions of the statement of claim. This is not like the typical limitations issue where the issue of
discoverability is paramount and a trial is necessary in order to determine whether the plaintiff
knew or ought to have known about the existence of its claim.
[35]

The original statement of claim contained a broad claim of misrepresentation in

paragraph 47 to the effect that the defendants had led them on with respect to their intentions
about the Dixie Facility.

It is true that there is no specific reference to the December 2006

Representation in that paragraph, but I construe the language in paragraph 47 as being broad
enough to encompass any one of a number of misrepresentations alleged to have been made
during the course of the parties business relationship, including the December 2006

2012 ONSC 384 (CanLII)

barred.

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Representation.
[36]

I conclude that there is no genuine issue requiring a trial on the issue of the

is not statute barred as the amendments to the statement of claim simply fleshed out the
misrepresentation claim which had already been asserted.
[37]

Turning now to the other arguments made by the defendants regarding the

misrepresentation claim, I focus first on the Pre-contractual Representation. The defendants


submit that the claim is barred because the Logistics Agreement contained an entire agreement
clause. In making that argument they rely upon the decision of Justice Hainey in McNeely v.
Herbal Magic Inc., 2011 ONSC 4237.
[38]

In the McNeely case Justice Hainey reviewed the law regarding the intersection of pre-

contractual misrepresentations and entire agreement clauses:


[17]
However, the defendants argue that Canadian courts have consistently held that where
sophisticated commercial parties negotiate contracts containing entire agreement clauses that
specifically preclude reliance on representations, such clauses are a complete defence to
negligent misrepresentation claims and it is not necessary that the clauses contain an explicit
reference to negligence in order to preclude an action for negligent misrepresentation. In support
of this position, the defendants rely upon the decision of Ronald Elwin Lister Ltd. v. Dunlop
Canada Ltd., where the plaintiffs claim for negligent misrepresentation and a collateral warranty
was dismissed because of an entire agreement clause in the contract which excluded liability as
follows:
Dunlop and the Dealer agree that, except as herein expressly stated, no representation,
statement, understanding or agreement has been made or exists, either oral or in writing
which imposes any liability upon Dunlop in connection with this Agreement.
[18]
In Dunlop, the plaintiffs sought to enforce a number of pre-contractual representations
and assurances as to the profitability and nature of the business that had been given by
representatives of the defendant prior to entering into a franchise agreement for a retail business.
Rutherford J. dismissed the claim relying on the entire agreement clause as follows:
There is one aspect of the present case, however, which in my view is fatal to the
plaintiffs claim for damages for negligent misrepresentation. I have already stated my
finding that cl. II of the franchise agreement was effective, in the circumstances of this
case, to exclude contractual liability upon Dunlop arising from the express terms of that
document. I have further come to the conclusion that cl. II was effective to exclude
liability for negligent misrepresentation as well.

2012 ONSC 384 (CanLII)

applicability of the Limitations Act defence. I find that the December 2006 Representation claim

10

[19]
The entire agreement clauses in this case specifically refer to all prior agreements,
understandings, representations or warranties, negotiations and discussions, whether oral or
written, among the Parties hereto. In my view, the clauses demonstrate that the parties intended
that the written agreements represented their entire agreement notwithstanding any prior oral
representations or discussions regarding the subject matter of the agreements. Rutherford J.s
reasoning in the Dunlop case applies equally to the facts of this case and I find that a
commercially reasonable interpretation of the entire agreement clauses precludes a negligent
misrepresentation claim based upon any pre-contractual discussions, including Mr. Belzbergs
statements to Mr. McNeely.

[39]

I concur with the analysis of Justice Hainey in the McNeely case. Where two

sophisticated parties enter into a business deal and specifically indicate that they are not relying
on any pre-contractual misrepresentations and that the written agreement represents the sum total
of their understanding, it is simply not a commercially reasonable interpretation to find that the
parties did not mean to preclude claims of negligent pre-contractual misrepresentations
[40]

I find that there is no genuine issue requiring a trial with respect to the Pre-contractual

Representation and I grant the defendants summary judgment motion dismissing that claim.
[41]

The position of the defendants with respect to the December 2006 Representation is

that the misrepresentation complained of is not actionable because it was alleged to have been
made by Mr. Lyman prior to decision of the board of directors of AEO to open its own
distribution centre. The defendants argue that until such time as AEO had a settled intention to
in-source its distribution centre that any statement they made was truthful. The defendants rely
upon the Ontario Court of Appeal decision in Hembruff v. Ontario Municipal Employees
Retirement Board, [2005] O.J. No. 4667 (CA), for the proposition that a forecast about the future
cannot sustain an action in negligent misrepresentation.
[42]

It is important at this juncture to consider the specific pleading with respect to the

December 2006 Representation:


24.1 In or about December of 2006, NLS received a phone call from a Canadian racking supplier
advising that American Eagle had just placed a large order.

2012 ONSC 384 (CanLII)

In my view, the agreement between the parties expressed in cl. II that no


representation or statement had been made and there had been no presumption of
fact upon which the dealer relied in entering into the agreement acts as an effective bar,
in the circumstances of this case, to recovery on the basis of any pre-contractual
representation other than one made fraudulently.

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24.2 In light of the gravity of this information, which indicated that American Eagle was looking to set
up its own facility within Canada, contrary to what NLS had been lead to believe, NLS contacted
American Eagle shortly thereafter to confirm whether its concern was justified.

customer and source of revenue, and of having a facility much too large for its customer base.
24.4 In response, American Eagle represented as follows:
(a)

that the service levels of NLS were great and meeting or exceeding expectations;

(b)

that American Eagle had no intention of in-sourcing a distribution facility in Canada; and

(c)

that American Eagle had sought information about the cost of racking, but that doing so
was just a litmus test and only part of its ongoing due diligence, to be able to satisfy
themselves that the rates being charged by NLS were reasonable and that using NLS as its
third party logistics services provider, rather than having an in-house facility, was the more
cost effective model.

24.5 NLS relied on these representations and conducted its business affairs in reliance of them, and in
the belief that they were accurate and not misleading.

[43]

The position of the defendants that they simply represented that there was no present

intention to in-source does not respond to all of the allegations made by the plaintiff. For
example, the plaintiff alleges that a specific representation was made that any investigation with
respect to racking was only for due diligence purposes.
[44]

The plaintiff submits on the return of this motion that the evidence it now has is that as

of December of 2006 the defendants had been taking active steps toward acquiring their own
distribution centre.
[45]

In my view, the determination of whether the December 2006 Representation is

actionable is one that requires a trial. It is only through the trial process that a court can
determine whether the statements made were false, misleading or inaccurate and whether the
reliance placed on the statements was reasonable in the circumstances. The defendants motion
for summary judgment with respect to the December 2006 Representation is dismissed.

2012 ONSC 384 (CanLII)

24.3 If the information were true, it meant that NLS was faced with the prospect of losing its largest

12
[46]

There remains the issue of the March 2007 Representation. The defendants argument

regarding the veracity of their statement does not apply because this representation was made at
a time following the decision of the board of directors of AEO to in-source their logistics

because no damages flowed from the alleged misrepresentation. They argue that in March of
2007 the plaintiff had already entered into its lease and thus there was no detrimental reliance on
that representation.
[47]

The plaintiff submits that had they been told the truth in March, they would have taken

different steps including providing notice of termination to their employees.


[48]

The damages resulting from the March 2007 Representation are likely minimal.

However, I cannot say with any degree of certainty that there will be no damages proven should
this matter proceed to trial and I find that a trial is necessary in order to determine that issue.
Thus the defendants motion for summary judgment with respect to the March 2007
Representation is dismissed.
(d)
[49]

Good Faith
In order to advance a claim of breach of a duty of good faith in the performance of a

contract a plaintiff must point to a specific term of the contract, whether express or implied,
which the defendant has not performed in good faith. Justice Charbonneaus comments in
CivicLife.com Inc. v. Canada, [2005] O.J. No. 3485 (Ont. S.C.), appeal allowed in part [2006]
O.J. No. 2474 (C.A.), are apt:
Even if the action is framed as a breach of the defendants duty to perform the contract in
good faith, the plaintiff must identify an agreed term, which the defendant has failed to
perform in good faith. That term may be an important discretion granted to the
defendant, an express obligation imposed upon the defendant or an implied obligation
that may be reasonably implied from the express terms of the contract in the context of
the bargained objectives and benefits the parties contracted to accomplish. However,
such a term must be found to exist.
[50]

In Transamerica Life v. ING Canada Inc. [2003] O.J. NO. 4656 (C.A.) Justice

OConnor made clear that there is no stand-alone duty of good faith:

2012 ONSC 384 (CanLII)

services. Instead the defendants submit that the March 2007 Representation is not actionable

I agree with Transamerica that Canadian courts have not recognized a stand-alone duty of
good faith that is independent from the terms expressed in a contract or from the
objectives that emerge from those provisions. The implication of a duty of good faith has
not gone so far as to create new, unbargained-for, rights and obligations. Nor has it been
used to alter the express terms of the contract reached by the parties. Rather, courts have
implied a duty of good faith with a view to securing the performance and enforcement of
the contract made by the parties, or as it is sometimes put, to ensure that parties do not act
in a way that eviscerates or defeats the objectives of the agreement that they have entered
into: see GATX, supra; Greenberg, supra; Gateway Realty, supra.
[51]

Counsel for the defendants notes that the Court of Appeal in CivicLife refers to the

overall intention of the parties and the reasonable expectations of the parties in determining
whether a duty of good faith is applicable. I accept the defendants submission that the court
must look to the mutual expectations and intentions of both parties and that the intention of NLS
alone is insufficient to ground a duty of good faith.
[52]

As I interpret the case law, I must look to the actual agreement entered into by the

parties to determine whether there is a specific provision, whether express or implied, which is
not being performed in good faith. In addition, it is open to me to determine whether the
objectives of the parties, as gleaned from the contract, have been eviscerated or defeated by the
conduct of the defendants. But it is impermissible for me to impose an extra contractual duty of
good faith performance which is not grounded in the contract.
[53]

The plaintiff relies upon the following provision found in Schedule B of the Logistics

Agreement:
RESPONSIBILITIES OF THE CLIENT:
Provide accurate volume projections and information required by the Provider for planning, at
regular intervals and when requested:
October 1: monthly inbound and outbound volumes and special events for the Spring
season (February to July);
April 1: monthly inbound and outbound volumes and special events for the Fall season
(August to January);
Monthly: on Monday of the last week in each calendar month, provide the final projected
inbound and outbound volume for the following accounting month; and
Weekly: on Thursday of each week, provide the expected volume for the following
week.
Ensure vendor compliance to the Providers specifications, or accept the consequences of noncompliance (e.g. refused shipments and exception charges).

2012 ONSC 384 (CanLII)

13

14

[54]

The plaintiff submits that pursuant to this provision the defendants had an obligation to

breached their duty of good faith by providing inaccurate information regarding their in-sourcing
intentions and activities.
[55]

I do not accept that argument as it is based on a flawed interpretation of the clause.

When read in context it is clear that this clause is purely operational and is designed to ensure
that AE Canada provides the plaintiff with accurate information regarding volumes and other
related information so that the plaintiff is in a position to ensure that it can effectively provide
logistics services. There is nothing in the language of the clause which suggests that it imposes
an obligation on AE Canada to provide information regarding its long-term intentions.
[56]

I find that there is no specific provision, whether explicit or implied, in the Logistics

Agreement which can be relied upon by the plaintiff to establish that the agreement was not
carried out in good faith.
[57]

I am also satisfied that the express terms of the Logistics Agreement demonstrate that

there was no mutual expectation of a long term relationship between the parties. The parties
agreed to a 23 month initial term of the Logistics Agreement. Only AE Canada had the option to
renew the Logistics Agreement for successive six-month terms following the initial term. In
addition, either party could terminate this Agreement at any time for convenience on 180 days
prior written notice to the other party, provided, however, that no such notice for termination
may be delivered by either party within the first 18 months following the date of this
Agreement.
[58]

There is nothing in the contract which demonstrates a mutual expectation or intention to

enter into a long term contract. This is not the type of case referred to by Justice OConnor in
Transamerica where the conduct of a party in the performance of the contract amounts to an
evisceration of the objectives of the contract.
[59]

It is clear that the plaintiffs claim for breach of duty of good faith is not tenable at law.

2012 ONSC 384 (CanLII)

provide accurate information to the plaintiff for its planning purposes and that the defendants

15
A trial is not required as there is no genuine issue on the point. The defendants motion for
summary judgment with respect to the claim of a breach of duty of good faith is granted.

[60]

The defendants motion for summary judgment is granted with respect to the contract

claim, the Pre-Contractual Representation and the breach of duty of good faith claim. The motion
is otherwise dismissed.
[61]

With respect to costs, if the parties cannot agree on the issue they may make brief

written submissions to me. The defendants submissions are due on February 1, 2012. The
plaintiffs submissions are due on February 10, 2012 and any reply submissions are due February
17, 2012.
[62]

Order to go accordingly.

HOURIGAN J.
Date: January 19, 2012

2012 ONSC 384 (CanLII)

Disposition