IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR

GENERAL DIVISION

Citation: Walsh v. TRA Company Limited, 2022 NLSC 6

Date: January 19, 2022
Docket: 200101T1035

BETWEEN:
DAVID WALSH and LENORA WALSH
FIRST PLAINTIFF
AND:
TRA COMPANY LIMITED
FIRST DEFENDANT
AND:
FOODLAND LIMITED
SECOND DEFENDANT
AND:
SOBEYS GROUP INC.
THIRD DEFENDANT
AND:
SOBEYS CAPITAL INCORPORATED
FOURTH DEFENDANT
AND:
SOBEY’S LAND HOLDINGS LIMITED
FIFTH DEFENDANT
AND:
JOSEPH GREEN
SIXTH DEFENDANT

Before: Justice Glen L.C. Noel

 Page 2

Place of Hearing: St. John’s, Newfoundland and Labrador

Dates of Hearing: November 23 – 27, 30; December 1 – 3, 7 –

11; 14 – 18, 2020; and January 4 – 8; March
29 – 31; June 28, 29; July 5 and 6, 2021

Summary:

The Plaintiffs were the sole shareholders of corporations that owned and operated
grocery stores in the Town of Bay Bulls under the Foodland banner and on
Merrymeeting Road in St. John’s as Walsh’s Family Foods. They sold their shares
in the corporations that operated the stores in 1995 and 1996, respectively.

They claim their corporations were not supplied goods by Defendant TRA at the cost
arrangement that TRA had promised them, and that they lost money on the sales of
their shares in the corporations resulting from the Defendants’ failure to pay the
promised trade deals. Their action seeks damages from the Defendants for negligent
or fraudulent misrepresentation.

The Court held:

1. The Walshes have not established the elements necessary to prove negligent
or fraudulent misrepresentations.

2. The Walshes’ claims for negligence, negligent misrepresentation, and

personal losses for fraudulent misrepresentation are statute-barred by s. 5(a)
and (b) of the Limitations Act. The only claim not time-barred (but dismissed
for no liability) is for economic losses arising from fraudulent
misrepresentation governed by s. 6(c) of the Limitations Act.

3. The Walshes failed to establish (i) an independent and separate wrong to them
personally as shareholders, and (ii) the claims for loss of share value are
damages sustained by the Corporations and not a direct loss to them as
shareholders. The common law rule in Foss v. Harbottle precludes their
claims, and denying the claims cannot be considered “too flagrantly opposed
to justice.”
 Page 3

4. The Walshes did not sustain any direct personal losses for which they can
recover damages.

5. The Walshes’ expert-opinion evidence is inadmissible, and the admissible

evidence failed to prove the Walshes suffered losses associated with the sale
of their shares in either of the Bay Bulls or Merrymeeting Road Corporations.

The Court dismissed the action against the Defendants with no order as to costs for
the reasons provided.

Appearances:

Paul D. Dicks, Q.C. and

Megan S. Reynolds Appearing on behalf of the Plaintiffs

Colm St. R. J. Seviour, Q.C.,

Jonathan D. Dale and
Christopher D. Goodridge Appearing on behalf of the Defendants

Authorities Cited:

CASES CONSIDERED: Walsh v. TRA Company Limited, 2016 NLTD(G)

119; Foss v Harbottle, (1843) 67 E.R. 189, (1843) 2 Hare 461; Walsh v. TRA
Co. [2006] N.J. No. 389, 2006 CarswellNfld 376 (N.L.S.C.(T.D.)); Walsh v.
TRA Co., 2007 NLCA 50; Walsh v. T.R.A. Company Limited, 2015 NLTD(G)
27; H.(F.) v. McDougall, 2008 SCC 53; Queen v. Cognos Inc, [1993] 1 S.C.R.
87; Hercules Managements Ltd v. Ernst & Young, [1997] 2 S.C.R. 165; Lam
v. Chiu, 2012 BCSC 440; R. v. B. (K.G.), [1993] 1 S.C.R. 740; Hennessey v
Eastern Regional Health Authority, 2019 NLSC 239; Midland Resources
Holding Ltd. v. Shtaif, 2017 ONCA 320; WEH Enterprises Ltd. v. Squires,
2010 NLCA 41; Morgan v. Rogers, 2011 NLCA 27; Central & Trust Co. v.
Rafuse, [1986] 2 S.C.R. 147; Ryan v. Moore, 2005 SCC 38; Grant Thornton
LLP v. New Brunswick, 2021 SCC 31; Bauer v. Erben, 2007 NBQR 299;
Brunette v. Legault Joly Thiffault, s.e.n.c.r.l., 2018 SCC 55; NPV
Management Ltd. v. Anthony, 2003 NLCA 41; Danyluk v. Ainsworth
Technologies Inc., 2001 SCC 44; Kosmopoulos v. Constitution Insurance Co.
of Canada, [1987] 1 S.C.R. 2; 642947 Ontario Ltd. v. Fleischer (2001), 209
D.L.R. (4th) 182, 56 O.R. (3d) 417 (C.A.); Salah v. Timothy’s Coffees of the
 Page 4

World Iinc., 2010 ONCA 673; Yaiguaje v. Chevron Corporation, 2018 ONCA
472 Groupe d’action d’investisseurs dans Biosyntech c Tsang, 2016 QCCA
1923; Midland Resources Holding Ltd. v. Shtaif, 2017 ONCA 320; Tran v.
Bloorston Farms Ltd., 2020 ONCA 440; McGowan v. Bank of Nova Scotia,
2010 PESC 17, aff’d 2001 PECA 20; 3Com Corp. v. Zorin International
Corp., 2006 CarswellOnt 3333, 148 A.C.W.S. (3d) 819 (C.A.), Catalyst Pulp
& Paper Sales Inc. v. Universal Paper Export Co., 2008 BCSC 515;
Streamside Engineering & Development Ltd. v. Canadian Imperial Bank of
Commerce, [1990] Nfld. & P.E.I.R. 220, 266 A.P.R. 220 (N.L.S.C.(T.D.));
Cuscuna c. Ferrarelli, 2017 QCCS 2475; Rogers v. Bank of Montreal (1985),
30 B.L.R. 41, 64 B.C.L.R. 63 (S.C.); Rogers v. Bank of Montreal, [1987] 2
W.W.R. 364, 9 B.C.L.R. (2d) 190 (C.A.); Scotia Mortgage Corp. v. Lockhart,
2011 CarswellOnt 15667, [2012] O.J. No. 1143 (Sup. Ct. J.); Scotia Mortgage
Corp. v. Lockhart, 2012 ONCA 158; leave to appeal denied, 303 O.A.C. 400
(note), 440 N.R. 394 (note); Martin Marietta Materials Canada Ltd. v. Beaver
Marine Ltd., 2016 NSSC 225; Piccolo v. Piccolo, 2014 ONSC 5280; White
Burgess Langille Inman v. Abbott and Haliburton Co., 2015 SCC 23; Walsh
v. TRA Company Limited, 2019 NLSC 131; Bye v. Newman, 2016 BSSC 267;
Hiscott v. Hall, 2015 NLCA 1; Walsh v. TRA Company Limited,
2019 NLSC 167

STATUTES CONSIDERED: Limitations Act, S.N.L. 1995, c. L-16.1;

Limitation of Actions Act, S.N.B 2009, c. L-8.5; Corporations Act, R.S.N.L.
1990, c. C-36; Judicature Act, R.S.N.L. 1990, c. J-4

RULES CONSIDERED: Rules of Supreme Court, 1986, S.N.L. 1986, c. C-

42, Sch. D

TEXTS CONSIDERED: Bruce MacDougall, Misrepresentation, (Toronto:

LexisNexis, 2016)

REASONS FOR JUDGMENT

NOEL, J.:
 Page 5

TABLE OF CONTENTS
INTRODUCTION .......................................................................................................................... 8
BACKGROUND .......................................................................................................................... 10
How It Started for the Walshes and TRA Newfoundland....................................................................... 11
The Walshes Becoming Independent Foodland Operators ..................................................................... 11
Merrymeeting Road Store Acquisition ................................................................................................... 12
Walshes’ Sale of their Stores and Shares ................................................................................................ 13
The Pleaded Causes of Action and Foundation of the Claims ................................................................ 13
Legal Constraints on the Claims ............................................................................................................. 14
Documentary and Testimonial Evidence ................................................................................................ 16
ISSUES ......................................................................................................................................... 17
ANALYSIS ................................................................................................................................... 18
1. Did the Defendants negligently or fraudulently misrepresent to the Walshes the terms and
conditions of the Supply Arrangement? .................................................................................... 18
Context of the Two Alleged Misrepresentations .................................................................................... 19
Defendants’ Position on the Misrepresentation Allegations ................................................................... 20
Burden and Standard of Proof ................................................................................................................. 21
Elements of Negligent Misrepresentation ..................................................................................... 21
Duty of Care Based on “Special Relationship” or “Personal Relationship” ........................................... 22
No Untrue, Inaccurate or Misleading Representations ........................................................................... 24
The 1983 Foodland Presentation, Including the Foodland Brochure ..................................................... 25
David Walsh........................................................................................................................................ 25
Lenora Walsh ...................................................................................................................................... 26
Joseph Green ....................................................................................................................................... 27
The Secretly Taped Calls .................................................................................................................... 29
Russ Tiller ........................................................................................................................................... 31
Foodland Brochure.............................................................................................................................. 33
‘Dead-Net’ Costing Commercially Unreasonable .................................................................................. 34
John Gardiner ...................................................................................................................................... 34
Darrell Rushton ................................................................................................................................... 35
Rushton as a Source of Alleged Misrepresentation ............................................................................ 35
Other Elements of Cognos Test – Negligence and Reliance .................................................................. 35
Requirement to Show Damages .............................................................................................................. 37
 Page 6

Elements of Fraudulent Misrepresentation ................................................................................... 37

The Alleged Deceitful Conduct .............................................................................................................. 38
Sobeys Equivalent Cost or Pricing Misrepresentation after the Walshes Commenced Foodland
Operations ............................................................................................................................................... 38
Separateness of TRA and Sobeys Business Operations .......................................................................... 40
Joseph O’Leary ................................................................................................................................... 41
1984 Sobeys Supply Agreement ......................................................................................................... 42
Misrepresentation Claims Ignore Foodland Program Benefits Offered to the Walshes’ Corporations .. 43
Karl Vokey .......................................................................................................................................... 44
Off-Invoice Allowance – Supplier’s Invoice Cost with 5% Upcharge Less the Deal ......................... 44
Additional Price Support to Foodland Operators ................................................................................ 45
The Manual Override of the Supplier’s Invoice Cost on Non-Directs................................................ 47
Rebates on Direct Products ................................................................................................................ 49
Walshes’ Acknowledgement of Foodland Program Benefits .............................................................. 49
Retail-Oriented Differences between Sobeys (corporate stores) and Individual Operators (Foodland
stores).................................................................................................................................................. 50
Walshes’ Reliance on the Sobeys Departmental Analyses (SDAs) ........................................................ 52
TRA Financial Records........................................................................................................................... 54
2. Are any of the claims out of time and barred by the applicable statutory limitation period? ... 55
Limitations Decision ............................................................................................................................... 55
Grant Thornton LLP v. New Brunswick.................................................................................................. 58
Application of Discoverability to the Facts ............................................................................................ 59
By-Cheque evidence ........................................................................................................................... 60
Tiller’s 1997 No Net-Net Cost Advice ............................................................................................... 62
Mr. Walsh’s Examination on Lunch Meetings in 1998 ...................................................................... 63
January 29, 1999 Meeting with Counsel and Bill Moulton ................................................................ 64
Fraudulent Concealment Doctrine Has No Application ......................................................................... 66
3. Are the claims for losses to the Walshes’ Corporations precluded by the common law rule in
Foss v. Harbottle, and if so, can this be considered “too flagrantly opposed to justice”? ........ 67
Sale of Shares in Bay Bull Store ............................................................................................................. 67
Sale of Shares Respecting Merrymeeting Road Store ............................................................................ 68
Application of Foss v Harbottle.............................................................................................................. 69
Piercing the Corporate Veil .................................................................................................................... 70
ONCA Decisions in Midland Resources and Tran v. Bloorston ............................................................ 74
No Independent Wrong to the Walshes as Individuals ........................................................................... 77
 Page 7

Other Authorities Relied on by the Walshes ........................................................................................... 80

4. Did the Walshes otherwise sustain any direct personal losses for which they can recover
damages? ................................................................................................................................... 82
Derivative Claims Not Recoverable ....................................................................................................... 83
Claim for Mental Anguish ...................................................................................................................... 84
Corporations Act Remedies Not Availed of by the Walshes .................................................................. 86
5. What, if any, damages can the Walshes establish through the admissible expert evidence for
alleged losses resulting from having sold their shares at an artificially low price? .................. 86
Admissibility of Expert Opinion of Ashley Power-Stack for the Walshes ............................................. 87
The Guiding Authorities on Expert Opinion Evidence ....................................................................... 87
Power-Stack’s Engagement as an Expert............................................................................................ 88
Trial Ruling on Threshold Qualification of Power-Stack ................................................................... 90
Cross-examination of Power-Stack on her Analysis Approaches ....................................................... 93
Defendants’ Case Law on Admissibility of Expert Opinion............................................................... 95
Accepted Criticism of the Allowance Analysis by Defendants’ Expert ................................................. 96
(i) The SDAs as compared to the financial statements of the Walshes’ Corporations ....................... 97
(ii) The implied margins of the Walshes’ Corporations using Allowance Analysis ........................... 98
(iii) The Implied Operating Profits of the Walshes’ Corporations...................................................... 99
Walshes’ Objections to the Admissibility of the Glass Report ............................................................. 100
Consideration Paid for the Shares ......................................................................................................... 102
The Joint Consulting Agreement for Merrymeeting Road Sale ........................................................ 103
Other Material Points of Disagreement between the Experts ............................................................... 104
a) Grouping of the “Bulk Sales” Department with the “Grocery” Department ............................... 105
b) The Issue Relating to Valuation of Past and Future Losses ........................................................ 106
c) Accounting for Notional Salary ................................................................................................... 107
d) Approach to Estimating Maintainable EBITDA ......................................................................... 108
No Losses Established on either Share Sale ......................................................................................... 110
Bay Bulls........................................................................................................................................... 110
Merrymeeting Road .......................................................................................................................... 111
COSTS ........................................................................................................................................ 111
CONCLUSION ........................................................................................................................... 113
 Page 8

INTRODUCTION

[1] David Walsh is a persistent and strong-willed gentleman, formerly involved

in the retail grocery business. He refuses to let go of his understanding of the
wholesale grocery supply arrangement he thought and hoped he had secured with
TRA and Sobeys dating back to 1983.

[2] He and his wife Lenora Walsh have been married 53 years. They are both in
their late seventies. They worked extremely hard, and generously supported their
community throughout their working lives. They won numerous awards for their
accomplishments in supermarket customer service. They have endured much as a
loving family, including the loss of their son to brain cancer before the Trial
concluded.

[3] Sobeys is a large successful national grocery wholesaler and retailer with
several corporate arms, including TRA Newfoundland Limited and Foodland
Limited.

[4] The Walshes were the sole shareholders of corporations that owned and
operated grocery stores in the Town of Bay Bulls and on Merrymeeting Road in St.
John’s. They claim their corporations were not supplied goods and product by TRA
at the cost arrangement they were promised. Their action seeks damages from the
Defendants in tort for negligent or fraudulent misrepresentation.

[5] The matter for determination in this case, as framed by Counsel for the
Walshes in their Closing Trial Submissions, is:

Whether the Walshes lost money on the sales of their shares in two companies as
a result of the Defendants’ failure to pay various trade deals to the Walsh
companies, which owned stores at Bay Bulls and Merrymeeting Road in
St. John’s.
 Page 9

[6] Counsel for the Defendants submit the Walshes’ misrepresentation claims
cannot succeed because:

a) the claims are for losses to their corporations, and the law does not permit the
Walshes as shareholders to recover for a wrong to the corporations;

b) they are time-barred under the Limitations Act, S.N.L. 1995, c. L-16.1;

c) their misrepresentation allegations are demonstrably unfounded; and

d) even if their claims are somehow tenable, the Trial evidence confirms that no
damages were incurred by either the Walshes or their corporations.

[7] It is one of the longest active civil cases before our Court. The Walshes filed
their action over 20 years ago, in 2001. There have been several filed decisions
along the way in conduct of the proceedings. (see Appendix A)

[8] A central figure in all of this is the Sixth Defendant, the late Joseph Green.
He was the General Manager/President of TRA Newfoundland Limited until his
retirement in 1990. He died long before the Trial commenced. His answer to the
Walshes’ allegations did not go without preservation. Mr. Walsh secretly recorded
private conversations with Green, and at the age of 85, Green provided four days of
Discovery testimony. For the Walshes to succeed in their claim, I would have to
find that Green repeatedly lied to Mr. Walsh — a man he revered as a mentor and
best friend.

[9] Mr. Walsh’s preoccupation for all these years has been to expose and share in
“all trade deals” that the buying power of TRA and Sobeys was able to generate. He
claims that is what the Defendants promised, never passed-on, and never shared with
his corporations. If they had, the Walshes’ corporations would have been more
profitable and the value of their shares much higher.
 Page 10

[10] On a best-case scenario, their expert opinion evidence, if admissible (which

the Defendants strongly contest), puts the loss at $1,715,000.

[11] I searched long and hard to find a path for the Walshes to succeed. I would
like to be in a position to award them some measure of damages. But unfortunately,
their claim is fraught with legal barriers and evidentiary shortfalls, and the damages
not what the Walshes seek.

[12] They had the finest of counsel in Paul D. Dicks, Q.C. and his extremely
capable junior counsel, Megan S. Reynolds. Despite the very best in legal
representation and an impressive expert witness, the law and established facts do not
support any of the relief the Walshes are seeking.

[13] The law restrains judges from doing what they prefer and their heart desires.
I have to do what the law demands and the evidence reveals. As much as I want the
Walshes to be vindicated and succeed in this lawsuit, I cannot be governed by my
sympathy for them.

[14] Mr. Walsh, in his testimony, said he was not looking for sympathy or
vengeance but justice. It is my duty to explain to him and Mrs. Walsh why justice
requires that I dismiss their action. It is a judgment that I take no comfort in
delivering.

[15] If there is any solace for the Walshes, for reasons that I will provide, I am not
ordering costs against them.

BACKGROUND

[16] To appreciate the legal and factual issues engaged, I will lay out the
chronology and background of the dispute.
 Page 11

How It Started for the Walshes and TRA Newfoundland

[17] Mr. Walsh in 1975 joined with three partners to incorporate Southern
Discount Limited and purchase a convenience store business in Bay Bulls. Shortly
thereafter, they built a 5000 square-foot Quonset hut (semi-circular metal building)
and operated a supermarket. Mr. Walsh and his partner Tony Barton bought out
their other partners in Southern Discount.

[18] TRA got its start in Newfoundland in the early 1980s when Sobeys purchased
the assets of an insolvent wholesaler. TRA with its warehousing capability began
supplying product to the Sobeys stores; other Sobeys group banner stores, such as
the Foodland; and some independents that included Southern Discount.

[19] TRA and TRA Newfoundland Limited over the years went through various
corporate amalgamations and renaming within the Sobeys group of companies, and
ultimately amalgamated and continued as Sobeys Capital Incorporated (“Sobeys”).
There is no dispute that the Walshes have named the responsible legal entities (I
refer to TRA and TRA Newfoundland Limited interchangeably in these reasons).

[20] In 1983, Mr. Walsh approached TRA for financial support to buy Tony Barton
out of the Bay Bulls business. Mr. Walsh accepted TRA’s loan of $200,000 to allow
him to buy out Barton for a total of $250,000.

The Walshes Becoming Independent Foodland Operators

[21] Foodland was a tradename owned by Sobeys and was used to expand sales in
the province through the Foodland banner-store concept for small rural
supermarkets. The “Foodland Program” was a retail program provided by TRA.
 Page 12

[22] In the fall of 1983, the Foodland Program was presented to Mr. and
Mrs. Walsh. The meeting occurred at TRA’s office in Donovans Business Park.
Mr. Walsh put the timing of this meeting as being in October/November 1983,
shortly after the buyout of Barton.

[23] Green and Russ Tiller of TRA, in the Foodland presentation meeting,
reviewed and provided a brochure to the Walshes titled “The Foodland Program.”
Following the meeting, Mr. and Mrs. Walsh, Green and his wife, and Tiller and his
wife went out for a celebratory dinner.

[24] The Walshes allege it was based on the representations made at the Foodland
presentation meeting, together with discussions that Mr. Walsh had with Darrell
Rushton, Sobeys Vice-President and subsequent President of wholesale operations,
that they decided to become an independent Foodland banner store on January 1,
1984.

[25] Southern Discount was renamed Walsh’s Foodland Limited on February 29,
1984, and operated at Bay Balls as “Walsh’s Foodland.” The Walshes owned the
shares of Davlen Holdings Limited, which held the shares of Walsh’s Foodland
Limited.

Merrymeeting Road Store Acquisition

[26] In 1995, the Walshes incorporated DLW Investments Ltd. with the intent of
purchasing a grocery business in St. John’s. DLW Investments proceeded with this
acquisition in mid-1995, purchasing the Merrymeeting Road store, which it operated
as “Walsh’s Family Foods.” Although not a Foodland banner store, the supply
arrangement also applied to Walsh’s Family Foods.
 Page 13

Walshes’ Sale of their Stores and Shares

[27] The Walshes claim they relied on the representations of the Defendants to
their detriment, resulting in the stores becoming unprofitable and forcing them to
sell the stores.

[28] On February 10, 1995, the Walshes sold their shares in Davlen Holdings, the
company that owned the Bay Bulls store, to Sobeys, and on July 16, 1996, sold their
shares in DLW Investments, the company that owned the Merrymeeting Road store
to Colemans. (I will refer to Davlen Holdings and DLW Investments as the
“Corporations”).

The Pleaded Causes of Action and Foundation of the Claims

[29] The Walshes assert three causes of action:

(a) fraudulent misrepresentation;

(b) negligent misrepresentation; and
(c) negligence.

[30] There is no pleaded claim for breach of contract. It was the Corporations, and
not the Walshes, who are alleged to have been promised that TRA would pass along
all trade deals, and/or TRA would charge the Corporations the same costs as the
Sobeys stores.

[31] The Walshes in their Further Amended Statement of Claim formally

abandoned their prior-pleaded claim in contract.
 Page 14

[32] The supply arrangement was an agreement between TRA and the
Corporations (the “Supply Arrangement”). The Walshes as individuals and
shareholders were not parties to any agreement or contract with TRA.

[33] The Supply Arrangement consisted of TRA’s provision of products from

TRA’s wholesale operations, called “Non-Directs,” and the supply of products from
suppliers, such as dairy products, potato chips and soft drinks, delivered directly to
the Walshes’ stores and billed to and paid by TRA, known as “Directs.”

[34] For good reason, counsel for the Walshes did not purse the claim in simple
negligence in their Trial Brief or Closing Submissions. Nothing in the evidence
otherwise supports a claim in negligence alone. In earlier proceedings before this
Court (Walsh v. TRA Company Limited, 2016 NLTD(G) 119, at para 33, and referred
to below as the “Limitations Decision”), the Walshes acknowledged that there is no
independent claim in negligence for pure economic loss.

[35] The only ground for liability against the Defendants rests on the alleged
misrepresentations.

Legal Constraints on the Claims

[36] The Walshes’ claims are seriously constrained by the common law rule in
Foss v Harbottle, (1843) 67 E.R. 189, (1843) 2 Hare 461, as well as prior judicial
rulings in this matter.

[37] Foss v. Harbottle stands for the fundamental principle of corporate law that a
corporation and its shareholders are different entities and only the corporation can
sue for a wrong done to it. Shareholders have no cause of action for wrongs done to
their corporation. Shareholders cannot sue for consequential losses to themselves
resulting from damage inflicted on their corporation in which they own shares.
 Page 15

[38] Orsborn J struck the entirety of this action in 2006. He concluded, when
viewing the Statement of Claim contextual as a whole, it “is a corporate loss claim
and is not maintainable by individual shareholders” (Walsh v. TRA Co. [2006] N.J.
No. 389, 2006 CarswellNfld 376 (N.L.S.C.(T.D.)).

[39] On appeal, the action was reinstated: Walsh v. TRA Co., 2007 NLCA 50
(“Reinstatement Decision”). The Court of Appeal in the Reinstatement Decision
was not prepared to find that the Walshes’ action could not succeed, given that they
had pled certain personal duties owed to them and had alleged, in part, to have
sustained personal damages. The Court held:

25. … The Walshes are not, in the allegations underlined in the excerpts from
the statement of claim set out in paragraph 2 above, asserting a right to recover, in
their capacity as shareholders, their share of any damages to which the corporation
might be entitled if the pleaded allegations are made out. They have alleged a
special relationship, misrepresentation arising out of that relationship, reliance on
those misrepresentations and, as a consequence, they claim, they have personally
suffered damages. Whether they will be able to lead evidence to demonstrate such
a personal relationship, in addition to or as opposed to a corporate relationship
between the Walsh Companies on the one hand and the Sobey Companies and
Green on the other hand, must await trial of the issues. They are not to be precluded
from having the opportunity to establish such a relationship, and presenting their
argument as to entitlement at law, by the court anticipating that a Foss v. Harbottle
defence will be presented and will be successful.

[40] In 2015, in an application to strike the pleaded damages for “losses resulting
from having sold their shares at an artificially low price,” Whalen CJ recognized the
two legal pre-conditions to any claim advanced by the Walshes (at para. 32):

(a) an independent relationship or duty existing between them and the wrongdoer;
and

(b) the damages represent a loss separate from that of their Corporations that is
causally linked to the personal wrong done to the Plaintiffs: Walsh v. T.R.A.
Company Limited, 2015 NLTD(G) 27 (the “2015 Pleadings Decision”).
 Page 16

[41] Whalen CJ went further and held (at para. 43) that the Walshes’ alleged losses
resulting from having sold their shares at an artificially low price “are damages
suffered by the Corporations and not the Plaintiffs.” Notwithstanding this finding,
Whalen CJ was not prepared to hold on a striking of pleadings application that the
Walshes had no chance of success.

[42] In particular, Whalen CJ relied on appellate authorities for the proposition that
treating the Corporations and the Walshes as one entity and refusing to permit their
claim for the impugned damages may lead to a result “too flagrantly opposed to
justice.”

[43] Finally, McGrath J in the Limitations Decisions held that the Walshes’ claims,
except for economic losses arising from fraudulent misrepresentation, are governed
by a two-year limitation period, subject to the discoverability principle.

Documentary and Testimonial Evidence

[44] The parties worked cooperatively and assembled a Common Book of

Documents consisting of 13 Volumes, 332 Tabs, 4133 pages. This allowed for the
convenience in the management of documentary exhibits at Trial and efficient use
of court time in Trial spanning over the course of six weeks. The parties were not
restricted from tendering other documents in evidence.

[45] The parties agreed that documents under Category 1 in the Common Book
would be entered as consent exhibits and form part of the Trial record for the truth
of their contents. Category 2 documents do not form part of the Trial record, unless
a witness identified and spoke to the document, at which point it was entered as an
exhibit through the first witness speaking to it. Documents noted as Category “X”
in the Common Book were subject to the right of a party to object to admissibility.

[46] The Walshes presented their evidence through Mr. Walsh’s seven days of
testimony followed by Mrs. Walsh, and two former employees of TRA, Russ Tiller
 Page 17

and Joseph O’Leary. The Walshes called Ashley Power-Stack (her testimony lasted
four days) as an expert in business valuations, and in particular, share valuations.

[47] Testimony from the Defendants came primarily from Karl Vokey (seven days
duration) and two others, John Gardiner and Darrell Rushton, who through their
roles with TRA or Sobeys had knowledge of the Supply Arrangement with the
Walshes’ Corporations. The Defendants tendered Susan Glass as an expert in
business valuation and damage quantification, and Glass testified for three days.

[48] Counsel left no stone unturned in preparing their submissions for my deciding
the issues. I not only had the benefit of their detailed Trial Briefs but also lengthy
written Closing Submissions of the Plaintiffs and the Post-trial Brief of the
Defendants, together with closing oral submissions. At my request, counsel
provided a complete transcript of the Trial proceedings.

ISSUES

[49] The issues for my determination are:

1. Did the Defendants negligently or fraudulently misrepresent to the Walshes

the terms and conditions of the Supply Arrangement?

2. Are any of the claims out of time and barred by the applicable statutory
limitation period?

3. Are the claims for losses to the Walshes’ Corporations precluded by the
common law rule in Foss v. Harbottle, and if so, can this be considered “too
flagrantly opposed to justice”?
 Page 18

4. Did the Walshes otherwise sustain any direct personal losses for which they
can recover damages?

5. What, if any, damages can the Walshes establish, through the admissible
expert evidence, for alleged losses resulting from having sold their shares at
an artificially low price?

ANALYSIS

1. Did the Defendants negligently or fraudulently misrepresent to the

Walshes the terms and conditions of the Supply Arrangement?

[50] There is a fundamental difference of understanding between the parties on

what the Supply Arrangement was intended to mean and include. No
documentation exists detailing the specific terms of the Supply Arrangement.

[51] Mr. Walsh is an honest man. He believes firmly that TRA and Green misled
him and Mrs. Walsh and deceitfully concealed from them the true cost of goods that
their Corporations were paying compared to the Sobeys stores. Mr. Walsh has a
misguided understanding of the Supply Arrangement. His perception of the
Defendants’ mistreatment of his Corporations is unsupported by the preponderance
of evidence.

[52] Mrs. Walsh’s credibility is beyond reproach. She presented as a quiet person
who candidly acknowledged this dispute has consumed their lives. She spoke of
them losing friendships over the years because Mr. Walsh would not stop talking
about it. She put considerable time and hours into the stores, but she had limited
knowledge and involvement in the Supply Arrangement the Corporations had with
TRA.
 Page 19

Context of the Two Alleged Misrepresentations

[53] Mr. Walsh’s motivation and purpose for pursuing the Foodland Program was
to avail of TRA’s buying power, which was increased by having Sobeys within the
buying group. TRA was able, because of its bulk purchasing power and
warehousing capabilities, to purchase significant volumes (e.g. carloads) of grocery
products at the lowest possible prices. This enabled TRA to pass on preferred
supplier pricing costs to the Walshes’ Corporations, spoken to in the evidence as the
“Supplier’s Invoice Cost.” By themselves, the Walshes’ Corporations were limited
to purchasing products on smaller volumes at higher supplier prices.

[54] The Walshes claim their Corporations were enticed to enter the Supply
Arrangement with TRA on two promises that turned out to be either negligent or
fraudulent misrepresentations. First, they claim their net cost for products purchased
through TRA would include the full benefit of all supplier discounts (“trade deals”)
— the ‘all trade deals off’ representation. Second, they would receive the same
product cost arrangement as the Sobeys stores, that being TRA’s cost plus five
percent — the ‘Sobeys equivalent cost’ representation. They allege the Sobeys
stores received substantial trade deals that TRA did not pass on to their Corporations
to reduce the cost of product.

[55] The trade deals fell into three board categories:

1. TRA invoiced the Walshes’ Corporations the Supplier’s Invoice Cost plus a
5% upcharge less the off-invoice supplier deal or allowances on products from
TRA’s warehouse (the “Off-Invoice Allowance”).

2. Suppliers paid rebates to TRA on the products delivered directly to the

Walshes’ stores (“Rebates on Directs”).

3. Suppliers paid various allowances after they had issued the invoices, including
by-cheques, volume discounts, co-op advertising, and other rebates (referred
 Page 20

to collectively as “Rebates on Non-Directs.” The Defendants also refer to

these as Incremental Supplier Funding received by Sobeys stores, as reflected
in the Sobeys Departmental Analyses (“SDAs”). Some of the witnesses at
times referred to this as “inside monies.”

[56] It is not in dispute that the Walshes’ Corporations received the benefit of the
Off-Invoice Allowance. They claim they never received their full entitlement to
Rebates on Directs and Rebates on Non-Directs.

Defendants’ Position on the Misrepresentation Allegations

[57] The Defendants submit the totality of evidence refutes the misrepresentation
allegations. The contention that the Corporations were to receive ‘all trade deals off’
would mean TRA promised to provide “dead net” costs (costs of product net of all
trade deal) — a commercially absurd proposition. No other TRA customer,
including the Sobeys stores, received such a deal. Witnesses for TRA and Sobeys
testified that if TRA supplied the Walshes on such a basis, TRA would have lost
money.

[58] On the ‘Sobeys equivalent cost’ representation, the Defendants submit firstly,
the evidence establishes that TRA invoiced the Corporations at exactly the same
product prices as TRA charged the Sobeys stores; and secondly, there is no evidence
that the Walshes’ Corporations were promised Incremental Supplier Funding
received by Sobeys stores.

[59] The Defendants further summit the misrepresentation allegations ignore the
substantial financial and price support TRA provided to the Walshes’ Corporations
as part of the Foodland Program benefits.
 Page 21

Burden and Standard of Proof

[60] The Walshes have the burden of proving their misrepresentation allegations
on a balance of probabilities. The standard of proof is no different for negligent or
fraudulent misrepresentations. While I have to remain mindful of the seriousness of
the fraudulent allegations when assessing the evidence, the standard of proof does
not change: H.(F.) v. McDougall, 2008 SCC 53, at para. 40.

Elements of Negligent Misrepresentation

[61] I will review the elements and evidence pertaining to negligent

misrepresentation, and then consider fraudulent misrepresentation.

[62] The Supreme Court of Canada set out the elements of negligent
misrepresentation in Queen v. Cognos Inc, [1993] 1 S.C.R. 87, at para. 34, as
follows:

(1) there must be a duty of care based on a "special relationship" between the
representor and the representee;
(2) the representation in question must be untrue, inaccurate, or misleading;
(3) the representor must have acted negligently in making said misrepresentation;
(4) the representee must have relied, in a reasonable manner, on said negligent
misrepresentation; and
(5) the reliance must have been detrimental to the representee in the sense that
damages resulted. In the case at bar, the trial judge found that all elements were
present and allowed the appellant's claim.
 Page 22

Duty of Care Based on “Special Relationship” or “Personal Relationship”

[63] To hold that the Defendants were in a “special relationship” with the Walshes,
two factors need to be present:

a) the Defendants ought reasonably to have foreseen that the Walshes would rely
on their representations, and

b) the Walshes’ reliance would, in the particular circumstances of the case, be

reasonable: Hercules Managements Ltd v. Ernst & Young, [1997] 2 S.C.R.
165, at para. 24.

[64] The Court of Appeal’s Reinstatement Decision provides additional direction

on the nature of the relationship with the Defendants that the Walshes must establish.
The Walshes must demonstrate “a personal relationship, in addition to or as opposed
to a corporate relationship between the Walsh Companies on the one hand and the
Sobey[s’] Companies and Green on the other hand.” [emphasis added]

[65] The Walshes have failed to demonstrate a special or personal relationship

between them and the Defendants. While the Walshes came to form good
friendships over time in their dealings with TRA Newfoundland, and especially
Green, the representations made to the Walshes arise solely from a corporate
relationship and not to them as individuals. The Walshes as individuals did not
contract with TRA; the Supply Arrangement was strictly between Corporations and
the alleged promises were made to the Walshes’ companies.

[66] On a broader basis, the Walshes allege the Defendants, knowing that the
Walshes placed their trust in them during the course of their relationship from 1983
to 1996, owed them a duty of care to be open and honest with them on matters
relevant to their operations. I find the duty of openness and honesty was to the
Corporations, and the Defendants did not breach any duty of care to the Walshes as
individuals.
 Page 23

[67] TRA and Foodland’s affiliation with Southern Discount evolved out of a
corporate relationship.

[68] Southern Discount, in becoming a Foodland affiliate in late 1983, was

progressing from its status as an independent stand-alone store to becoming a
member of TRA’s Foodland Program. Southern Discount had a prior commercial
relationship with TRA. It continued its commercial dealings with TRA under the
Foodland banner. The relationship was not with the Walshes personally.

[69] The Foodland presentation was made to the Walshes in their capacities as
Southern Discount representatives, not as individuals. TRA had no commercial
interest in dealing with the Walshes as individuals. It was the business of Southern
Discount that was the subject of the Foodland presentation.

[70] In contrast with the commercial discussions involving Southern Discount

becoming a Foodland affiliate, Mr. Walsh did have personal dealings with TRA
when it came to buying out his partner, Tony Barton. The financing of Barton’s
buy-out was a commercial transaction between Mr. Walsh individually and
personally with TRA, whereas the Sothern Discount–TRA connection was a
corporate relationship.

[71] The Walshes’ friendship with Green is of no assistance in establishing a

“special” or “personal relationship.” When Green first made the representations to
the Walshes to become part of the Foodland Program, they were not close friends
but became so over the course of the business relationship. I accept Mr. Walsh’s
evidence that the respect he had for Green was a significant factor for the Walshes
in joining the Foodland Program. He came to look up to Green as a trusted advisor
and considered him like a father. That does not diminish that Green, in his capacity
as TRA’s point person, was at all times dealing with the Walshes in a commercial
capacity as representatives of their companies and not personally as individuals.

[72] The Supply Arrangement did not engage the Walshes in their personal
capacities. TRA invoiced the Walshes’ Corporations and not the Walshes
 Page 24

personally. The Walshes had no personal liability to pay invoices if their

Corporations failed to pay.

[73] It follows that there exists no duty of care owed by TRA and Green to the
Walshes in their personal capacities. The Walshes’ claims fail on this essential
threshold requirement.

[74] If I am wrong and the Defendants did owe a duty of care to the Walshes as
individuals separate from their Corporations, their claims still fail on the other
elements of the Cognos test.

No Untrue, Inaccurate or Misleading Representations

[75] I must focus carefully on the actual representations. The Supply Arrangement
constitutes the contract, but the terms of the contract arose from pre-contractual
representations and discussions. The representations that induced the Walshes into
the contract were not untrue, inaccurate, or misleading.

[76] TRA and Sobeys, however, could have perhaps avoided this costly litigation
if they had taken care to document the Supply Arrangement, and had been more
forthcoming and open with Mr. Walsh that he was not getting and was never going
to get “net-net cost” of product as he envisaged. The lack of openness does not lead
to legal liability but goes to costs, as I will discuss when dealing with costs.

[77] Mr. Walsh perceived, in his mind and heart, that the representations that were
made to him and Mrs. Walsh were untrue, inaccurate, and misleading. The weight
of the evidence refutes the assertions and perception that the Walshes erroneously
held.
 Page 25

[78] The Walshes must establish the Defendants made the representations and that
the representations were false. Whether there has been a representation of fact is
determined on an objective basis on all of the evidence: Bruce MacDougall,
Misrepresentation, (Toronto: LexisNexis, 2016) at 83, 85, and 128.

[79] The Walshes rely on three principal sources of TRA representations: (i) the
1983 Foodland presentation meeting, including the Foodland brochure;
(ii) Mr. Walsh’s discussion with Darrell Rushton; and (iii) representations as to
TRA’s pricing to the Sobeys stores after the Walshes’ Corporations entered into the
Supply Arrangement.

[80] Mr. Walsh’s recollections are challenged not only by TRA witnesses,
Rushton, Green and John Gardiner, but also by Tiller called as a witness for the
Walshes.

[81] Mrs. Walsh could offer only vague remembrances of what Green and Tiller
discussed with them in the Foodland presentation. Her evidence is understandably
of limited probative value in corroborating Mr. Walsh’s recollections of the
misrepresentations.

The 1983 Foodland Presentation, Including the Foodland Brochure

David Walsh

[82] At the Foodland presentation meeting Mr. Walsh attended with Mrs. Walsh,
Green and Tiller went over the benefits to the Walshes of becoming a part of the
Foodland Program. They would be joining one of the biggest buying groups in
Canada. Mr. Walsh recalled being told, as the retailer, they would look after the
customers, and the wholesaler, and TRA, in turn, would look after them. By joining
the Foodland Program, Mr. and Mrs. Walsh would be independent operators
carrying the Foodland banner in their franchised area from Trepassey to Bay Bulls
on the Southern Shore.
 Page 26

[83] Mr. Walsh testified that that their “net cost” for products purchased through
TRA would be the same as Sobeys and that they would receive the full benefit of all
supplier discounts. In exchange, the Walshes were required to pay TRA’s net cost
plus the same 5% upcharge that was charged to the Sobeys stores. Mr. Walsh
described in his cross-examination that there was “no doubt whatsoever that we were
receiving exactly the same as Sobeys.”

[84] Mr. Walsh’s understanding on “net costing” goes beyond the ability of the
Walshes’ Corporations to purchase from TRA at carload prices (volume discounts)
without buying carload volumes and the ability to get the “Off-Invoice Allowance.”
Mr. Walsh understood “net costing” to mean all deals and allowances would be
“netted down” on the TRA invoice.

[85] There would be no way for TRA to show on the upfront issued invoice for
product supplied to the Walshes’ Corporations trade deals from suppliers that were
subsequently accredited to TRA or Sobeys (the “inside monies”). However, I accept
the submissions of the Walshes that TRA had the ability to track, account for, and
provide the benefit of ‘all trade deals,’ if that was in fact what the Walshes’
Corporations were promised.

[86] Mr. Walsh did not state in his direct evidence the specific trade deals
promised, but he acknowledged in cross-examination that his Corporations received
many of the trade deals listed in his pleadings.

[87] He could not recall the discussion of By-cheques at the Foodland presentation.
Prior to selling his shares, he assumed he was receiving the full amount of Rebates
on Directs.

Lenora Walsh

[88] The Foodland presentation meeting came as a surprise to Mrs. Walsh. She
was working as a nurse at the time and preoccupied with raising the Walshes’ young
 Page 27

children as well as her nursing career. She had very limited involvement with
Southern Discount or the grocery business up to 1983. On the day of the meeting,
she had worked an entire nursing shift, had returned home and was preparing dinner
for her children when Mr. Walsh informed her that they would be going for a
meeting at TRA’s offices that evening. She had not previously discussed the
opportunity to join the Foodland Program with Mr. Walsh.

[89] Although Mrs. Walsh heard what was said at the meeting, she acknowledges
she “didn’t know what it all meant.” She recalls hearing that they were to pay “cost”
plus the 5% upcharge less the deals. When asked about whether that was TRA’s
cost, Mrs. Walsh’s recollection was that they were told that they would be paying
the same as Sobeys. She did not recall whether TRA’s invoice cost was discussed
nor whether the concept of ‘net-net’ pricing was discussed. She had no knowledge
of what deals existed in the grocery store business at the time of the meeting.

[90] Mrs. Walsh indicated that Tiller went through the Foodland brochure with
Mr. Walsh, but that she was not paying close attention to all of it.

[91] She remembers the parties were excited about what they discussed at the
meeting, and “how happy Dave was about it.”

[92] When I turn to consideration of Green’s and Tiller’s evidence on the Foodland
presentation, I find no support for the contention that the Defendants made the ‘all
trade deals’ representation to the Walshes or that the Defendants represented the
Walshes’ Corporations were to receive Sobeys’ costs.

Joseph Green

[93] Green was first the General Manager, and subsequently the President of TRA,
for the period of 1979 to 1990. He had primary responsibility for the Foodland
Program and its upcharge and royalty operators.
 Page 28

[94] Green died in 2014. Pursuant to the Rule 46.11(2) of the Rules of Supreme
Court, 1986, S.N.L. 1986, c. C-42, Sch. D, Sobeys gave the Walshes notice to enter
Green’s Discovery testimony as Trial evidence. Rule 30.13(1)(c) permits any part
or all of a deposition, so far as admissible under the rules of evidence, where the
deponent is dead, to be entered as evidence for any purpose by any party. There is
no evidentiary rule precluding the admission of Green’s material evidence.

[95] I accept Green’s evidence and find that after many years retired from TRA he
had no reason to lie and did not lie or mislead Mr. Walsh in any way.

[96] When Green was discovered in April 2010, he had no specific recollections
of the Foodland presentation meeting, but he was able to confirm what he would
have told the Walshes about the Foodland Program and Supply Arrangement.

[97] On the Off-Invoice Allowance, Green confirmed TRA would supply goods at
supplier invoice cost, plus the 5% upcharge, less any invoice deal.

[98] TRA collected Rebates on Directs paid by suppliers and TRA then paid 50%
to the stores. He explained in his Discovery testimony how all direct products that
went to the stores were invoiced through TRA to achieve higher volume percentage
rebates from suppliers than individual stores could get on their own. TRA shared
the rebates evenly between the stores.

[99] By-cheques were not offered to the Walshes or any Foodland stores. The
money received from supplier By-cheques was used by TRA as price support for
Foodland stores; specifically on staple items that had no up-charge; on items
advertised and sold by the stores at below cost as a loss leader; and on special in-
store promotions and giveaways.
 Page 29

The Secretly Taped Calls

[100] Mr. Walsh secretly recorded 18 persons. Mr. Walsh taped Green in three
telephone calls, which occurred on May 28, 1999; May 30, 1999, and June 18, 1999.
These calls were transcribed.

[101] Despite Counsel for the Walshes giving notice at a Pre-trial Case Management
meeting of their intent to object to the entry of transcripts of these calls, they did not
raise objection at Trial to the admissibility of the transcripts as evidence.

[102] I admit the taped and transcribed conversations on the “principled approach”
to the admission of evidence. Generally, hearsay statements — out-of-court
statements offered to prove the truth of the contents – are not admissible. What was
said in the conversations between Mr. Walsh and Green meets the principled
approach requirements of relevancy, necessity, and reliability: Lam v. Chiu, 2012
BCSC 440, at para. 8; and R. v. B. (K.G.), [1993] 1 S.C.R. 740. The statements are
highly probative and there is no prejudice to the Walshes in the sense of unfairness
by misuse, overconsumption of time, or distraction and confusion of issues.

[103] I attach significant weight to Green’s statements. The calls occurred prior to
the Walshes commencing litigation. Green was long-retired from TRA, with no
residual connections to TRA and Sobeys. Green was wholly unaware that Walsh
was taping him. Mr. Walsh challenged Green to tell the truth and Green confirmed
each time, “I’m telling you the truth, Dave.”

[104] Mr. Walsh’s purpose in making and taping the calls was to confirm the
particulars of the 1983 Foodland presentation and to get Green to admit the ‘all-trade
deals off’ version of the Supply Arrangement. Mr. Walsh failed in this effort.

[105] Green confirmed what was promised was the Off-Invoice Allowance or
“TRA’s invoice cost.” Walsh asked for clarification on invoice cost and Green said,
“invoice cost is the supplier’s invoice cost.” He explained Mr. Walsh and every
 Page 30

other Foodland upcharge store received “the supplier’s invoice cost, less the off case
deal.” Mr. Walsh asked, “okay, so all I got was the off-invoice allowance?” Green
replied, “yes, the off case allowance, yes.” When Mr. Walsh specifically put to
Green that he was to receive “all the deals,” Green categorically denied this:

A. No, I didn’t say you got all …

Q. Oh you did, Joe.

A. All the off invoice deals, Dave, off invoice deals.

[106] Mr. Walsh, who later attended all of Green’s Discoveries, confirmed that
Green was consistent “to the grave” with his version of the Foodland presentation.
Mr. Walsh testified that Green had a “fantastic memory.”

[107] In the conversations with Green, Mr. Walsh did not challenge him on the other
central allegation that the Walshes make that they were promised they would get
Sobeys’ cost.

[108] It is simply untenable that Green would turn on Mr. Walsh and lie to him as
Mr. Walsh alleges. I asked Mr. Walsh during his testimony why a man that he
revered turned on them. This was his reply:

A. Well, I guess the only answer I can give you, that Joe Green was
Newfoundland’s answer to Sybil.

Q. To?

A. Sybil, the movie where they had multiple personalities. The man—there was a
side of him that I know now that was the hardest working, kindest man, considerate
man you ever met in your life, and the other side that [you] didn’t know, he was
cunning and baffling, and you believe him. …

[109] I cannot accept Mr. Walsh’s explanation. Green had no reason to lie to
Mr. Walsh. Green spoke the truth in his taped conversations with Mr. Walsh, and
 Page 31

the truth of his statements undermines Mr. Walsh’s own memory of the Foodland
presentation.

Russ Tiller

[110] Neither did Tiller’s evidence lend support to Mr. Walsh’s recollections.

[111] Tiller was a former TRA management employee that the Walshes called as a
witness. He was with TRA in 1983 and 1984, until Green asked him to leave the
company. Subsequently, he had supply arrangements with TRA in Nova Scotia for
his own business operations.

[112] Tiller had good recall of the Foodland presentation and was familiar with the
Foodland Program, having presented it to others on many occasions. I find his
evidence was balanced. He had previously given Discovery testimony and
Mr. Walsh had also secretly taped his conversation with him.

[113] Tiller related that the meeting included a “page-by-page” review of the
Foodland brochure.

[114] He emphasized to the Walshes that TRA had the ability to buy in bulk
(carloads of grocery items) and provide the Walshes with volume-purchasing
advantage, including lowest available prices from suppliers and the security of
supply. He explained to them how the Off-Invoice Allowance would involve the
supplier published timeframe deals off the supplier’s invoice.

[115] He was unsure how By-cheques came up in the discussions, but Green did say
the Walshes would get credit for By-cheque deals and it was something he would
further discuss with Mr. Walsh. He related By-cheques at the time were not a big
part of the business in Newfoundland.
 Page 32

[116] Tiller’s understanding of the “Trade Deals are Passed On” section of the
Foodland brochure was that it was confined to the off-invoice deals.

[117] Sobeys’ internal costing, merchandising, and trade deals were not the subject
of the Foodland presentation.

[118] Nevertheless, his evidence on the ‘Sobeys equivalent cost’ representation

helps explain why the Walshes came away with a different understanding than he
and TRA had on what Sobeys’ cost meant. They were told they would get the “same
price as Sobeys.” Tiller understood this to mean “the same going-out cost.” The
invoice price for both Sobeys stores and the Walshes’ store was the same. The term,
‘net cost’ or ‘net-net cost’ was never used.

[119] Tiller confirmed he did not dwell on cost that much because “it’s like opening
a can of worms” and “someone’s definition of cost was different than somebody
else’s.” He wanted to avoid the part on cost. He “went by as quickly as possible”
knowing it could not “be avoided forever.” He confirmed whatever cost meant he
understood it could not mean “TRA’s net cost” for supplying product to Foodland
operators.

[120] Tiller was aware that one of Mr. Walsh’s goals in wanting to join the Foodland
Program was to compete with Bidgoods’ store, a supermarket within driving
distance of customers for the Walshes’ Bay Bulls store. Tiller made the odd
comment in his testimony, about Mr. Walsh wanting to compete against somebody
like Bidgoods that “he’s smarter than I thought he was initially.” Throughout all of
Mr. Walsh’s testimony, I never once doubted his resolve and astuteness in going
after what he wanted to achieve.

[121] Rather than glossing over and avoiding the discussion on cost (whether
competing with Bidgoods was a realistic possibility or not), I would have expected
Tiller to give Mr. Walsh a more fulsome explanation of how supplier cost and trade
deals worked in the industry. Mr. Walsh then would probably not have come away
 Page 33

from the presentation with the impression that he was getting the same cost treatment
as Sobeys.

[122] Tiller was unsure of how much concentration or explanation either he or

Green put on the issue of Rebates on Direct at the Foodland presentation. He
recalled there had been previous discussion with Mr. Walsh about Rebates on Direct
when he was operating as Sothern Discount. I take from Tiller’s evidence there was
general discussion with Mr. Walsh prior to the Foodland presentation about the
ability of TRA to generate volume discounts from suppliers and manufacturers of
both direct and non-direct products.

[123] The most Tiller could say was that during his short time with TRA the
Walshes’ Bay Bull store would have received from TRA a percentage of the Rebates
on Directs like others.

Foodland Brochure

[124] I can see in reference to the “Trade Deals Are Passed On” section of the
Foodland brochure, how the Walshes would be left with some confusion that they
would be receiving ‘all trade deals off.’ But putting the brochure in the context of
the evidence does not bear out the ‘all trade deals off’ or the ‘Sobeys equivalent cost’
misrepresentations.

[125] The brochure reads:

TRADE DEALS ARE PASSED ON

• Manufacturer and suppliers deals are passed on to the retailer

• Allowances are deducted from the invoice
• “Buy in” Opportunities are provided before the deal or promotion
termination…
 Page 34

[126] The wording does not state all deals or allowances are passed on or deducted.
The brochure makes no reference to Sobeys price equivalency.

[127] My conclusion on the Foodland presentation evidence is that TRA, through

Green and Tiller, promised the Walshes the Off-Invoice Allowance deals and some
portion of monies from By-cheques and Rebates on Directs. Tiller and Green could
have done better explaining to the Walshes what was in their contemplation, so
Mr. Walsh would not have had the confusion and unrealistic commercial expectation
about the Supply Arrangement.

‘Dead-Net’ Costing Commercially Unreasonable

[128] Effectively, what Mr. Walsh contends the Walshes were promised — ‘dead-
net costing’ — is commercially unreasonable. I accept the evidence of both John
Gardiner and Rushton that it would not have been economically viable for TRA to
fulfil Mr. Walsh’s expectation of ‘all-trade deals off’ at a 5% upcharge.

John Gardiner

[129] Gardiner joined TRA Newfoundland in 1986 as Vice-President of Operations

and succeeded Green as President of TRA in 1989. He described the concept of
“dead-net costing” to mean stripping out any and all subsidies (trade deals) a product
could possibly garner on receipt in the warehouse or after performance sales to get
it to the absolute lowest cost to TRA. He testified, “it would be ludicrous” to expect
TRA to promise the Walshes’ companies would be charged on a dead-net cost basis.
He explained TRA’s operating cost would be in the six-and-a-half to seven percent
range, so at dead-net cost on a 5% upcharge TRA would be selling products at a loss.
TRA did not have a dead net cost arrangement with any of its retailers.
 Page 35

Darrell Rushton

[130] Rushton likewise confirmed TRA “wouldn’t have a wholesaler or warehouse

business,” if it supplied the Walshes’ Corporations based on product costs net of all
TRA’s trade deals, allowances, and other product subsidies.

Rushton as a Source of Alleged Misrepresentation

[131] The Walshes’ pleadings (at para. 18) identify Rushton as a principal source of
misrepresentations. Rushton was just short of turning 83 when he testified. He was
with Sobeys for 43 years until his retirement in 2000. He was articulate, and after
all these years, still had reasonable recall of his interactions with Mr. Walsh.

[132] Mr. Walsh’s evidence is somewhat confusing as to the timing of meetings

with Rushton. He is clear Rushton was not present during the Foodland presentation
meeting. In answer to a question on re-direct, he said he talked to Rushton “a bit
before” his meeting with Green and Tiller, and Mrs. Walsh was not present. They
both confirmed that Mr. Walsh on some unknown date gave Rushton a ride to the
airport, and Rushton told him he was doing the “right thing” joining the Foodland
Program.

[133] Walsh gave no testimony to support Rushton made the ‘all trade deals off’ or
‘Sobeys equivalent cost’ representations. Rushton confirmed he had no discussions
with Mr. Walsh about trade deals other than the capability of buying at container-
load prices.

Other Elements of Cognos Test – Negligence and Reliance

[134] The remaining elements of the Cognos test only come in play if the Walshes
had satisfied the Defendants owed them a duty of care and made false or misleading
representations. The Walshes must prove the Defendants acted negligently in
 Page 36

making the alleged misrepresentations and that the Walshes were reasonable in their
reliance on the negligent misrepresentations.

[135] The standard of care expected (Cognos at para. 56) on the Defendants is “a
duty to exercise such reasonable care as the circumstances require to ensure that
representations made are accurate and not misleading.”

[136] While TRA could have done better explaining and documenting terms of the
Supply Arrangement, the evidence does not meet the burden of establishing on a
balance of probabilities that the Defendants were negligent in failing to take
reasonable care in dealing with the Walshes.

[137] The Walshes’ reliance on the alleged misrepresentations was not reasonable
in all the circumstances. Mr. Walsh simply heard what he wanted to hear and believe
that he was getting all the deals and same pricing treatment as Sobeys stores. The
evidence put forth by the Defendants demonstrates that was not commercially
attainable or reasonable.

[138] The evidence also demonstrates that a reasonable and prudent person in Mr.
Walsh’s circumstances, while operating the stores and buying from TRA, would
have taken steps to inquire if he was receiving all the trade deals.

[139] Numerous TRA invoices to the Walshes’ companies entered as evidence state
“Less Deal” and not “Less Deals.”

[140] Mr. Walsh had some knowledge of By-cheques and Rebates on Direct at the
time of the Foodland presentation. It was only after he sold his shares and started
working with a competitor grocery retailer, Colemans, that he became more
knowledgeable of the extent that all trade deals or “inside monies” could generate.
Gardiner and Ruston confirmed that Mr. Walsh never asked them whether he was
receiving all trade deals or “inside monies.”
 Page 37

[141] The Supply Arrangement offered to the Walshes was not what Mr. Walsh
honestly believed he had secured and wished he had with TRA. In the non-exclusive
Supply Arrangement that the Walshes had with TRA, it was incumbent on
Mr. Walsh to raise with TRA and insist he get all trade deals and the same cost
equivalency as Sobeys. He could have walked away from the business arrangement
he had with TRA and become affiliated or deal with another wholesaler, or attempted
to negotiate a more economically favorable Supply Arrangement with TRA.
Instead, he chose to sell his shares in the Walshes’ Corporations.

Requirement to Show Damages

[142] I will deal with the final element of Cognos, that the Walshes show damages
resulted, when addressing damages under Issue 3.

Elements of Fraudulent Misrepresentation

[143] To establish fraudulent misrepresentation, or deceit, the Walshes must prove

the following five elements: Hennessey v Eastern Regional Health Authority, 2019
NLSC 239 at para. 34; and Midland Resources Holding Ltd. v. Shtaif, 2017 ONCA
320, at para. 162.

(i) a false representation of fact by the defendant to the plaintiff;

(ii) knowledge the representation was false, absence of belief in its truth,
or recklessness as to its truth;

(iii) an intention the plaintiff act in reliance on the representation;

(iv) the plaintiff acts on the representation; and

(v) the plaintiff suffers a loss in doing so…

 Page 38

[144] It is apparent that there is substantial consistency in the elements of negligent

misrepresentation and fraudulent misrepresentation. The principal difference is the
intention of deceit, which is required to ground fraudulent misrepresentation.

The Alleged Deceitful Conduct

[145] The Walshes in their Closing Submissions maintain that TRA and Sobeys
took active and deliberate steps to conceal from the Walshes the nature, extent, and
value of the Trade Deals they received and deliberately, deceitfully, and fraudulently
misrepresented that the Walshes’ stores were paying the same net costs for products
as the Sobeys stores. They allege that, in response to inquiries about competitors
selling at lower prices, TRA employees, including Green and Gardiner, consistently,
deliberately, knowingly, and fraudulently misrepresented that the Walshes’ stores
were paying the same product costs as TRA/Sobeys. And finally, the Walshes rely
on the 1984 Sobeys Supply Agreement as evidence of a fraudulent scheme to
artificially inflate the Sobeys invoices to make it appear that Sobeys was paying the
same as the Foodland stores.

[146] Mr. Walsh in his testimony accused the TRA senior personnel of creating “a
Ponzi scam that would make the Mafia blush.” In his younger days, Mr. Walsh
fought in the boxing ring and he had no trouble facing anybody coming at him, but
he said, “I was not prepared for my corner to be doing a number on me.”

[147] There was no “Ponzi scam” and Mr. Walsh’s corner did not turn on him. The
Walshes have failed to prove deceitful conduct on the part of the Defendants.

Sobeys Equivalent Cost or Pricing Misrepresentation after the Walshes

Commenced Foodland Operations

[148] I have addressed that the ‘all trade deals off’ representation was not made to
the Walshes, and now turn to the representation that TRA deceitfully misrepresented
 Page 39

to the Walshes that they were receiving the same equivalent cost or pricing as the
Sobeys stores, after the Walshes’ Corporations entered into the Supply Arrangement.

[149] The Walshes alleged in their Trial Brief that TRA/Sobeys went to great
lengths to hide “all trade deals” were not passed on to the Walshes’ Corporations,
including generating false invoices. Their Further Amended Statement of Claim (at
para. 28) pleads that the Defendants took active and deliberate steps to prevent the
Walshes from ascertaining the actual and/or nature of the various trade deals, and
this amounted to “fraudulent concealment” and “an abuse of high level of trust.”
The Walshes led no evidence to establish the creation of false invoices, nor any
evidence of fraudulent concealment, nor an abuse of trust on the part of the
Defendants.

[150] Mr. Walsh testified that five or six years after commencing as a Foodland
operator, he questioned Bidgoods’ ability to undersell him on popular selling items,
Tetley Tea and Fraser Farms Meatballs. This occurred at a time when he said, “I
was making a few dollars, we were doing half decent, as I thought, and I wanted to
build on.”

[151] He challenged Pat O’Keefe, TRA’s new head buyer, on the Tetley and Fraser
Farms pricing issue at the TRA offices. Green joined the discussion and showed
Mr. Walsh that the Foodland price book and the Sobeys price book were the same.

[152] Gardiner related in his evidence how he similarly showed Mr. Walsh the
Sobeys price book and the Foodland price book, which were the same.

[153] The Closing Brief of the Walshes notes that TRA failed to produce any Sobeys
invoices or price books in the Defendants’ document production or as Trial exhibits.
However, Mr. Walsh admitted that TRA management showed him the Sobeys price
book and the invoices were the same for Sobeys stores as Foodland operators.
Despite the absence of corroborating documentary proof, I am satisfied on the
testimony at Trial that the Sobeys stores were invoiced on the same basis as
 Page 40

Foodland stores (with the exception of staple items — milk, sugar and flour, which
the Foodland stores were not charged the 5% upcharge).

[154] There was therefore no false or deceitful representation of fact made to the
Walshes.

[155] Likewise, TRA and its management did not have knowledge the
representation was false, absence of belief in its truth, or recklessness as to its truth.

[156] The evidence fails to support a finding that the Defendants took active and
deliberate steps to conceal the true nature of its cost arrangement with the Sobeys
stores from the Walshes.

Separateness of TRA and Sobeys Business Operations

[157] Notwithstanding their connection as part of the buying group, TRA and
Sobeys businesses were separate operations. TRA, as the warehouse operator and
supplier for the Sobeys stores, had no influence on Sobeys’ management, operations,
merchandising, and prices. The Sobeys stores were not part of the Foodland
Program, and did not receive the benefits of the Foodland Program.

[158] Green consistently indicated that he was not involved with the Sobeys stores
and did not have knowledge of or a role in their operations or business. When asked
about the deals Sobeys stores were getting, he stated, “I don’t know … I was not
associated with Sobeys stores.” In discussing rebates, he said, “I was never involved
with Sobeys’ business. I don’t know what they did.” And he testified further, “I
had no arrangement with Sobeys, I didn’t do any dealings with Sobeys on anything
really.”
 Page 41

[159] Gardiner similarly had no involvement with the Sobeys stores management or
operations, and had no knowledge of the SDAs.

[160] Rushton had no involvement with the operations of the Sobeys stores. Asked
about TRA’s ability to influence the cost of product sold in Sobeys stores, he stated
it was up to Sobeys “to do whatever they felt was necessary to compete” with
competitor stores. He had no knowledge of SDAs and no reason to have access to
any of the retail operations information.

Joseph O’Leary

[161] TRA hired Joseph O’Leary in 1979 as a buyer, and he became the Director of
Purchasing for TRA Newfoundland in the early 1980s. He worked with TRA until
1990 reporting to the General Manager, Green. The Walshes called O’Leary as a
witness.

[162] His evidence confirms that TRA invoicing (on non-staple products) was the
same for Foodland operators as the Sobeys stores. He made the interesting
observation in support of the Walshes’ position that the invoices did not accurately
represent the true cost of product for the Sobeys stores. He stated: “Because it can
show that you are getting the same price as Sobeys. There’s a front door and there’s
a back door, but what goes in the front door is not the same as what goes in the
backdoor.”

[163] I accept the invoicing would not show additional monies in other deals and
allowances potentially available and that were in fact paid over to Sobeys. There is
nothing nefarious or fraudulent about the manner of TRA’s invoicing. O’Leary
acknowledged in cross-examination that TRA’s management was not colluding and
contriving to produce a method of invoicing to deceive Mr. Walsh.
 Page 42

1984 Sobeys Supply Agreement

[164] Mr. Walsh testified in relation to the agreement between Sobeys Stores
Newfoundland, Lofoods Newfoundland (a Sobeys subsidiary), as Buyers, and TRA
Newfoundland, as Seller, from 1984 (the “1984 Sobeys Supply Agreement”).
Significantly, it post-dates the 1983 Foodland presentation, and it did not pertain to
the Foodland stores or other TRA banner stores.

[165] Mr. Walsh did not see the 1984 Sobeys Supply Agreement while he was
operating as a Foodland, only acquiring it after he sold his stores.

[166] The Walshes submit firstly, it is proof of the type and nature of rebates that
TRA was supposed to pay the Walsh stores. Secondly, it demonstrates that
TRA/Sobeys must have had the capacity to track products purchased and the amount
and types of Trade Deals, discounts and rebates available on which the percentages
could be calculated.

[167] The Walshes point to the strong language that “Under no circumstances will
by cheque allowances be used to net out the product cost,” as evidence that the By-
cheque amounts were known and calculable at the time of sale. Otherwise, there
would be no need to specify that they not be used to net out the product cost.

[168] The Walshes go further and argue the strength of the language is evidence that
TRA and Sobeys were likely concerned that its invoices might become known to its
other customers, and see that Sobeys was charged less than the Foodlands, contrary
to the TRA representations. They allege this is evidence of a fraudulent scheme to
artificially inflate the Sobeys invoices to make it appear that Sobeys was paying the
same as the Foodland stores.

[169] I am unable to accept the Walshes’ position on their view of what the 1984
Sobeys Supply Agreement proves. In his direct evidence, Mr. Walsh confirmed, “our
Foodland Program compared perfectly with this.” He confirmed that the Sobeys
 Page 43

stores upcharge was 5% and By-cheques were not to be provided to buyers. What
it does reflect is substantial benefits were accruing to TRA as the wholesaler for
Sobeys, thus providing TRA with more discretionary funds to administer to the
Foodland Program.

[170] Respecting the quarterly rebate in Clause 7, Gardiner and O’Leary testified
this payment to Sobeys was to offset freight charges Sobeys incurred. Sobeys
incurred its own fright charges in transporting goods from TRA’s warehouse to the
Sobeys stores. Foodland stores received the benefit of no transportation charge to
their stores.

Misrepresentation Claims Ignore Foodland Program Benefits Offered to

the Walshes’ Corporations

[171] The claims of fraud, deceit, and concealment are erroneously premised on the
understanding that the Walshes’ Corporation would be treated the same as Sobeys
stores not just on the Off-Invoice Allowance, but also in every respect on the manner
of allocation of Trade Deals and for netting down the cost of product. This is an
erroneous misconception, and seriously ignores the Foodland Program price support
and other benefits the Walshes’ Corporations received.

[172] The Foodland benefits reflect an alternate financial support program for the
Foodland stores, including the Walshes’ Corporations. The evidence confirms their
Corporations received substantial forms of additional price support in a different
manner than the Sobeys stores.

[173] The Defendants tendered evidence as to the Supply Arrangement and other
aspects of the Foodland Program from Green, Rushton, Gardiner, and most
extensively Karl Vokey.
 Page 44

Karl Vokey

[174] Vokey first joined TRA in 1988 after completing university. He was directly
involved and oversaw the pricing as provided to the Walshes’ Corporations and other
Foodland stores. He testified in his capacity as the Senior Vice-President, Grocery
Merchandising and National Resourcing with Sobeys.

Off-Invoice Allowance – Supplier’s Invoice Cost with 5% Upcharge Less the

Deal

[175] Vokey spoke in considerable detail on the workings of the Off-Invoice

Allowance. It started with the Supplier’s Invoice Cost. Suppliers would publish a
price list typically once a year of the product case cost based on the volume-buying
bracket of TRA and Sobeys. TRA would work with brokers and agents or suppliers
directly to achieve the most favorable case price. The case cost would then be
entered in TRA’s computer system.

[176] As a starting point, Foodland and other upcharge customers of TRA would be
availing of the optimal case cost in the system. They could purchase on a one-case
order.

[177] The “deal,” or sometimes referred to as the “published deal,” was a temporary
per-case reduction of the Supplier’s Invoice Cost that would be in effect for a limited
period of time. It directly and immediately reduced the amount that TRA had to pay
the supplier for the product.

[178] TRA communicated and circulated monthly the pricing available to the
Foodland operators in a “Regular Price Book.” It would show the product cost
(Supplier’s Invoice Cost) and any applicable Off-Invoice Allowance.
 Page 45

[179] The Off-Invoice Allowance was thereby tied to each individual case of
product purchased during the deal period. TRA accounted for the Off-Invoice
Allowance at the time of TRA’s receipt of the product in the warehouse. Generally,
suppliers promoted the product through the published deal and did not require retail
performance.

[180] For other rebates, deals, and allowances, suppliers often required retail
performance activity measured through, among others, product display, carrying
periods, and competitive consumer pricing. On such rebates and allowances, unlike
the Off-Invoice Allowance, TRA had to track and make an after-purchase
reconciliation.

[181] In addition to the benefit of Foodland and Sobeys having the lowest upcharge
of any of TRA’s customers, TRA provided additional price support to Foodland
operators, in which the Walshes’ Corporations participated. TRA did not provide
this additional price to the Sobeys stores.

Additional Price Support to Foodland Operators

[182] The purpose for providing the additional price support, and one of the key
aspects of the Foodland Program, was to ensure Foodland operators remained
competitive on a per-item basis without having to incur specific losses on sales that
would otherwise have been loss leaders.

[183] There were certain staple and high-demand items that were price sensitive and
commonly sold at a loss to drive consumer demand and sales on higher-margin
items. Promotional activity played a significant part of it.

[184] The forms of the additional price support was retail-focused, and included the
following: TRA’s Every Day Low Price Program (the “EDLP Program”), the
Weekly Flyer Program, Store Credits, and discretionary price reductions.
 Page 46

[185] The EDLP Program was designed to make products perceived to be price-
sensitive for consumers (local grocery shoppers) available to Foodland stores on a
monthly basis. It made certain high-volume products, in the range of 1500 – 2000
items, available to the Foodland Stores at a further discounted price. The prices
available to the Walshes’ Corporations through the EDLP Program were lower than
the prices for those same products as set out in the Regular Price Book, and
represented a discounting of price beyond the Off-Invoice Allowance. TRA
communicated the EDLP Program to Foodland operators by way of an additional
price book (the “EDLP Price Book”).

[186] TRA prepared weekly flyers for the Foodland stores to increase consumer
activity in the stores. At the relevant timeframe, flyers were the number one tool for
communicating and promoting products to consumers.

[187] The Weekly Flyer Program, as well as the EDLP Program, both played into
the 80-20 rule that Vokey and certain others spoke to in their testimony. The 80-20
rule is the general principle that 20% of a store’s product would result in 80% of the
stores sales, and that the pricing on these staple 20% products was extremely
competitive.

[188] Consistent with the objective of keeping individual operators whole on loss
leaders, TRA provided additional price support to the Foodland stores to help
maintain the margins achieved by the Foodland stores on products while on special.

[189] The Weekly Flyer Program included the provision of a third price book, called
the “Merchandising Planner.” The Merchandising Planner, which supplemented
the Regular Price Book and the EDLP Price Book, showed the products that would
be in the flyer for a specific week and the special pricing available to the Foodland
Stores during the applicable period. The products in the Merchandising Planner
under “Special Cost” frequently had prices discounted beyond the prices as reflected
in the Regular Price Book.
 Page 47

[190] The Merchandising Planner set out the precise amount of additional price
“allowance” or subsidization (beyond any applicable Off-Invoice Allowance) that
was being provided on each product. Vokey, Gardiner, and Tiller confirmed the use
of “allowance” as used in the Merchandising Planner to show the Foodland operators
the “Landed Store Cost” of the product from the Regular Book Cost is not to be
confused with the Off-Invoice Allowance. Mr. Walsh acknowledged he had the
opportunity to buy as much of a particular item at a lower cost as he wanted, and sell
at a higher cost after the flyer expired.

[191] TRA gave Store Credits (not including those credits for damaged product or
incorrect shipments) to account for situations where a Foodland operator sold staple
and/or price-competitive items at what would otherwise have been a loss. The
principal difference between Store Credits as compared to the additional price
support through the EDLP and Flyer Program is that the Store Credits actually
resulted in credits from TRA to the Walshes’ Corporations in reference to their
purchases and were initiated by the Foodland operator itself.

[192] Tiller and Vokey said Store Credits on staple competitive items sold at a loss
could amount to hundreds of dollars per week payable by TRA to individual
Foodland operators. TRA tendered documentary evidence of credits of this nature
payable to the Walshes’ stores. An example of a Store Credit to the Walshes’
Corporations was subsidization of the unit cost of a carton of milk sold at less than
what they paid because of market conditions.

[193] There were additional discretionary reductions of the Off-Invoice Allowance

on occasions, including reimbursement for special event promotions and more
significantly, the manual override of the Supplier’s Invoice Cost on the supply of
Non-Direct products.

The Manual Override of the Supplier’s Invoice Cost on Non-Directs

[194] All of the evidence from people familiar with TRA’s pricing system,
including Tiller, testified to the fact that, at the material time, the Supplier’s Invoice
 Page 48

Cost was entered into TRA’s system, customers were put into pricing groups based
on their applicable upcharge, and invoices were automatically generated according
to those pricing groups. Similarly, the evidence established that the only way to
provide additional price support to a customer of TRA was to do a manual price
override in TRA’s system.

[195] Business records entered at Trial showed this form of additional price support
being provided to the Walshes’ Corporations, as discussed more fully below.

[196] Gardiner spoke to the mechanics of the price override, in the context of the
Merchandising Planner, which as recognized by Mr. Walsh, included the provision
of additional price support. TRA’s computer program system would generate the
regular product price, and for TRA to override the price in the system it would
involve a manual override in the Merchandising Planner. Tiller also noted there was
no other way to do it cost-effectively within the TRA system.

[197] Vokey spoke to the price override in reference to specific and numerous
invoices to the Walshes’ Corporations.

[198] In the absence of a price override, the invoices were generated automatically
in reference to the “Unit Cost” as denoted on the invoice, which Vokey confirmed
would be “after the 5% upcharge was applied” and “before the application of the off
invoice deal,” with the invoice then noting “Less Deal” to signify the reduction of
an applicable Off-Invoice Allowance. All of these prices would have been
communicated by way of the Regular Price Book.

[199] In the context of a price override, meaning additional price support, whether
further to the EDLP Program, the Weekly Flyer Program, or purely discretionary
price support, the invoices would have had to be subject to a price override. In that
situation, the system-generated invoices would simply reflect a lower “Unit Cost”
and would not directly indicate that additional price support had been provided.
 Page 49

[200] A number of invoices for a competitive staple product and loss leader,
Carnation Milk, were referred to as examples of the provision of additional price
support, by way of the manual price override, with prices below the Supplier’s
Invoice Cost. Vokey explained the invoices did not reflect “Less Deal” on the
invoice itself, but that the unit price that TRA sold to the Walshes’ Bay Bulls store
was considerably less that the Supplier’s Invoice Cost. Even though TRA did not
produce or tender the actual supplier’s invoices for the Carnation Milk within the
relevant time, I accept the evidence of Vokey as confirmation that TRA substantially
subsidized the unit cost of this product for the invoiced period.

Rebates on Direct Products

[201] In addition, TRA provided the upcharge Foodland operators, including the
Walshes’ Corporations, with a quarterly cheque of at least 50% of the rebates
received by TRA on account of the purchases by the applicable store.

[202] On the payment of Rebates on Directs, Gardiner testified TRA looked at each
store individually to ensure they were competitive in their market on staple items,
such as dairy milk and bread prices.

Walshes’ Acknowledgement of Foodland Program Benefits

[203] Mr. Walsh acknowledged in his cross-examination that the Walshes’

Corporations were receiving additional price supports and other services from TRA
beyond the standard Off-Invoice Allowance. He recognized various forms of price
support “on a daily basis” by way of the EDLP Program, the Weekly Flyer Program,
Store Credits, and other discretionary price support.

[204] He confirmed TRA provided the Foodland operators, including the Walshes’
Corporations, with extensive retail counselling services, at the store department
level, at no charge. TRA provided retail accounting services at a modest cost. TRA
provided monthly budgeting services, seminars and semiannual meetings for
 Page 50

Foodland operators. TRA had a Foodland Advisory Committee that provided

guidance on store-level profitability, store-level costs, and other aspects relating to
store sales.

[205] Mr. Walsh also acknowledged TRA provided Walsh’s Foodland with
financing for the development of the new store in Bay Bulls, and at no charge,
budgeting and engineering consulting services for the design and construction of the
store.

[206] And finally, as Vokey noted, there was a Foodland council made up of
Foodland operators that would liaise and meet regularly with TRA management.

[207] It would not have been commercially reasonable for TRA to provide all of
these additional price supports and administrative supports to the Walshes’
Corporations for the 5% upcharge.

[208] TRA did not provide additional forms of price support to Sobeys stores
because of the different commercial realities faced by the corporate stores as
compared to individual operators.

Retail-Oriented Differences between Sobeys (corporate stores) and

Individual Operators (Foodland stores)

[209] There is a fundamental commercial difference between the manner Sobeys

stores operated, in a corporate store environment, as compared to how independent
Foodland operators functioned, such that the receipt of Incremental Supplier
Funding was necessarily accounted for in a different way.

[210] In a corporate store environment, such as that of Sobeys stores, the Sobeys
prices to consumers, and particularly on promotional activities, would have a lower
 Page 51

margin before the subsequent receipt of, and separate accounting for, Incremental
Supplier Funding.

[211] For Foodland operators, TRA actually provided the price support for
promotional activities and highly competitive staple items by way of a reduction in
the purchase price of items invoiced. Foodland operators were able to maintain
positive (or zero) margins on promotions that would have yielded lower (or negative)
margins in the Sobeys corporate environment.

[212] Unlike Sobeys, TRA did not measure the internal cost of its additional price
support as provided to the Foodland operators in reference to the amount of
Incremental Supplier Funding subsequently received.

[213] The Walshes claim their Corporations were promised that they would receive
an equivalent level of price reduction to account for all of TRA’s subsequently
received allowances. Most importantly, I have found that TRA did not make such a
promise. If I had found TRA made that promise to the Walshes’ Corporations, TRA
had the ability to separately track and determine the amounts of Incremental Supplier
Funding, as Sobeys did. That, however, was not the way TRA administered the
Foodland Program and accounted for its sources of price support to the Walshes’
Corporations.

[214] Gardiner corroborated Vokey’s evidence that TRA received funding from
suppliers to support the additional price support provided to Foodland operators, and
the TRA financial statements did not separately account for the price support or
funding received. Tiller indicated revenue from By-cheques would not be enough
to make it worthwhile for TRA, and “we went wherever we could go to get the
money” to keep Foodland operators competitive and move product.

[215] The additional price support to the Walshes’ Corporations was made possible
largely through TRA’s subsequent receipt of Incremental Supplier Funding. TRA
was also able to provide additional price support to Foodland operators from other
revenue streams of TRA, including the higher upcharge TRA charged to other
 Page 52

customers. As well, TRA made product available for Foodland stores, which TRA
had purchased and warehoused, at its own expense, during since-expired deal
periods.

[216] The Incremental Supplier Funding was provided to TRA at some point after
TRA’s acquisition of the product and was provided to TRA either (i) on volume
purchases of the buying group, including Sobeys, or (ii) TRA’s specific retail and
promotional activities (such as the Weekly Flyer Program and promotional activity
of stores operated under TRA’s Foodland, Riteway and Quikway banners). The
Canada Packers Agreement is documentary evidence of promotion-based
Incremental Supplier Funding that was exclusive to TRA.

[217] Sobeys would have separately negotiated and received their own promotion-
based Incremental Supplier Funding for retail-oriented subsidies from suppliers,
where TRA had no ability to influence Sobeys’ retail or promotional practices.

Walshes’ Reliance on the Sobeys Departmental Analyses (SDAs)

[218] Mr. Walsh’s emphasis on the importance of the SDAs is misplaced. His first
time receiving and seeing the SDAs was in 2003, long after the relevant timeframe
and two years following commencement of the litigation. He testified when he
reviewed the document, he “had the puzzle solved.” He stated: “This finally fit into
my way of thinking that I knew that they could not deny the facts that were here, and
I knew now why they could show me Sobeys prices and Foodland prices as being
the same.”

[219] What the SDAs show is the clear distinction between a corporate environment
and an independent operator environment and confirmatory evidence of the
substantial additional price support to the Walshes’ Corporations.

[220] Vokey was the only witness who had personal knowledge of the SDAs. He
started working with SDAs after he commenced working in the retail division with
 Page 53

Sobeys in 1995 or 1996. He had not seen the SDAs while working with TRA, and
neither did Green, Gardiner, or Rushton.

[221] Vokey noted that the SDAs contain the consolidated information for all of
the Sobeys stores in Newfoundland and Labrador before then providing the same
categories of information for the individual Sobeys stores.

[222] I will describe in some detail what the SDAs capture, as it is necessary for my
subsequent discussion of the expert opinions.

[223] The information in the SDAs is broken down by departments, and a review of
the SDAs show headings for departments such as “Grocery Sales,” “Canteen Sales,”
“Meat Sales,” “Fish Sales,” and a variety of other departments, with similar
information below each department. Importantly, for each department, the SDAs
show “Sales,” “Store Margin,” “Allowances,” and “Total Gross Profit.”

[224] Vokey explained:

a) The “Sales” line in the SDAs show the retail sales for each Sobeys department
to Sobeys’ customers during the applicable timeframe, both in terms of actual
dollars and sales of that department as a percentage of total sales;

b) The “Store Margin” line is the difference between what Sobeys sold the
product for to its customers less what Sobeys paid for the product on their
invoices, and is shown both in dollars and as a percentage of the sales within
the applicable department;

c) The “Allowances” line reflects the additional allowances that were separately
negotiated by Sobeys with suppliers for their retail activity and were paid
 Page 54

directly to Sobeys by those suppliers, and is shown both in dollars and as a

percentage of the sales within the applicable department; and,

d) The “Gross Profit” line is a summation of the “Store Margin” and

“Allowances” lines, again reflected both in dollars and as a percentage of sales
within the applicable department.

[225] Vokey confirmed that all of the trade deals received by Sobeys are captured
fully in the “Allowance” line of the SDAs.

[226] He explained Foodland operators, including the Walshes’ Bay Bulls store, had
total gross margins on grocery sales, on average, higher or equivalent to Sobeys
stores. This was because Sobeys accounted separately for “Store Margin” and
“Allowances” to get to their “Gross Profit” margin, while TRA furnished the
additional price support through the cost of goods on the invoice.

TRA Financial Records

[227] The Walshes take issue with why TRA’s business records do not show with
specificity the net amount of additional price support provided to the Walshes’
Corporations, as compared to the net amount of Incremental Supplier Funding
received by TRA on account of purchases made by the Walshes’ Corporations.

[228] In short, there was no obligation on TRA to account for the Incremental
Supplier Funding (the all-trade deals) in the manner Sobeys did. TRA’s operations
in the late 1980s and early 1990s did not internally track the Incremental Supplier
Funding for its financial statements. Tiller’s evidence was that they went whenever
they could to find the funding. Unlike Sobeys, TRA did not have the same
meticulous tracking and accounting of subsequently received supplier funding.
 Page 55

[229] The exercise of determining the additional price support provided to the
Walshes’ Corporations would involve an invoice-by-invoice comparison on a case-
by-case weekly basis. There is no justification for requiring the Defendants to incur
that level of forensic detail in light of the accepted Trial testimony.

[230] TRA did pass on Incremental Supplier Funding through additional price
support to the Walshes’ Corporations. I am unable to determine with any degree of
specificity the amount of Incremental Supplier funding passed on to the Walshes’
Corporations. Nevertheless, I am satisfied on the testimony of the Defendants’
witnesses, which was not refuted by any of the witnesses for the Walshes, that the
additional price support in the form of reduced cost of goods was substantial.

[231] Having carefully considered the evidence of each witness and the evidence as
a whole, I find the Walshes have not established the elements necessary to prove
negligent or fraudulent misrepresentations.

2. Are any of the claims out of time and barred by the applicable statutory
limitation period?

Limitations Decision

[232] The Defendants previously brought a Summary Trial Application on the

limitations issue in this matter. Although McGrath J held in the Limitations Decision
that she was unable to make a finding respecting the application of the
discoverability principle on the evidence before her. [She did confirm the applicable
limitation periods for the pleaded causes of action and claimed damages.
 Page 56

[233] The applicable limitation periods are:

Cause of Action Heads of Damage

Personal Losses Economic Losses
Mental Loss of Loss of Selling of Loss of Ability
Anguish Reputation Income shares at to work in
artificiall industry
y low
proces

Negligent Per section 5(b) of the Limitations Act, the limitation period for negligent
Misrepresentation misrepresentation and all associated claims for damage is two years.

[234] McGrath J held (at para. 50) that both the economic losses and the personal
losses occurred at the time the Bay Bulls store was sold in February 1995, and the
Merrymeeting Road store was sold in July 1996. The Statement of Claim was not
issued until April 6, 2001. As a result, other than the fraudulent misrepresentation
claim for economic losses from the sale of the Merrymeeting Road store, the
Walshes must rely upon the concept of discoverability to postpone the running of
time so that their claims are not time-barred.

[235] Section 14(1) of the Limitations Act allows the postponement of the running
of the limitation period for actions stipulated therein, including an action “for
personal injury.” Section 13(1) expressly provides that the common law rules
respecting the time at which a cause of action arises continue to apply. Accordingly,
McGrath J concluded (at para. 49) that even for actions that do not fall within section
14(1), the common law rules of discoverability apply.

[236] While the common law rule on discoverability and the statutory definition of
discoverability in the Limitations Act do not contain identical wording, the same
interpretive approach applies: WEH Enterprises Ltd. v. Squires, 2010 NLCA 41; and
Morgan v. Rogers, 2011 NLCA 27.

[237] Under the common law rule, “a cause of action arises for purposes of a
limitation period when the material facts on which it is based have been discovered
 Page 57

or ought to have been discovered by the plaintiff by the exercise of reasonable

diligence” (Central & Trust Co. v. Rafuse, [1986] 2 S.C.R. 147, at 224; and Ryan v.
Moore, 2005 SCC 38, at paras. 2 and 22).

[238] The wording in Section 14(1) reads: “the limitation period fixed by this Act
does not begin to run against a person until he or she knows or, considering all the
circumstances of the matter, ought to know that he or she has a cause of action.”
[emphasis added]

[239] McGrath J’s ruling stated:

56 As such, while section 14 of the Limitations Act does not expressly import
the requirement that the plaintiff exercise reasonable diligence, it is clear that, in
considering all circumstances of the matter under section 14, a court must take into
account whether the plaintiff ought to have discovered that he or she had a cause of
action by exercising reasonable diligence. …

[240] The Walshes have the legal burden of establishing an entitlement to a

postponement.

[241] McGrath J dismissed the Defendants’ Application for Summary Trial because
(at para. 142) she was unable on the whole of the evidence before her to find the
facts necessary to decide when the Walshes knew or ought to have known of their
cause of action. She also found that it would be inappropriate and otherwise unjust
to decide the limitations issue on a Summary Trial Application. She pointed out (at
para. 136) a trial judge would have the benefit of Mr. Walsh’s direct examination
and a fulsome cross-examination and re-direct. She had concerns (at para. 137) that
Mr. Walsh’s post-Discovery anxiety and stress “may have caused him to mix up
dates.”

[242] McGrath J’s comments on discoverability are entirely consistent with the
recent decision of the Supreme Court of Canada’s in Grant Thornton LLP v. New
Brunswick, 2021 SCC 31.
 Page 58

Grant Thornton LLP v. New Brunswick

[243] Grant Thornton makes clear the particular degree of knowledge required to
discover a claim. This decision was released after the conclusion of the oral
submissions the parties made before me in July 2021. Counsel for the Defendants
wrote to me on September 27, 2022, with the concurrence of counsel for the
Walshes, to bring the decision to my attention for consideration on the issue of
discoverability. The parties did not seek to make further submissions.

[244] Although the Supreme Court was dealing with the specific language and
interpretation of the New Brunswick legislation, Limitation of Actions Act, S.N.B
2009, c. L-8.5 (the “LAA”), the comments of Moldaver J, concurred unanimously by
all six other judges hearing the appeal, have import for my analysis and findings.

[245] Grant Thornton held that the discoverability provision of the LAA codifies the
common law rule of discoverability. That is similar to what the Newfoundland and
Labrador Court of Appeal has held on the statutory discoverability provision of the
Limitations Act: (WEH Enterprise, at para. 13; and Morgan, at para. 16).

[246] As established by both the common law rule and the statutory discoverability
provision, “the limitation period is triggered when the plaintiff discovers or ought to
have discovered through the exercise of reasonable diligence the material facts on
which the claim is based” (Grant Thornton, at para 40).

[247] Grant Thornton also considered the particular degree of knowledge required
to discover a claim. Moldaver J proposed the following approach (at para. 42): “a
claim is discovered when a plaintiff has knowledge, actual or constructive, of the
material facts upon which a plausible inference of liability on the defendant’s part
can be drawn.”

[248] Grant Thornton goes on to explain (at para. 46) that: “The plausible inference
of liability requirement ensures that the degree of knowledge needed to discover a
 Page 59

claim is more than mere suspicion or speculation.” The standard does not require
“certainty of liability,” “perfect knowledge,” or “perfect certainty.” A plaintiff does
not need to know the exact extent or type of harm it has suffered.

[249] McGrath J (at para. 74) in the Limitations Decision recognized, “[i]t is also
not necessary that a plaintiff have knowledge of all evidence that may tend to prove
their claim or make it more probable that the claim will be successful. The Walshes
needed knowledge of the material facts to plead and support the claim against the
Defendants.

Application of Discoverability to the Facts

[250] I turn to the question of determining when the Walshes discovered their claim
against TRA and Sobeys. The focus is particularly on Mr. Walsh’s knowledge, as
he was the directing mind of their Corporations and in the forefront of the
investigative inquiries on whether TRA passed on all the deals.

[251] What did Mr. Walsh know and when, or through reasonable diligence ought
to have known, from which a plausible inference can be made that TRA did not pass
on all the trade deals resulting in a loss to the Walshes’ Corporations and their
ultimate sale price.

[252] I note Hoegg JA in Morgan (at para. 26) expressed when dealing specifically
with section 14 of the Limitations Act that: “While the concept of knowledge
encompasses awareness and appreciation, it would be preferable to use the actual
word "know" as found in the statute.” I will therefore remain cognizant that I have
to apply the actual wording of section 14 to my factual findings on the requisite
degree of Mr. Walsh’s knowledge. That is, when did he know or, considering all
the circumstances of the matter, ought to known that he had a cause of action?

[253] The Defendants contend Mr. Walsh knew the facts relevant to his cause of
action against TRA on or before January 29, 1999. A finding that the limitation
 Page 60

period began to run in January 1999 (or any point prior to April 6, 1999) means that
the only cause of action and claim for relief left is the claim for economic losses
arising from fraudulent misrepresentation.

[254] The Walshes submit the evidence supports their entitlement for postponement
of the two-year limitation period to June 1999. Before then, they say Mr. Walsh was
on a fact-finding exercise triggered by suspicion that culminated in the possession
of sufficient knowledge on which to commence legal action. In 1998, he began to
make inquiries after he discovered that a competing independent supermarket was
able to make money while he was not. I will explore the evidence on the Walshes’
Corporations profitability later, which reveals that the Corporations were able to
make money but not to the extent Mr. Walsh expected.

[255] They say it was not until Mr. Walsh confronted his trusted advisor, Green, in
a conversation in June 1999 that Green finally admitted the truth: that the Walshes’
stores had not received the benefit of the Trade Deals. They propose that while
Mr. Walsh may have had suspicions before then, they were nothing more than
suspicions.

[256] I find on assessing the testimony and totality of the evidence before me that
Mr. Walsh had ample knowledge of the material facts by at least January 1999 to
draw a plausible inference of liability on TRA’s part.

By-Cheque evidence

[257] The chronology of Mr. Walsh’s knowledge of material facts, or what counsel
for the Defendants refer to as “the Walshes’ consciousness of their cause of action”
begins with their awareness of By-cheques.

[258] By-cheques were one of the specific trade deals pleaded in the Walshes’
Further Amended Statement of Claim in paragraph 21(m), specifically averred to as
“published by cheque allowance.”
 Page 61

[259] The Defendants point out the evidence directly contradicts Mr. Walsh’s
position that he did not know about By-cheques until within two years of issuance
of the action. He stated in cross-examination, “I wasn’t aware of anything about By-
cheques when I was in business.” The Walshes’ witnesses, Tiller and O’Leary both
testified that they were involved in By-cheque discussions with Mr. Walsh,
respectively in 1983 and by no later than 1992.

[260] I find By-cheque allowances were a material fact that Mr. Walsh had
knowledge of more than two years before commencing the action. It is
understandable why Mr. Walsh may have been confused about his first knowledge
of By-cheques based on what Tiller and O’Leary told him about By-cheques. Tiller
told him that By-cheques were “a very small part of the business,” and O’Leary
confirmed that By-cheques “weren’t the large portion of the business” at the time he
talked to Mr. Walsh.

[261] Notwithstanding Mr. Walsh’s first knowledge of By-cheques, he continued to

doggedly pursue the fact of receipt of By-cheque allowances. Mr. Walsh confirmed
in cross-examination that he discussed By-cheques with Green at a lunch meeting in
December 1998. In one of the taped conversations with Green on June 18, 1999,
Mr. Walsh said:

… the closest time you ever come to telling me the truth of it, Joe, is when we had
a bite of lunch at Auntie Crae’s there in December. I mean you started telling me I
wasn’t getting the By-cheques and that. That’s when I started getting on to it.

[262] Mr. Walsh’s apparent explanation for not commencing his claim in December
1998 when he knew he was not getting By-cheques directly credited to Off-Invoice
deals is that Green told him “the By-cheques were so small that you’re worrying
about nothing.”

[263] I cannot accept Mr. Walsh’s explanation (and lack of requisite knowledge) for
not commencing the action until April 2001 in light of the other pertinent testimony
on discoverability.
 Page 62

Tiller’s 1997 No Net-Net Cost Advice

[264] Tiller provided evidence in relation to the Walshes’ knowledge in 1997 that
the Defendants were not providing their Corporations with the deals and allowances,
which the Walshes allege they were promised.

[265] Tiller was examined on a telephone conversation with Mr. Walsh on July 1,
2000, that Mr. Walsh taped without Tiller’s knowledge. In that call, Tiller made it
clear that he had told Mr. Walsh three years previously, that Walsh did not receive
net cost pricing from TRA. The transcribed conversation included this exchange:

RT Well, if you stop and think about it, how would he – how could an outfit geared up to
service hundreds of customers like TRA ever ever in a dogs ages be able to come up with
a system that would treat you any different than all the others.
DW Yeah
RT And manage it properly, so you know in your own heart and soul you weren’t getting it.
DW Yes.
RT Sure, I told – now don’t get me wrong now, but I told you this three years ago,
remember?
DW Yes.
RT That you weren’t getting it.
DW Yes.
RT Not invoice cost – not TRA cost.
DW Not TRA’s cost.
RT TRA’s net/net cost.

[266] The timing of the exchange was the subject of examination, cross-
examination, and re-direct at Trial. Mr. Walsh had suggested that the references to
“three years ago” was really “three months ago.” However, Tiller was explicit that
the call occurred three years prior to the date of the telephone discussion. In re-
direct, he testified:

Q. Is when the conversation might have occurred, whether it was three months ago
or you seemed to suggest at Discovery it was three months ago?

A. No, it was three years.

Q. It was three years?

 Page 63

A. Yeah.

Q. Okay. Okay.

A. You know, and he couldn’t get it. They weren’t going to give him cost.

Q. That was your --

A. On a retail program.

[267] On further inquiry from me, Tiller confirmed it was three years ago from the
date of the July 2000 call, and not three months. Such cogent viva voce evidence is
what I had the benefit of hearing and assessing that McGrath J did not in the
Summary Trial.

Mr. Walsh’s Examination on Lunch Meetings in 1998

[268] There is additional evidence from 1998 that indicates Mr. Walsh had material
knowledge of grounds necessary to commence the action.

[269] Mr. Walsh and Mrs. Walsh had a lunch meeting at the Albatross Hotel in
Gander on September 29, 1998 following attendance at a wake with Green, Pat
O’Keefe of TRA, and others. Mr. Walsh confirmed on cross-examination that, at
this lunch, Green stated that Foodland was not the same anymore because the CEO
of Sobeys, Doug Stewart, was not sharing as much of the deals anymore. Mr. Walsh
confirmed he later told O’Keefe (in a telephone call Walsh taped) that if Green had
not made those comments, he would not have gotten wise to some issues.

[270] Mr. Walsh discussed the Albatross Hotel lunch comments with TRA’s head
buyer, Brian Forristall on October 12, 2002. The transcript of the call was entered
as an exhibit through Mr. Walsh. Mr. Walsh is recorded as saying: “Now, I knew
the difference then, right, because I was after finding. Sure he (Green) never passed
the deals on.” Mr. Walsh stated at Trial, in this conversation with Forristall, he was
pretending he knew more than he did. I find Mr. Walsh’s perception of his memory
from that call is misinformed.
 Page 64

[271] In a lunch with Green and O’Keefe at the Avalon Mall on October 28, 1998,
Walsh said Green expressed he was “really upset” that TRA and Sobeys would not
let Foodlands make money anymore.

[272] Mr. Walsh confirmed that by December 1998 he was aware of the 1984
Sobeys Supply Agreement and that By-cheques were not to be passed along.

[273] Mr. Walsh therefore knew by December 1998 that the Walshes’ Corporations
were not receiving all the deals in the same manner as Sobeys, but he was working
to “complete the puzzle.” The legal requirement for commencement of the action is
not completion of the puzzle. Mr. Walsh had the ‘pieces of the puzzle’ or so-called
material facts he needed to frame the action. Completion of the puzzle can wait for
the tendering of the evidentiary pieces to prove the elements of the causes of action.

January 29, 1999 Meeting with Counsel and Bill Moulton

[274] If I am wrong about the requisite knowledge Mr. Walsh had acquired by
December 1998, he most certainly had sufficient knowledge for discoverability on
January 29, 1999.

[275] Mr. Walsh tracked down Bill Moulton, who was with Newfoundland
Margarine and Red Rose Tea, and had him come to his house for a meeting on
January 29, 1999. Mr. Walsh’s purpose was to learn how the supply of goods from
the manufacturer to the wholesaler worked, and in particular, to learn about the
costing of goods. Mr. Walsh’s lawyer at the time, Gerry O’Brien, Q.C., who
ultimately issued the Statement of Claim, attended that meeting. Asked about why
O’Brien was present, Mr. Walsh testified:

Q. And you wanted Mr. O’Brien to attend because you wanted Moulton to tell
both of you how the suppliers provide money to the wholesalers?

A. How suppliers provided money?

Q. Yeah.
 Page 65

A. I wanted to know about the costing and how it worked.

Q. Yeah.

A. And Mr. O’Brien was there for lunch as he was many times.

Q. Yeah.

A. With us.

Q. But you wanted Mr. O’Brien to hear what Mr. Moulton had to say, correct?

A. Mr. O’Brien was a friend besides a lawyer and, sure, I was, I never denied the
fact that I was suspicious in 1998. …

[276] In that discussion, Moulton related to Mr. Walsh numerous aspects of trade
deals that were available to wholesalers in the marketplace. Moulton made notes of
the meeting and gave them to Mr. Walsh. The notes speak to the amount of product
bought on deal, what would show up on an invoice and how “hidden dollars” are
dealt with. Mr. Walsh testified under cross-examination by Seviour, Q.C. as to
Moulton’s information as follows:

Q. And by the last part of 1998, it’s fair to say that you were feeling there was
something not right about all of this?

A. That’s right.

Q. And when you say something was wrong, you mean something was
wrong with the pricing, which TRA had provided to your companies?

A. I don’t know if that was exactly what I had, but I just knew—I had a gut
feeling maybe, maybe since for a long, long time, but I could never put my finger
on it. And even up then, I couldn’t put my finger on it, but Joe was upset and I
didn’t know, I didn’t know how they were doing it, I didn’t know they were, they
were pricing us the same as Sobeys to fool us. I didn’t know that.

Q. But when you say that you thought –

A. Mr. Seviour, that was proven when we met with Bill Moulton. I mean, I
said there’s no hidden dollars with Sobeys. I said, we got exactly the same prices
as Sobeys. I mean, this was put together pretty slick. I mean, you want to have an
 Page 66

awful lot of wholesale experience to be able to tie to on a cover what they were
doing. (emphasis added)

Fraudulent Concealment Doctrine Has No Application

[277] The Walshes rely on the doctrine of fraudulent concealment. I question the
residual necessity of this equitable doctrine in light of the now well-established legal
requirements to engage the discoverability principle. Nevertheless, since the
Walshes seek reliance on the doctrine, I find it is of no assistance to them.

[278] The doctrine allows for the postponement of a limitation period, in the context
of the Defendants’ deliberate concealment of material facts that would have
prevented the Walshes from reasonably knowing they had a cause of action : Bauer
v. Erben, 2007 NBQR 299, at para. 111. It would indeed be unjust to permit the
Defendants to benefit from their ability to conceal matters long enough to fall within
the limitation period.

[279] I have determined that the Defendants did not conceal the material facts that
would trigger the running of the limitation period from the Walshes. When
Mr. Walsh confronted Green and Tiller, they revealed to him that he was not
receiving the alleged entitlements and what he believed TRA had promised the
Walshes.

[280] The relationship the Walshes built with Green over the years, through their
association with TRA and time thereafter, was unquestionably one of mutual
friendship and trust. , not knowing he was being taped, had the opportunity to
mislead and conceal the truth, but he never lied to or gave Mr. Walsh the ammunition
he was attempting to marshal against the Defendants.

[281] I am satisfied that Mr. Walsh knew or ,considering all the circumstances of
the matter, ought to have known he had a cause of action against the Defendants on
or before January 29, 1999.
 Page 67

[282] The Walshes therefore discovered their claim more than two years before
commencing it on April 6, 2001. The Walshes’ claims for negligence, negligent
misrepresentation, and personal losses for fraudulent misrepresentation are all
statute-barred by s. 5(a) and (b) of the Limitations Act. The only claim not time-
barred (but dismissed for no liability) is for economic losses arising from fraudulent
misrepresentation governed by s. 6(c) of the Limitations Act.

3. Are the claims for losses to the Walshes’ Corporations precluded by the
common law rule in Foss v. Harbottle, and if so, can this be considered
“too flagrantly opposed to justice”?

[283] Even if I had found TRA made the misrepresentations alleged, the application
of Foss v. Harbottle and the settled law would not allow the Walshes to recover
damages for sale of their shares in their Corporations.

Sale of Shares in Bay Bull Store

[284] The evidence establishes the following:

(a) The Walshes were the shareholders of Davlen Holdings, which in turn held
all of the shares of Walsh’s Foodland that operated the Bay Bulls store.

(b) When faced with the prospect of TRA opening an additional Foodland store
on the Southern Shore in 1994, the Walshes decided to leave the Foodland
Program and to deal with another grocery supplier – Lewisporte
Wholesalers/IGA.

(c) The deal with IGA collapsed because IGA sought control over the Bay Bulls
store, which David Walsh was unprepared to relinquish.
 Page 68

(d) When the deal with IGA collapsed, the Walshes agreed to sell their shares in
Davlen Holdings to Sobey’s Land Holdings Limited, and their house at Bay
Bulls to TRA. This sale occurred on February 10, 1995. The price paid for
the Walshes’ shares in [Davlen Holdings] was structured on a tax-efficient
basis to be $1.625 million.

[285] The price included $125,000 that was attributable to the sale of the Walshes’
Bay Bulls house for $250,000.

[286] Davlen Holdings and Walsh’s Foodland Limited were dissolved effective
May 1, 1998.

Sale of Shares Respecting Merrymeeting Road Store

[287] The Walshes were the shareholders in DLW Investments Ltd., which owned
and operated the Walsh’s Family Foods store at Merrymeeting Road, St. John’s.

[288] In 1996, the Walshes offered to sell their shares in the Merrymeeting Road
business to TRA and to Colemans. The offer states: “THIS SALE IS OUR
RETIREMENT PLAN.”

[289] TRA declined the Walshes’ offer.

[290] The Walshes agreed to sell their shares in DLW Investments to Colemans.
They entered into an Agreement for Sale of Shares among the Walshes, Colemans
and DLW Investments. The sale occurred on or about July 16, 1996, at an aggregate
consideration of $1,285,000, made up as follows:

a) $100,000 purchase price;

b) repayment of shareholder’s loans in the amount of $735,000;
 Page 69

c) consulting fees in the aggregate of $450,000 under a seven-year Joint

Consulting Agreement.

[291] DLW Investments was dissolved on September 30, 1997.

Application of Foss v Harbottle

[292] The well-settled law is that:

(i) a shareholder cannot advance a cause of action in respect of a wrong to a

corporation. There must be an independent wrong done to the shareholder;
and,

(ii) a shareholder cannot recover damages which were sustained by a

corporation. A shareholder’s damage must be direct and independent from
the injury suffered by the corporation.

[293] The two prerequisites to an individual, personal claim by a shareholder were

most recently confirmed by the Supreme Court of Canada in Brunette v. Legault Joly
Thiffault, s.e.n.c.r.l., 2018 SCC 55. Justice Rowe (at para. 29) stated:

In Houle,1 this Court reaffirmed that shareholders cannot institute proceedings in

relation to faults committed by a third-party defendant against a corporation as the
right to do so belongs to the corporation itself: pp. 177-80. The Court recognized,
however, that in certain circumstances shareholders may possess their own right of
action against the same defendant: pp. 180-87. In such cases, the shareholders must
establish (1) that the defendant breached a distinct obligation owed to the
shareholders, and (2) that this breach resulted in a direct injury suffered by the
shareholders, independent from that suffered by the corporation: ibid., at pp. 182
and 186; see Biosyntech, [2016 QCCA 1923], at para. 30.

1
Banque nationale du Canada c. Houle, [1990] 3 S.C.R. 122
 Page 70

[294] Brunette is confirmation of the common law rule, and is binding authority
notwithstanding the fact that Brunette was itself decided in the context of Quebec
civil law. I take particular note that Justice Rowe (as he then was) concurred in the
Court of Appeal reasons for the Reinstatement Decision.

[295] In this province, our Court of Appeal in NPV Management Ltd. v. Anthony,
2003 NLCA 41, recognized the two distinct prerequisites. The Court held that a
shareholder’s claim for loss of share value failed to satisfy either of the two
prerequisites, and noted (at para. 43) that: “Reduction in the value of shares falls
clearly within the ambit of a derivative action, and outside the scope of a personal
action.”

[296] The two prerequisite principles were applied consistently throughout this
litigation in the Reinstatement Decision and Whalen CJ’s 2015 Pleadings Decision.
Orsborn J at a much earlier stage in the proceedings applied the principle that a
corporate loss claim is not maintainable by individual shareholders.

[297] The Walshes are stuck with this Court’s prior finding that their claim for
losses resulting from having sold their shares at an artificially low price “are
damages suffered by the Corporations and not the Plaintiffs.” Issue estoppel
prevents the Walshes from re-litigating that same question decided previously in the
proceedings between the parties, when it was a final decision on the issue: Danyluk
v. Ainsworth Technologies Inc., 2001 SCC 44, at para. 25.

Piercing the Corporate Veil

[298] Whalen C J, in the 2015 Pleadings Decision, relied on the three authorities in
holding that the Court might have an equitable discretion to allow the Walshes to
pierce the corporate veils: (Kosmopoulos v. Constitution Insurance Co. of Canada,
[1987] 1 S.C.R. 2; 642947 Ontario Ltd. v. Fleischer (2001), 209 D.L.R. (4th) 182,
56 O.R. (3d) 417 (C.A.); and Salah v. Timothy’s Coffees of the World Iinc., 2010
ONCA 673). He held they had “a possible chance of success” in that a Judge of this
 Page 71

Court could find that refusing to permit their claim for loss of share value would lead
to a result “too flagrantly opposed to justice.”

[299] Counsel for the Defendants submit that to the extent there may have ever been
a residual discretion of the type referred to by Whalen CJ, the law has since been
clarified to confirm that no such discretion exists.

[300] The decisions of the Ontario Court of Appeal in Yaiguaje v. Chevron

Corporation, 2018 ONCA 472, the Quebec Court of Appeal in Groupe d’action
d’investisseurs dans Biosyntech c Tsang, 2016 QCCA 1923; and, most importantly,
the Supreme Court of Canada in Brunette were all decided after Whalen CJ’s
decision. These cases, the Defendants point out, affirm that the Court does not have
a residual discretion to deviate from the two necessary conditions for the
advancement of a shareholder action.

[301] Three years after the 2015 Pleadings Decision, the Ontario Court of Appeal
in Chevron rejected the argument that the reference to the “too flagrantly opposed
to justice” passage from Kosmopoulos (at para. 12) conferred any equitable
discretion on the court to pierce the corporate veil in the circumstances of that case.

[302] In Chevron, the appellants (plaintiffs) were the indigenous peoples of the
Republic of Ecuador who had their traditional lands polluted from oil exploration
and extraction. They obtained a foreign judgment in the Ecuadorian courts against
a subsidiary of Chevron Corporation, and sought to execute the judgment against
Chevron Canada after unsuccessful attempts to do so against Chevron and its
subsidiaries in the United States. The court (at para. 8) called it a “tragic case” and
recognized the appellants’ “frustration in obtaining justice is understandable.”

[303] The appellants in Chevron urged the court to ignore the corporate separateness
of Chevron Corporation and Chevron Canada. They argued the courts have an
equitable ability to pierce the corporate veil whenever it appears just. The court
concluded that is not the law in Ontario, and stated (at para. 10) that the appellants
 Page 72

provided “no principled basis for piercing the corporate veil other than the assertion
that we should do so in the interests of justice.”

[304] It must be noted, however, the court in Chevron acknowledged (at para. 79)
that the equities of the case were far from clear. The United States courts had found
the Ecuadorian judgment against Chevron Corporation was the result of “massive”
fraudulent behavior by counsel for the appellants in the Ecuadorian proceedings.

[305] Also, after the 2015 Pleadings Decision, the Quebec Court of Appeal, in
Biosyntech, rejected a proposed class action that would have had a group of
shareholders bring an action after they lost the value of their shares. The
shareholders alleged the directors of the corporation committed a number of faults
that led to the corporation’s bankruptcy and asset sale. It appears from my reading
of the case that among the four pleaded faults (at para. 12) there was no specific
allegation of fraud on the part of the directors.

[306] In speaking to the distinction between a corporation and its shareholders, the
court in Biosyntech noted (at para. 24) that “[s]uch distinction, at least in the
corporate context, is hardly exclusive to Quebec civil law. The principle is known
in Common Law jurisdictions as the rule in Foss v. Harbottle.”

[307] Biosyntech referred (at para. 29) with approval to our Court of Appeal’s
decision in NPV as authority for the principle that a shareholder cannot bring an
action for loss of share value.

[308] Moreover, I am bound by the 2018 Supreme Court of Canada’s decision in

Brunette. It considered a claim of the two individual plaintiffs that were trustees of
a company called Fiducie, which was the sole shareholder of a holding company,
9143-1304 Québec Inc. that itself controlled corporations comprising Groupe
Melior.
 Page 73

[309] The plaintiffs in Brunette claimed that the defendants, a group of lawyers and
accountants, committed a number of professional faults in setting up the tax structure
of Groupe Melior and, in doing so, breached their duty to advise Fiducie. They
alleged that the tax structure set up by the defendants was not compliant with
legislation and that it exposed the corporations to unexpected tax liability. The faults
they alleged led to the bankruptcy of most of the Groupe Melior corporations, the
bankruptcy of the holding company, and the total loss of value of Fiducie’s assets.

[310] Again, I observe there was no pleaded claim in fraud or fraudulent

misrepresentation. While Groupe Melior’s vice-president had committed fraud
worth $1.8 million against the corporations, the plaintiffs did not plead fraud or
fraudulent misrepresentation against the named defendants.

[311] Justice Rowe in Brunette, with specific reference to Houle and to

Kosmopolous, expressly dispelled any suggestion that there is a residual discretion
allowing plaintiffs to pierce the corporate veil they created in order to recover
corporate losses. He stated, (at para. 27) “just as shareholders cannot be liable for
faults committed by the corporation, so too are they barred from seeking damages
committed against it.” He noted (at para. 30): “Houle did not create an exception to
the general rule barring shareholders from recovering damages in relation to faults
committed against the corporation.”

[312] There is considerable merit to the Defendants’ submission that subsequent

case law leaves no residual discretion to depart from the two necessary conditions
for the advancement of a shareholder action. In light of my conclusion below that
the Walshes have not established the first prerequisite, an independent actionable
wrong, it is unnecessary for me to make a broader pronouncement on the law. I
confine my ruling to the narrow issues left for trial determination by the Court of
Appeal Reinstatement Decision and the 2015 Pleadings Decision.
 Page 74

ONCA Decisions in Midland Resources and Tran v. Bloorston

[313] Dicks, Q.C. attempted to meet the Foss v. Harbottle argument of the
defendants by focusing in oral submissions on two Ontario Court of Appeal
authorities: Midland Resources Holding Ltd. v. Shtaif and Tran v. Bloorston Farms
Ltd., 2020 ONCA 440. These authorities do not aid the Walshes in their claims.

[314] Midland Resources involved claims for fraudulent misrepresentation and

conspiracy. The parties were shareholders in two successive corporate ventures to
develop small oil and gas fields in Russia. The first venture was through Magellan
Energy Limited. It became apparent Magellan was not the legitimate public
company some of the shareholders had thought it was. It turned out to be a sham
public corporation promoted by two of the defendants. The shareholders reorganized
their venture using a new company, Koll Resources Limited, to continue it.

[315] The court in Midland Resources characterized the claims (at para. 116) as
personal in nature, seeking damages for tortious harm directly caused to the plaintiff
shareholders. The plaintiffs alleged the individual defendants engaged in deceit and
conspiracies to induce them to part with their money and invest in Magellan and
Koll. The court concluded (at para. 117) the rule in Foss v. Harbottle does not
preclude a shareholder from maintaining a claim for harm done directly to it.

[316] The appellate court held there was no error in the trial judge’s findings on the
“unusual facts” of this case that Midland, the shareholder, did suffer a direct injury
or loss by the defendants’ fraudulent conduct. The defendants’ conduct caused
Midland to invest monies in Magellan. Midland claimed for the loss of that
investment. The court said (at para 119): “That distinguishes the present case from
the typical ‘indirect loss’ case in which a shareholder seeks to recover the loss of
share value because the manner of operations of the corporation depressed the
market price for its stock.”

[317] The Walshes are seeking loss of share value because the alleged
misrepresentations of the Defendants affected the operations of their Corporations
 Page 75

and depressed the value of their shares. To hold such loss as “too flagrantly opposed
to justice” would require me to stretch the concept of justice to contortions not
recognizable by settled law, and without equitable factual grounds for doing so. If I
had found the Defendants made fraudulent representations and engaged in a
fraudulent concealment as alleged, the Walshes would perhaps be in a much better
and convincing position to support the position that refusing to permit their claim
for loss of share value would lead to a result “too flagrantly opposed to justice.”

[318] I cannot do justice to the parties by ignoring fundamental legal principles that
I am bound to apply.

[319] The more recent decision of the Ontario Court of Appeal, relied on by counsel
for the Walshes, in Tran simply confirms the limit of the rule in Foss v. Harbottle.
The court made clear (at para. 32):

… a wrong done to the corporation that results in diminished share value does
not ground a personal cause of action for the shareholder. The party with the
cause of action for the wrong is the corporation. The loss in share value is simply
reflective of the loss incurred by the corporation as a result of the wrong done to it,
and would be remedied if the corporation took action to recover its loss from the
wrongdoer. [emphasis added]

[320] In Tran, the court found (at para. 3) the wrong was not done to the corporation,
but to the shareholder personally.

[321] The plaintiff was a tenant under the lease with the defendant, and only the
plaintiff had a cause of action for its wrongful termination. The plaintiff operated a
restaurant through an incorporated company in the leased premises. The lower court
found that the incorporated company had no cause of action against the defendant
because it was not the tenant under the lease. The restaurant closed when the
landlord locked the plaintiff tenant out. She sued to recover for the loss of the value
of her shares in the company operating the restaurant because her shares became
worthless.
 Page 76

[322] Dicks, Q.C. relies particularly on this passage from Tran (at para. 65) and
argues this fits squarely with the Walshes’ claim:

When a shareholder sues because of a wrong done to her, and in the absence of a
wrong to the corporation that gives the corporation a cause of action, allowing the
shareholder's action for any properly recoverable damages respects the separate
legal identity of the corporation. The shareholder is pursuing her own cause of
action, not a cause of action that belongs to a separate legal person (the
corporation). Moreover, a claim for loss of share value is a claim for damage to the
shareholder's property (the shares), not a claim for anything that belongs to the
corporation. Shares in a corporation are property of the shareholder, not of the
corporation.

[323] The distinguishing aspect of the Walshes’ claim is that the alleged wrong was
to the Walshes’ Corporations. The plaintiff’s corporation in Tran had no cause of
action and could not bring the action.

[324] The reasoning in Tran (at para. 67) also addressed the second necessary
requirement permitting claims for loss of share value — the loss suffered must be
direct and independent from that suffered by the corporation. The circumstances in
Tran illustrated when a claim for diminution in share value is not simply a claim for
loss that is reflective of the loss suffered by the corporation. The claim for
diminution in share value resulted from a relationship with the wrongdoer that was
independent of any relationship the corporation had with the wrongdoer. Only the
plaintiff, and not the corporation, was in a contractual relationship with the
defendant.

[325] The court concluded (at para. 68): “Accordingly, the rule in Foss v. Harbottle
does not preclude a claim for diminution of share value when the shareholder has
her own cause of action because of a wrong done to her, and the corporation, which
suffered a loss but not because of a legal wrong done to it, has no cause of action.”

[326] Lastly, Tran acknowledged (at para. 37) “[w]hen the same or overlapping
facts constitute actionable wrongs against both the corporation and shareholder, a
shareholder’s claim for diminution in share value may or may not be permissible.”
 Page 77

No Independent Wrong to the Walshes as Individuals

[327] What remains paramount is that the Walshes must establish an independent
wrong to them as individuals. They have failed to do so.

[328] The Walshes confuse and conflate obligations owed to their Corporations as
obligations owed to them in their personal capacities. They fail to appreciate the
distinct legal existence of the Corporations.

[329] The Walshes misapprehend the legal distinction between the Walshes as
individuals and their Corporations, and they misconstrue the nature of the
contractual relationship. In Paragraph 3 of the Closing Submissions, the Walshes
say that they (the Walshes) were promised net cost of products that would be
discounted with the full benefit of all supplier discounts, and that they (the Walshes)
were to pay such net cost plus an upcharge to TRA as Sobeys paid. They specifically
refer to this as the “Contract.” At paragraph 404, they incorrectly describe the
Contract as “the Plaintiffs’ contract with TRA/Sobeys in late 1983.”

[330] They cannot establish an independent wrong to them as individuals because

of these irrefutable facts:

i. There was no contractual relationship with the Walshes;

ii. The Walshes were never a Foodland affiliate;

iii. They, as individuals, had no entitlement to trade deals;

iv. Any benefits of the alleged contractual arrangement between TRA and the
Walshes’ Corporations would have been for the Corporations, not the
Walshes; and
 Page 78

v. The Walshes did not purchase any goods from TRA or any of the
Defendants.

[331] All of the misrepresentations alleged concern the asserted rights of the
Corporations, not the Walshes personally. They are all representations as to what
the Corporations were expecting to receive.

[332] It is readily apparent from the Walshes’ Closing Submissions the struggle
their counsel had, after all of the tendered evidence, to point to any evidence that
established a separate duty of care owed to the Walshes as individuals. Their counsel
cannot be faulted for that — despite voluminous document product, years of
litigation, and a lengthy Trial — there is no evidence to prove the existence of the
pleaded claim of a “special relationship” or “personal relationship.”

[333] The action survived dismissal at the pleadings stage but cannot survive
dismissal after fulsome scrutiny of the evidence. The Walshes were fully entitled to
the Court’s assessment of their claims on the evidence tendered.

[334] The Walshes’ confusion about the distinction between duties owed to a
corporation and duties owed to shareholders is not uncommon in litigation involving
attempts to circumvent the rule in Foss v. Harbottle and to pierce of the corporate
veil.

[335] In Brunette, Rowe J, explained the confusion in obligations:

37 It is clear from the foregoing that the appellants confuse the obligations owed
by the respondents to the Groupe Melior corporations with those allegedly owed to
Fiducie and to Mr. Maynard. … The problem is that an obligation owed by the
respondents to Groupe Melior does not necessarily give rise to an independent
obligation owed to Fiducie.

39 It is, of course, true that injury to the corporations in Groupe Melior may have
consequences for those holding their shares. Fiducie is the sole shareholder of 9143-
 Page 79

1304 Québec inc.; this corporation controlled in whole or in part, the corporations
of Groupe Melior. …

40 … a legal obligation owed to Fiducie [is] distinct from those owed to the
Groupe Melior.

[336] Similarly, in McGowan v. Bank of Nova Scotia, 2010 PESC 17, aff’d 2001
PECA 202 the plaintiffs were the sole shareholders of a farm machinery company
called McGowan Tractor. McGowan Tractor did its banking with the defendant
bank, where it had a line of credit. The plaintiffs alleged that the bank manager told
the plaintiffs that McGowan Tractor had 30 days to pay off its line of credit, and
continuously threatened them with enforcement proceedings.

[337] McGowan Tractor paid off its line of credit, but McGowan claimed he
suffered serious health problems brought on by the stress of operating the company
under the uncertain circumstances. McGowan Tractor’s financial circumstances
continued to decline, and the plaintiffs sold their shares for $1.00, and thus lost
almost all their equity.

[338] The plaintiffs blamed the company’s failure and their personal loss on the
actions of the bank. They asked the court “to lift the corporate veil of McGowan
Tractor” and to enable them to recover damages against the bank. They claimed the
bank breached its contract with McGowan Tractor and the plaintiffs, and further, the
bank owed a duty of care to the plaintiffs and breached that duty.

[339] Like the Walshes, the plaintiffs in McGowan sought to pierce the corporate
veil that they themselves had created, and argued the defendant owed them a separate
duty of care. The trial court and the appellate court dismissed their claims.

2
Leave to appeal to the Supreme Court of Canada dismissed McGowan v Bank of Nova Scotia (2012), 1026 A.P.R.
358 (note), 330 Nfld. & P.E.I.R. 358 (note) (SCC).
 Page 80

[340] The Court of Appeal in McGowan held that the defendant Bank did not owe
the shareholders a duty of care because the relationship at issue was with the
company, not the shareholders. McQuaid JA stated (at para. 42), “[i]t would be
unjust and unfair to impose upon the [bank] a duty of care to the shareholders of the
company with respect to actions which [the bank] took against the company and not
the [McGowans] personally.”

[341] McQuaid JA furthermore explained (at para. 43) even if there was proximity
of relationship to make it foreseeable on the part of the bank that if it caused harm
to McGowan Tractor it would result in harm to the McGowans as shareholders,
policy reasons would nevertheless negate the duty of care. To impose a duty of care
otherwise would necessarily pierce the corporate veil and violate the long-standing
rule at common law.

Other Authorities Relied on by the Walshes

[342] The Defendants in their Post-trial Brief distinguish the case law authorities
that the Walshes put forward in their Trial Brief to support the assertion that a duty
of care was owed to them in their personal capacities. I accept the Defendant’s
position that the cases demonstrate the inappropriate conflation of duties that are
asserted to be owed to the Walshes as individuals, when they could only have been
owed to their Corporations.

[343] The Walshes refer to 3Com Corp. v. Zorin International Corp., 2006
CarswellOnt 3333, 148 A.C.W.S. (3d) 819 (C.A.), as a persuasive authority and
applicable to the facts of this action. The plaintiffs were the corporations that had
received the misrepresentations (not the shareholders), and it was the corporations
(not the shareholders) that were awarded damages. All that can be said about 3Com
is that it was a negligent misrepresentation action regarding deals, but it does nothing
to advance the Walshes’ causes of action and does not, in any way, advance their
argument that a special duty was owed to them in their personal capacity.
 Page 81

[344] The Walshes refer extensively to Catalyst Pulp and Paper Sales Inc. v.
Universal Paper Export Co, 2008 BCSC 515, as a persuasive precedent that there is
a duty of disclosure in contracts.

[345] The issue in the present action is not whether there is a duty as between
contracting parties. The issue is whether a duty is owed to shareholders of a
corporation that has allegedly entered into a contract.

[346] Catalyst Pulp is not on point and is of no assistance to the Walshes’ action.
As with 3Com, the plaintiff in Catalyst Pulp was the corporation that had received
the misrepresentations (not the shareholders) and it was the corporation (not the
shareholders) that was awarded damages.

[347] The Walshes rely on Streamside Engineering & Development Ltd. v.

Canadian Imperial Bank of Commerce, [1990] Nfld. & P.E.I.R. 220, 266 A.P.R. 220
(N.L.S.C.(T.D.)) and state in their Trial Brief that liability was established because
the bank made no effort “to develop an accurate understanding of the principal
shareholder of the plaintiff company.” This case too supports the Defendants’
position that any duty of care was owed to the Corporations, and that the Defendants
were dealing with the Walshes in their capacity as representatives of those
Corporations.

[348] In Streamside at paragraph 4, the court noted under the heading Issues, “The
gist of Streamside’s claim, is an allegation of negligent misrepresentation by the
Bank, following a specific request, made by Streamside in the normal course of
business.” The plaintiff in that case was the corporation. The rule in Foss v.
Harbottle was not engaged.

[349] The Walshes also refer to Cuscuna c. Ferrarelli, 2017 QCCS 2475, a decision
of the Quebec Superior Court that invoked the court’s jurisdiction pursuant to
statutory oppression remedies to resolve a shareholder dispute. The plaintiff
shareholder successfully alleged that the other shareholder had acted
inappropriately, thereby diluting the value of her shares. The court found that this
 Page 82

was a direct loss. There is no support in Cuscuna to allow a plaintiff shareholder to

advance a claim of the corporation and recover corporate losses.

[350] Based on my review of all the presented authorities and evidence before the
Court, the Walshes have not established (i) an independent and separate wrong to
them personally as shareholders, and (ii) the claims for loss of share value are
damages sustained by the Corporations and not a direct loss to them as shareholders.
The common law rule in Foss v. Harbottle precludes their claims, and denying the
claims cannot be considered “too flagrantly opposed to justice.”

4. Did the Walshes otherwise sustain any direct personal losses for which
they can recover damages?

[351] Even if the Walshes could establish some basis for legal liability, they did not
sustain any direct personal losses entitling them to recover damages.

[352] The other pleaded damages consist of general damages for “loss of the ability
to work in the food retail industry,” “loss of reputation,” “mental anguish,” and a
special damages claim for “loss of income.”

[353] The Defendants note in their Post-Trial Brief that these claimed losses were
not at issue before Whalen CJ. However, the 2015 Pleadings Decision reflects (at
para. 1) that the claim for “loss of income” was considered as a claim for special
damages.

[354] At paragraph 39, Whalen CJ wrote, “[t]he Plaintiffs cannot, however, show
that the claim for ‘losses resulting from having sold their shares at an artificially low
price and loss of income’ is based upon a loss separate from their Corporations’
losses.” He stated, “it is clear that the losses, then, are really those of the
Corporations.” [emphasis added]
 Page 83

Derivative Claims Not Recoverable

[355] Whether the claim for loss of income is a loss to the Corporations, as the 2015
Pleadings Decision found, the loss of income claim and the claims for general
damages are nevertheless derivative claims that are not recoverable.

[356] Losses that are connected to a loss sustained by a company are derivative
claims and not recoverable by individual shareholders. Rogers v. Bank of Montreal
(1985), 30 B.L.R. 41, 64 B.C.L.R. 63 (S.C.)3 is the leading case on this point.

[357] In Rogers, the plaintiffs were shareholders of a company called Abacus. They
alleged that the defendants conspired to harm them personally as a result of the
defendants demanding that Abacus immediately repay a loan contemporaneous with
the appointment of a receiver, which drove Abacus into bankruptcy and caused
personal loss of their substantial share value. Damages claimed included (at para.
27 :

Loss of salary and position as an employee; Damages to business reputation; and

damages to livelihood as a result; Loss of dividends that arise from shares; Loss of
joint control; Loss of costs; Losses and costs resulting from legal actions
commenced by others as a result of the demise of Abacus.

[358] Regardless of whether a duty of care might have been owed to the individual
plaintiffs, the court in Rogers instead recognized that all of the alleged wrongful
conduct could only have been directed at the company itself. Upon recognition of
the nature of the alleged wrongdoing, it did not matter if a duty was owed to the
shareholders.

[359] The court in Rogers had the same struggle I am having in identifying the
activities that the Defendants directed against the Walshes personally as opposed to

3
Upheld on Appeal, Rogers v. Bank of Montreal, [1987] 2 W.W.R. 364, 9 B.C.L.R. (2d) 190 (C.A.).
 Page 84

their Corporations. The trial judge noted (at para. 49), “I strove on more than one
occasion to discover from plaintiffs’ counsel what the activities were that the
defendants directed against the plaintiffs personally as opposed to activities directed
against the company.” He concluded (at para. 113), “All hurt to the plaintiffs was
derived from the hurt to Abacus, or consequent upon it.”

[360] All of the claimed damages for personal losses flow from the alleged
wrongdoing against the Walshes’ Corporations, and would not have been sustained
but for the alleged harm inflicted to the Corporations.

Claim for Mental Anguish

[361] The Walshes’ claim for mental anguish, which is focused on Mr. Walsh, is
also unavailable.

[362] The Walshes did not tender any medical evidence at Trial to establish any
diagnosis, the severity of the symptoms, the causal connection, or the treatment
necessary.

[363] There was a limited amount of medical evidence entered at Trial solely for the
purpose of a memory aid. In discussing the basis of their admission during Trial, I
specifically ruled the records could be used as an aid for memory in the examination
of Mr. Walsh but not for truth of their contents.

[364] The Walshes’ Closing Submissions include various references to Mr. Walsh’s
medical records. To the extent that they are referenced for medical opinions, those
references are improper given the basis of the admission of those records.
 Page 85

[365] Furthermore, damages for mental anguish consequent upon the litigation
process, as opposed to being allegedly caused by the wrong itself, are not
recoverable.

[366] In Scotia Mortgage Corp. v. Lockhart, 2011 CarswellOnt 15667, [2012] O.J.
No. 1143 (Sup. Ct. J.)4, the Ontario Superior Court of Justice, citing another case
from that court, held: “stress relating to participation in litigation is not
compensable.”

[367] Any mental anguish sustained by the Walshes was a consequence of the
litigation. Prior to his Discovery by Defendants’ counsel in January of 2005,
Mr. Walsh was not under medication. He had a serious mental episode following
the discovery process, over his concern and fear of having forgotten or mixed up
dates. He required both hospitalization and medication. His reaction to the stress
was not a consequence of the wrongs alleged.

[368] During his direct-examination, Mr. Walsh was asked whether he had “any
psychological problems in 2005,” to which Mr. Walsh responded that he had
significant stress following his Discovery as he thought that he “did an awful job.”

[369] Mrs. Walsh was also asked to speak to the effect of the litigation on
Mr. Walsh, and she confirmed he was upset after the Discovery, that he could not
sleep and went to see his doctor. She stated, “[h]e thought he had perjured himself
that he had said a wrong date or something.”

[370] I have no doubt that this litigation has taken a serious toll on both Mr. Walsh
and Mrs. Walsh. I observed the physical and mental strain on them as they gave
their testimony in always a polite and courtesy manner. We had to take breaks (at
times when Mr. Walsh just wanted to keep going) during Mr. Walsh’s seven days of

4
Affirmed Scotia Mortgage Corp. v. Lockhart, 2012 ONCA 158, leave to appeal denied, (2012) 303 O.A.C. 400
(note), 440 N.R. 394 (note).
 Page 86

testimony, so he could take a short walk and monitor his blood sugar levels.
Mrs. Walsh came to the Trial most days, except on days when their son was in
hospital and needed care.

Corporations Act Remedies Not Availed of by the Walshes

[371] The Defendants submit that the Walshes could have pursued, but did not
pursue, their Corporations’ claims by way of a derivative action under the
Corporations Act, R.S.N.L. 1990, c. C-36. They point to particular provisions of the
Corporations Act, including sections 333(1), 331(4), 369(1), and 370(c).

[372] The Walshes did not go the route of a statutory derivative action. A derivative
action claim is not before the Court. I made no comment on whether that was the
proper procedure for the Walshes to have followed for adjudication on the substance
of their claims.

[373] For the foregoing reasons, the Walshes did not sustain any direct personal
losses for which they can recover damages.

5. What, if any, damages can the Walshes establish through the admissible
expert evidence for alleged losses resulting from having sold their shares
at an artificially low price?

[374] The admissible expert evidence establishes the Walshes cannot prove they
sustained damages resulting from the sale of their shares in the Corporations.

[375] The loss the Walshes claim is the difference between what the shares in each
of the Walshes’ Corporations would have been worth if each Corporation had
received the deals to which they were allegedly entitled and the actual sale price of
the shares.
 Page 87

Admissibility of Expert Opinion of Ashley Power-Stack for the Walshes

[376] Ashley Power-Stack is a Chartered Professional Accountant and a Chartered

Business Valuator. The Walshes tendered Power-Stack as an expert in business
valuations and share valuations.

[377] Power-Stack opined that the total loss of sale proceeds to the Walshes was
$1,715,000, consisting of $300,000 for Bay Bulls and $1,415,000 for Merrymeeting
Road. Her calculation of value for Bay Bulls was $1,800,000 and Merrymeeting
$2,225,000 less the sale proceeds the Walshes received. Power-Stack averaged the
values calculated for the Gross Margin Analysis and the Allowance Analysis to
arrive at her opinion on the total loss.

[378] The Defendants did not challenge the technical expertise of Power-Stack, but
objected to the admissibility of her report dated December 13, 2019, on the basis
that the opinion was not impartial, independent, or free of bias, which are additional
prerequisites to the qualification of an expert.

The Guiding Authorities on Expert Opinion Evidence

[379] The Defendants relied on case law holding expert opinion inadmissible where
an expert adopted a position requested of them so as to reflect the parties’ views, or
where the expert did not have the time to properly test what was asked of them:
Martin Marietta Materials Canada Ltd. v. Beaver Marine Ltd., 2016 NSSC 225, at
paras. 95–96; and Piccolo v. Piccolo, 2014 ONSC 5280 at para. 13.

[380] The Defendants say this is exactly what Power-Stack did when, at the request
of counsel, she adopted the Allowance Analysis to reflect Mr. Walsh’s “way of
thinking” without considering the implications of the approach requested of her.
 Page 88

[381] The Supreme Court of Canada in White Burgess held that, at the first step for
the qualification of an expert, the proponent must establish the threshold
requirements of admissibility, which are (1) relevance, (2) necessity, (3) absence of
an exclusionary rule, and (4) a properly qualified expert: White Burgess Langille
Inman v. Abbott and Haliburton Co., 2015 SCC 23, at para. 23.

[382] The expert witness’s duty is to the court and underlying that duty are the three
related concepts of impartiality, independence, and absence of bias. The court
explained (at para. 32):

The expert’s opinion must be impartial in the sense that it reflects an objective
assessment of the questions at hand. It must be independent in the sense that it is
the product of the expert’s independent judgment, uninfluenced by who has
retained him or her or the outcome of the litigation. It must be unbiased in the sense
that it does not unfairly favour one party’s position over another. The acid test is
whether the expert’s opinion would not change regardless of which party retained
him or her: …

[383] Cromwell J, in an opinion concurred by all judges who heard the appeal in
White Burgess, spoke (at para. 34) about the Court’s “gatekeeping role” when
considering admissibility of the expert opinion. He noted:

… a proposed expert’s independence and impartiality goes to admissibility and not

simply to weight and there is a threshold admissibility requirement in relation to
this duty. Once that threshold is met, remaining concerns about the expert’s
compliance with his or her duty should be considered as part of the overall cost-
benefit analysis which the judge conducts to carry out his or her gatekeeping role.

Power-Stack’s Engagement as an Expert

[384] The timing and details of Power-Stack’s retention are material to the
admissibility analysis.

[385] On September 10, 2019, the Walshes’ counsel sent Power-Stack various
documentation concerning her engagement to prepare an expert report.
 Page 89

[386] On October 18, 2019, Power-Stack sent Walshes’ counsel the retainer
agreement concerning the retention of Power-Stack’s firm to provide business
valuation services by providing a calculation of the losses incurred by the Walshes,
relating to the supply of products to two supermarkets previously owned and
operated by the Walshes.

[387] From Case Management of the proceedings, the Walshes’ expert report was
initially to be provided to Defendants’ counsel by November 27, 2019. This
deadline was extended, with the agreement of Defendants’ counsel and with notice
to the Court, to December 11, 2019.

[388] On December 11, 2019, Walshes’ counsel emailed Defendants’ counsel

stating, “[a]ttached please find the expert report in this cause.” The attached report
of Power-Stack dated December 11, 2019, was styled as “Draft Expert Report” and
the top of each subsequent page contained the wording, “Draft – For Discussion
Purposes Only.”

[389] The December 11, 2019 Report exclusively adopted an approach referred to
as the “Gross Margin Approach.” Conceptually, the Gross Margin Approach
attempted to value the Walshes’ Corporations after internally adjusting the gross
margins of the Walshes’ Corporations to be equal to the average gross margin of the
Sobeys stores as reflected in the SDAs. The December 11, 2019 Report opined that
there was no loss associated with the Bay Bulls store and a loss of $1,165,000
associated with the Merrymeeting Road Store.

[390] On December 12, 2019, the day after the Walshes’ expert report was required
to be provided to the Defendants and the day after the Walshes had provided the
Defendants with the December 11, 2019 Report as being their “expert report in this
cause,” Walshes’ counsel, Dicks, Q.C. emailed Power-Stack to inquire and ask:

I was wondering about the following two issues:

Were you able to discern what is included in allowances on the SDAs? Did it
include “off invoice” reductions (which are given at the time of purchase) or did it
 Page 90

also include rebates (which include what are sometimes referred to as “by cheque”
amounts) and other refunds which were given after the purchase?

If you were to assume that the total amounts included in the allowances in the
Sobey’s SDA’s were not amounts received by the Walshes, how would this affect
your valuations for the two stores? What would your valuations be in this scenario?

[391] The next day, Power-Stack delivered her “Calculation of Loss Report” dated
December 13, 2019, which she described in her testimony as her only final report.

[392] Power-Stack’s Calculation of Loss Report of December 13, 2019 fully

incorporates the Gross Margin Approach as originally contained in the earlier
Report, but also includes the alternate approach as asked of her by legal counsel,
referred to as the “Allowance Analysis.” The adoption of the Allowance Analysis
serves to significantly increase Power-Stack’s opinion of the loss.

[393] In cross-examination, the Defendants’ expert Susan Glass confirmed she has
prepared reports on scenarios suggested by clients which, in most cases, forms the
basis of an expert’s instructions and report. She also confirmed that draft reports are
usually circulated and discussed with clients before being finalized. The CBV
Practice Standards, No. 320 (at para. 1) allows for the provision of draft reports for
comment by the client.

Trial Ruling on Threshold Qualification of Power-Stack

[394] Co-counsel for the Defendants, Mr. Dale vigorously challenged and cross-
examined Power-Stack at the qualification stage of her testimony. He pressed her
on the adoption and inclusion of the Allowance Analysis in her Report at the explicit
request of Dicks, Q.C.. With detailed specificity, he questioned Stack-Power on the
Code of Ethics of The Canadian Institute of Chartered Business Valuators (“CBV
Institute”) and CBV Institute Practice Standards, No. 310, 320 and 330.
 Page 91

[395] In an oral decision during the course of Power-Stack’s examination on her

qualifications, I determined that the cross-examination at the qualification stage was
extending beyond what was contemplated by the applicable legal authorities. I
qualified Power-Stack for the purpose she was tendered as an expert witness and
allowed Dicks, Q.C. to continue with his direct examination and have Power-Stack
speak to her Calculation of Loss Report. I ruled that the admissibility of her Report
would be left for my determination at the end of the Trial.

[396] In my oral ruling, I relied on and noted White Burgess clearly states (at
para. 49) once the expert testifies as to the duty to the curt of independence and
impartiality, the threshold qualification requirement “is not particularly onerous and
it will likely be quite rare that a proposed expert’s evidence would be ruled
inadmissible for failing to meet it.” My concern was a Trial management issue and
how the voir dire admissibility hearing was becoming much longer than necessary,
and the fairness to the witness and the Walshes in having the expert evidence
excluded without Power-Stack even having the opportunity to explain and speak to
it under direct examination.

[397] I advised how my ruling may be different if this had been a jury trial. I had
much earlier in the proceedings denied the Walshes’ Applications for a jury trial:
(Walsh v. TRA Company Limited, 2019 NLSC 131). To now turn around and deny
the Walshes the opportunity to present their expert opinion evidence for my
consideration on admissibility at the end of the Trial would be quite unfair to them.
My ruling did not prevent Mr. Dale from coming back to his cross-examination in a
robust manner on the gatekeeping factors of impartiality and reliability before
Power-Stack’s opinion evidence can be admitted.

[398] I concluded, as part of my ruling on the threshold qualification hearing, as

follows:

I maintain a gatekeeping position with respect to this particular evidence even

though I am qualifying – I’m prepared to qualify the witness at this stage and allow
her to testify in respect to the opinion that she has given. I’m qualifying her in what
was asked to be qualified on is to give opinion evidence in business evaluations and
in particular, share evaluations …
 Page 92

[I]t is only a timing issue as to making the determination at this stage and allowing
the witness simply to get over the qualification stage and then the Defendants will
be permitted to come back to the cross-examination. I will when I render my
decision in this matter, have to consider that cross-examination and I can still, at
the gatekeeping exclusionary stage rule [on admissibility of the Report].

[399] After full consideration of the Power-Stack Report, the direct and cross-
examinations of Power-Stack, the benefit of the Glass Report and her testimony, the
guiding legal authorities, and the submissions of counsel, I am ruling the Power-
Stack opinion on the loss to be unreliable and inadmissible. I will conduct an
analysis of her Report and opinion to show why I cannot rely on it, and why I accept
Glass’s material criticisms of it and the Glass opinion on the loss.

[400] My foremost concern is that Power-Stack’s use of Allowance Analysis

unfairly favors the Walshes’ quantification of the loss. The Allowance Analysis is
based on the assumption that the total amounts in Incremental Supplier Funding (‘all
the deals’) were not passed on to the Walshes’ Corporations. The evidence
established the assumption to be erroneous, as I have found substantial deals were
passed on in the form of price support to the Corporations. That is not to say, all the
deals were passed on but simply that the Corporations received the benefit of
significant price support at the product level through the Incremental Supplier
Funding or the “inside monies.”

[401] The inadmissibility of Power-Stack’s opinion is not in any way discrediting

Power-Stack’s professional integrity and impressiveness as an expert witness.
Although challenged for failing to comply with professional standards, which I find
she did not offend in the preparation of her Report, she calmly and astutely explained
technical accounting and business valuation principles and conceded the inherent
assumption in the Allowance Approach was that the deals were not passed on.

[402] Power-Stack specifically recognized a limitation in the scope of review of her

opinion. She stated in her Report (at para .22):

Since the pertinent time period dates back thirty-five years and certain information
was not produced during litigation or could not be provided, we must identify a
 Page 93

limitation in the scope of our review. Assumptions were made in preparing this
report and are noted herein which we may have assumed differently if other
information has been made available. [emphasis added]

[403] Appendix C of the Report lists the information reviewed and relied upon. She
was not provided with any Pre-trial Discovery evidence or Answers to
Interrogatories. She would not have had the benefit of Pre-trial or Trial testimony
to verify her assumptions.

[404] Dicks, Q.C. did nothing inappropriate in asking her to make an assumption
that the amounts under Allowances in the SDAs were not passed on to the Walshes.
That is the position the Walshes advanced throughout this litigation, and quite
frankly, they were entitled to have the Court assess the evidence and merits of their
position. The Defendants’ Statement of Defence pleaded the Walshes’ Corporations
received “all of the deals … to which they were entitled.” It was not readily apparent
from either the pleadings or the Defendants’ document production that the Walshes’
Corporations received the benefit of all deals. Rather it was the evidence of Vokey,
through Pre-trial Answers to Interrogatories and his evidence at Trial, and
corroborated by others, that I was able to conclude substantial price support was
provided.

[405] Having considered the extensive evidence tendered by the Defendants on

price supports provided to the Walshes’ Corporations, I find the Walshes’ position
lacking in merit and cannot accept the foundational assumption of the Allowance
Analysis opinion.

Cross-examination of Power-Stack on her Analysis Approaches

[406] Power-Stack acknowledged in cross-examination that (1) any netting down

would show up in the gross margins of the Walshes’ Corporations, and (2) an
allowance line in the SDAs does not mean the Walshes did not receive the benefit
of those allowances. Power-Stack recognized that the financial reporting of Sobeys
might be different than that of the Walshes’ Corporations.
 Page 94

[407] This acknowledgment by Power-Stack is consistent with Vokey’s evidence

that the accounting for allowances separately in Sobeys’ SDAs reflects a different
way of doing the math than TRA did for the Walshes’ Corporations. Vokey testified:

How you got to the math is what’s different. Because we handed, “we” being TRA,
handed on the allowances in their cost of goods on the invoice. Foodland’s would
see a higher margin than a Sobeys store because a Sobeys store never handed on
their allowances they collected on their invoice. They were collected on a separate
line, hence, the allowance line.

[408] I am not convinced it was simply a way of doing the math differently. To
accept that proposition means I would have to believe ‘all the deals’ were passed on
to the Walshes’ Corporations. While I accept substantial amounts were passed on
the Walshes’ Corporations, I am not convinced based on the haphazard manner TRA
at the relevant time period accounted for Incremental Supplier Funding (unlike the
precision at which Sobeys accounted for it) passed on all deals and “inside monies”
to the Walshes’ Corporations. That does not assist the reliability of the Allowance
Analysis, since it assumes no Allowances as documented in the SDAs were passed
on.

[409] Stack-Power agreed that the Gross Margin Approach captures any passing
along of deals regardless of how they might have been financially reported by
Sobeys or by the Walshes’ Corporations. The Gross Margin Approach gives the
Walshes’ Corporations the full benefit of the allowances as reflected in the SDAs.
It brings the Walshes’ Corporations up to the same gross margin as Sobeys.

[410] The methodological problem with the Allowance Analysis is that it precludes
consideration of whether the Walshes’ stores received the same or equal treatment
as the Sobeys stores. By assuming the Walshes’ Corporations did not receive any
of the allowances as allocated in the SDAs, the Allowance Analysis inherently
overstates the loss to the extent that any allowances that were in fact passed along.
It necessarily results in a “double count” by giving the Walshes’ Corporations the
benefit of the total of all allowances without counting for any allowances received
by way of price support.
 Page 95

[411] Stack-Power specifically pointed out, “[t]here was no way for me to verify
whether or not the Plaintiffs’ Corporations have received any allowances.” She
could not reconcile if allowances had been paid with the information that she had.
She conceded that the methodology of the Allowance Analysis meant that if the
Walshes’ Corporations received allowances by way of netting down of product cost,
there would be a double count. She made it clear counsel requested the Allowance
Analysis scenario, and she applied it, on the assumption that Walshes’ Corporations
had not received any allowances. A concern not present in the Gross Margin
Analysis.

Defendants’ Case Law on Admissibility of Expert Opinion

[412] The Defendants rely on the “acid test” for admissibility that “the expert’s
opinion would not change regardless of which party retained” the expert: White
Burgess, at para. 32. They submit Power-Stack’s Report was not the product of
independent judgment; it was influenced by who had retained her; and the Report
unfairly favors the Walshes’ position over the Defendants.

[413] Expert evidence has been held to be inadmissible where the “evidence is
nothing more than a platform from which to argue” the party’s case: Piccolo, at
para. 16.

[414] In Martin Marietta, the court held proposed expert evidence to be

inadmissible as being nothing more than the plaintiffs’ theory of the case that failed
to challenge the positions put to them by counsel or seek contrary possibilities. The
court applied White Burgess and held (at para. 98) that the applicant (opposing party)
had met its burden in showing there is a “realistic concern” that the expert evidence
should not be received.

[415] It is worth noting that in Martin Marietta, the court recognized (at para. 95)
that the expert had “precious little time to review the evidence.” In fairness to Stack-
Power, she had only a day to prepare the Allowance Analysis asked of her, and had
insufficient time to consider and account for a scenario where the Court accepted
that the Walshes’ Corporations received substantial price support, as Vokey had
 Page 96

attested in his Pre-trial Answers to Interrogatories. The Answers to Interrogatories

dated January 22, 2019 (entered into evidence as Consent 5), and more particularly
his Answers to Interrogatories 5 and 10(d).

[416] Similar concerns to the present case also resulted in a proposed expert report
being inadmissible in Piccolo, where the court held that the expert’s evidence was
calculations in support of the parties’ position based on financial statements and
other documents of the proponent parties without independent analysis. The expert
was doing what his clients requested of him. The court noted (at para. 13), “[t]here
is nothing wrong with that. The issue becomes, however, whether what he did meets
the [established] criteria for admissibility as expert evidence.”

[417] The Defendants submit that the Allowance Analysis asked of Power-Stack,
including the assumption that all of the allowances as reflected in the SDAs were
not received by the Walshes’ Corporations, is similar to engaging an accident
reconstruction expert and asking the expert to assume that the accident happened on
a certain side of the road. That is what happened in Bye v. Newman, 2016 BSSC
267, which led to an accident reconstruction expert’s report being held inadmissible.
The court stated (at para. 19), “[t]he report has unfairly favoured the position of
Mr. Newman, and that makes it unreliable.” The expert did not meet the duty to the
court to provide impartial assistance.

[418] The Allowance Analysis that confirms Mr. Walsh’s “way of thinking” but
precludes the consideration of alternative explanations is not admissible as expert
evidence.

Accepted Criticism of the Allowance Analysis by Defendants’ Expert

[419] I qualified the Defendants’ expert, Susan Glass as an expert in business

valuation and damage quantification and permitted the tendering of her report dated
March 6, 2020, in Reply to Report of Stack-Power and Independent Assessment of
Loss. Counsel for the Walshes’ reserved the right to contest the admissibility of her
opinion in Closing Submissions.
 Page 97

[420] I admit and accept the opinion evidence of Glass on the flaws and her criticism
of the Allowance Analysis, without fully accepting her opinion that the Walshes’
Corporations received “all of the Additional Allowances” [emphasis added].

[421] Glass considered whether the Walshes’ Corporations received “equal

treatment,” as Power-Stack was engaged to do. Glass did this in three ways, which
led to her opinion (at para. 114 of the Glass Report) that the evidence “implies a high
likelihood that the Walsh Stores actually received some or all of the Additional
Allowances.”

[422] The three ways Glass used to assess the “equal treatment” of the Walshes’
Corporations were:

(i) Comparing Sobeys’ store margins and Sobeys' gross margins to the gross
margins achieved by the Walshes’ Corporations;

(ii) Calculating the gross margins of the Walshes’ Corporations that were
implied through Power-Stack’s Allowance Analysis and comparing them to
Sobeys; and

(iii) Determining the operating profits of the Walshes’ Corporations that were
implied through Power-Stack’s Allowance Analysis conclusions and
comparing them to other industry data.

(i) The SDAs as compared to the financial statements of the Walshes’ Corporations

[423] Glass compared the financial information as contained in the SDAs to the
financial information from the statements of the Walshes’ Corporations. She
recognized that the gross margins as reported by the Walshes’ Corporations were
 Page 98

significantly higher than the store margins achieved by Sobeys, before Sobeys
separately accounted for their receipt of Incremental Supplier Funding.

[424] Table 4.1 of the Glass Report, reproduced below, in reference to the objective
and uncontested data illustrates both the Walshes’ stores had gross margins
significantly higher than the Sobeys-store margins. Glass opined (at para. 118) that
these results establish that the Allowance Approach “is inappropriate and results in
double-counting, since many of the Additional Allowances separately reported by
the Sobeys Stores are already included in the Walsh Stores’ gross margins.”

Table 4.1 Store Margin vs. Gross Margin

Sobey’s Sobey’s
93.93 BB 94-96 MM

Store Margin 14.5% 13.3%

Additional allowances 6.5% 8.4%
Gross Margin 21,0% 19.3% 21.8% 21.4%

(ii) The implied margins of the Walshes’ Corporations using Allowance Analysis

[425] Glass looked at the gross margins of the Walshes’ Corporations that were
necessarily implied through Power-Stack’s Allowance Analysis.

[426] Power-Stack agreed in cross-examination that the Allowance Approach

results in an implied gross margin of the Walshes’ Corporations, which she could
have determined but did not do so.

[427] The calculations in Table 4.2 of the Glass Report showed that the Walshes’
Corporations would have had gross margins that were higher than the Sobeys
average gross margin and in fact higher than any of the Sobeys stores. These high
margins prove that TRA did provide the Walshes’ Corporations with additional price
support, as spoken to by the witnesses who had firsthand knowledge. Glass opined
she was not aware of any reason to suggest that such high implied margins would be
reasonable.
 Page 99

[428] The implied gross margins establish the Walshes would actually have been
treated more favorably than Sobeys.

(iii) The Implied Operating Profits of the Walshes’ Corporations

[429] Glass determined the operating profit margins of the Walshes’ Corporations
that were necessarily implied through the Allowance Approach.

[430] Glass concluded the Walshes’ Corporations would have had operating profits
that were higher than public company average.

[431] There was no evidence tendered at Trial, and Power-Stack does not speak to
it in her Report, that would suggest it is reasonable to conclude that the Walshes’
Corporations would have had operating margins that were, in some cases, multiples
higher than the most profitable public companies in North America.

[432] When presented with Glass’s findings on this point, Stack-Power suggested
that she did not think public companies were the most appropriate comparator. She
agreed that Sobeys Newfoundland stores would have been the most appropriate.

[433] There was no evidence tendered by the Walshes, who have the burden of
proof, suggesting or showing that the Walshes’ Corporations, on an alleged
entitlement to netting down or equal treatment, should have achieved higher gross
margins than any Sobeys store and should have had operating margins better than
the most successful public companies.
 Page 100

Walshes’ Objections to the Admissibility of the Glass Report

[434] The Walshes submit that the Glass Report discloses evidence of bias, and that
I should reject her opinion because her approach was intended, either intentionally
or inadvertently, to diminish the value of the Walshes’ stores. I do not accept the
complaints of bias leveled at Glass.

[435] The Walshes raise three principal areas of concern with the Glass Report.
They say the Glass Report and opinion should be rejected for (a) lacking
consideration of prior reports of Glass and reports of experts previously engaged by
the Plaintiffs; (b) failing to conduct an analysis in reference to The Oshawa Group;
and (c) accepting, without testing, the Defendants evidence that TRA had provided
additional price support to the Walshes’ Corporations.

[436] Power-Stack in her Report identifies other expert reports the Walshes had
previously obtained and prepared by other experts, including Duff & Phelps dated
October 13, 2017, and a Supplemental Expert Report of January 30, 2018, in
response to KPMG (Glass). During the cross-examination of Glass, I upheld the
Defendants’ objection to introduction of the prior opinion reports of Duff & Phelps,
but allowed Walshes’ counsel to ask Glass questions about the prior reports of Duff
& Phelps, since Glass and Power-Stack had reviewed those reports.

[437] Glass noted in response to questioning on the Duff & Phelps reports that their
Supplemental Report actually identified the need to consider a possible double-
counting if one were to proceed with an Allowance Analysis.

[438] In the context of the development of the Defendants’ expert opinion in this
litigation, it is unfair and inappropriate to compare the prior reports of Glass dated
December 21, 2017 and September 19, 2018, to the Glass Report of March 6, 2020,
which is the only expert opinion tendered by the Defendants. The report of
December 21, 2017, was in response to Duff & Phelps report of October 13, 2017.
After the Walshes ended their engagement with Duff & Phelps, they indicated they
would proceed to Trial without tendering any expert report. Glass therefore prepared
 Page 101

her report of September 19, 2018, removing any references to the Duff & Phelps
report.

[439] When the Walshes engaged Power-Stack, Glass then prepared the report
tendered at Trial.

[440] The cross-examination and Closing Submissions of the Walshes on the

comparisons between the Glass Report and prior reports do not undermine the
evidence of Glass and my acceptance of her opinion on the double-counting.

[441] With respect to her reference to the Oshawa Group, former counsel for the
Walshes instructed Duff & Phelps to assume the Walshes’ Corporations would have
earned a gross margin (sales less cost of sales) equal to that earned by The Oshawa
Group, less a 0.5% adjustment. The Walshes chose not to proceed to trial on the
report of Duff & Phelps, which quantified the loss on that basis. Power-Stack did
not speak to The Oshawa Group in her Report.

[442] Glass confirmed in her cross-examination what the publicly available data for
the Oshawa group, in Table 4.3 of her report, showed. The operating profits implied
by the Allowance Analysis would mean the Walshes’ Corporations would have been
two times more profitable that the Oshawa Group for all years, and that the
Merrymeeting Road store would have been more than five times more profitable.

[443] Counsel for the Walshes challenged Glass on whether she simply relied on
what Vokey told her, in discussions before preparation of her Trial Report about
TRA providing additional price support to the Walshes’ Corporations, rather than
independently testing her assumptions. Glass was clear that she premised her
analysis on the assumption of the Walshes’ Corporations receiving equal treatment
with Sobeys. The Allowance Analysis she confirmed results in the Walshes’
Corporations receiving significantly more favorable treatment than Sobeys.
 Page 102

[444] When challenged on the possibility that some allowances might have been
reflected in Sobeys stores’ margins in the SDAs, Glass explained that the Gross
Margin Approach implicitly accounts for any potential difference in the way
allowances were reported or received.

[445] I am unable to accept any suggestion that Glass lacked objectivity in her report
or testimony. Her assumptions and conclusions were based on objective data and
focused on the allegations in this proceeding.

Consideration Paid for the Shares

[446] Mr. Walsh, during his cross-examination, admitted that the total consideration
paid for the shares in the Walshes’ Corporations was structured to minimalize the
tax consequences to him and Mrs. Walsh. Mr. Walsh confirmed that the
consideration for the shares was as follows:

a) $1,625,000 for the shares in the Bay Bulls Corporation, of which $1,500,000
was paid by way of the share sale agreement, and with $125,000 of the
purchase price paid by TRA for the Walshes’ real property and attributed to
the share sale price; and

b) $1,285,000 for the shares in the Merrymeeting Road Corporation, of which

$835,000 paid by way of the share sale and with $450,000 paid over time as
part of a consulting arrangement.

[447] Both Power-Stack and Glass recognized that it would not be uncommon for
commercial transactions to be structured in a tax-efficient way, including by way of
the inclusion of consulting or other arrangements.
 Page 103

[448] Mr. Walsh acknowledged the business part of the Bay Bulls sale was $1.625
million and it was structured in a tax-efficient way so that TRA/Sobeys paid
$250,000 for their house in Bay Bulls. He agreed that in reality TRA/Sobeys only
paid $125,000 for the house, and the other $125,000 applied to the total proceeds for
the shares. Mr. Walsh’s testimony was consistent with prior testimony he gave in
these proceedings on August 27, 2019, and duly referenced in the Glass Report.

The Joint Consulting Agreement for Merrymeeting Road Sale

[449] Power-Stack agreed on cross-examination that if the Court were to find that
the $450,000 paid further to the Joint Consulting Agreement on the sale of
Merrymeeting Road Corporation was part of the purchase price, then $450,000
would be subtracted from her conclusion on the loss. The Glass Report similarly
identified that it is a factual question as to whether the $450,000 constituted part of
the consideration for the shares.

[450] The share sale agreement between the Walshes and Coleman Management
Services Limited provided at section 7.1(j) that the Walshes’ execution of the Joint
Consulting Agreement (as attached to sale agreement) was a condition of closing. I
find that the consulting agreement was part of the consideration for the shares.

[451] The Joint Consulting Agreement provided that the Walshes would be paid a
total of $450,000 over seven years, with $75,000/year for the first four years and
$50,000/year for the last three years. It also provided that the benefit of the payments
to the Walshes under the Joint Consulting Agreement “shall enure to their heirs,
successors and assigns,” confirming that it comprised part of the consideration for
the sale of the shares.

[452] The Walshes had earlier approached TRA and Sobeys on a potential sale of
the Merrymeeting Road Corporation. The Walshes’ proposal contained a written
offer that as part of the defined “Purchase Price” included payments in the future
starting at $75,000/year for first five years and $50,000 for next five years. They
achieved the goal of future payments for their shares in the sale to Colemans
(although for a shorter duration of years).
 Page 104

[453] Most importantly, Mr. Walsh confirmed during cross-examination that the
$450,000 paid further to the Joint Consulting Agreement was part of the
consideration for the sale of the shares and structured that way for tax purposes:

Q. This Consulting Agreement and the payments that were provided for under the
Consulting Agreement, that was really part of the purchase price for Merrymeeting
Road, correct?

A. Yes, same as the house in Bay Bulls, same thing.

Q. Same sort of tax efficient structure?

A. That’s right.

[454] Mr. Walsh’s evidence is consistent with his subsequent conduct and with the
conduct of Colemans. Mr. Walsh testified that he and Mrs. Walsh took the majority
of 1998 off. They received the $75,000 for that year further to the Joint Consulting
Agreement. In December of 1998, Mr. Walsh began working for Colemans and
received an annual salary of $40,000.

[455] Mr. Walsh confirmed the distinction between consulting payments and salary
payments: “Now we’re talking about a sale price, and we’re talking about going back
to work … I didn’t have to do anything for the consulting, if I didn’t want to.”

Other Material Points of Disagreement between the Experts

[456] Glass identified other material concerns or points of professional

disagreement with Power-Stack’s analytical approaches, including:

a) Stack-Power’s grouping of the bulk sales department with the grocery

department;

b) The issue relating to the valuation of past and future losses;

 Page 105

c) Failing to account for the cost of services provided by the Walshes, where
the Walshes did not take any salary for those services; and

d) The approach to estimating maintainable “EBITDA” (Earnings before

interest, taxes, depreciation, and amortization).

a) Grouping of the “Bulk Sales” Department with the “Grocery” Department

[457] Whether further to the Gross Margin Approach or the Allowance Analysis,
the techniques employed involve comparing the Sobeys departments, as identified
in the SDAs, to the departments operated by the Walshes’ Corporations.

[458] Power-Stack took the consolidated data of the 17 Sobeys stores and then
combined the separate data for the grocery, bulk sales, and merchandising
departments and concluded that this is the margin the Walshes’ Corporations should
have achieved on the grocery sales.

[459] The majority of the Sobeys stores did not report a department called “bulk
sales.” For those that did, the reported sales under the bulk sales department are
more modest than some of the larger departments, but had significantly higher
margins than the grocery department.

[460] Glass noted that the Walshes’ Corporations did not separately report bulk or
general merchandise sales, similar to 10 of the individual Sobeys stores. It was her
view that it is more appropriate to compare the Walshes’ grocery margins to the 10
most comparable Sobeys stores.

[461] The difference of professional opinion between Glass and Power-Stack’s

grouping of the bulk sales department with the grocery department is a material one
and has consequences for their conclusions.
 Page 106

[462] I accept Power-Stack’s grouping of the bulk sales department with the grocery
department served to increase her opinion on loss. The Walshes did not lead
evidence as to why this grouping was appropriate to proper interpretation of the
SDAs.

b) The Issue Relating to Valuation of Past and Future Losses

[463] The quantification by both experts involves a determination of past loss and
future loss. The issue of future loss only relates to Merrymeeting Road Corporation.
Neither expert quantified any loss on the sale of the Bay Bulls location as a future
loss.

[464] The past loss is the loss or the shortfall to the Walshes’ Corporations up to the
point of sale of the stores from 1984 to 1996. The assumption is that the cash would
remain in the Corporations because of the accumulation of additional revenue from
the alleged entitlement. Both experts assumed that the full amount, which would
have accrued while the Walshes owned the shares, would have remained in the
Corporations and not paid out as salary or dividends. The prospective purchaser
would have been purchasing the cash asset.

[465] The future loss is the net present value of all future years’ cash flow that would
have arisen had the alleged entitlement continued.

[466] For future losses, Glass identified what she termed as a “legal issue.” She
explained for future losses to be recoverable it needed to be determined whether a
prospective purchaser would pay for the anticipated future profits of a corporation,
if the agreement was not transferrable to them or if those same deals were already
available in the market.

[467] I accept the unconverted evidence of the Defendants that they would not have
allowed a commercially unreasonable agreement to be transferred to a third-party
purchaser.
 Page 107

[468] The Walshes have not tendered any evidence as to what pricing arrangements
might have been available from other suppliers. More fundamentally, if such deals
were available, then the valuation would not include consideration for future losses.
A prudent purchaser would not pay for future benefits, which they could already
obtain.

[469] Accordingly, I find the evidence does not support a claim for recoverable
future losses.

c) Accounting for Notional Salary

[470] A hypothetical purchaser of the Walshes’ Corporations would need to

consider whether the corporation is receiving the benefit of necessary services at no
cost, or otherwise would run the risk of overvaluing the corporation. Glass
considered the point of attributing a notional salary for services that the purchaser is
going to have to pay somebody to provide those same services. It represents a future
cost to the purchaser. Glass deducted a notional salary from her valuation of the
Merrymeeting Road Corporation.

[471] Mr. and Mrs. Walsh did not report on their personal income taxes taking any
salary from the Merrymeeting Road Corporation between 1994 and 1996. There
were no dividends paid out of the Corporation.

[472] The Walshes were working at Merrymeeting Road at the relevant time for
valuation purposes, immediately prior to the sale in 1996. Mr. Walsh testified that
during this period, he and Mrs. Walsh were working at the store “day and night
trying to keep that going,” and at one point said, “[i]t was seven people not on the
payroll.”

[473] Glass did not address notional salaries for Merrymeeting Road in her prior
reports because she was not aware at that time that the Walshes had not taken a salary
while working there.
 Page 108

[474] Glass noted that Mr. and Mrs. Walsh had both taken salaries from Bay Bulls,
and considering the smaller size of the Merrymeeting Road store, she elected to use
only one salary. She selected the amount of $60,000, equivalent to what the Walshes
received in 1993 and 1994 for the Bay Bulls site. If she had used two salaries, it
would have further reduced her opinion on loss.

[475] During her cross-examination, Glass explained the distinction between

compensation for services as compared to salaries for “management.” She noted her
implicit assumption that the Walshes were not previously overpaying themselves
given that the claim alleges the Walshes’ Corporations could not achieve a
reasonable rate of return.

[476] I find that the services Mr. and Mrs. Walsh provided to the Merrymeeting
Road store were of benefit to the business. The notional salary used by Glass reflects
the value of those services for the reasonable valuation of what a purchaser would
pay for the shares in the Corporation.

d) Approach to Estimating Maintainable EBITDA

[477] I accept the Glass opinion on the maintainable EBITDA for the Walshes’
Corporations, which results in further decreasing the quantification of loss.

[478] Merrymeeting Road Corporation only operated for the first six months of
1996. Glass opined that smaller businesses typically do not accrue expenses
throughout the year, such that interim statements of profit are often overstated.
Doubling Merrymeeting’s EBITDA from the first six months of 1996 results in an
overestimation of what likely would have resulted. Glass showed (at Table 5.7), in
reference to actual data from the Walshes’ Corporations, how the final EBITDA
results for 1995 were significantly lower than two times the reported amount after
six months.
 Page 109

[479] Table 5.7 shows that if the experts had simply doubled the six-month reported
EBITDA, they would have used a figure of $169,218, which is more than 27% higher
than the number that was actually achieved at yearend.

[480] Despite those concerns, Glass did double Merrymeeting Road’s six-month
EBITDA for 1996 for the purpose of her analysis, noting that her valuation of loss
would have decreased if she had addressed the evidenced overstatement.

[481] Power-Stack took the same approach to maintainable EBITDA, although she
made no reference to the concern Glass expressed.

[482] Glass also questioned Power-Stack’s approach toward estimating

maintainable EBITDA based on recognition of an upward trend for Merrymeeting
Road while disregarding the downward trend for Bay Bulls. Power-Stack,
recognizing an upward trend for Merrymeeting Road, added another $50,000 to her
low-end range of $335,000 increasing the selected high end to $385,000. Glass
pointed out “the high-end range of the EBITDA range would be $50,000 higher than
even a best-case estimate of EBITDA ever earned by the store.”

[483] Glass also noted that the main reason for the increased EBITDA in 1996 was
the reduction in labour costs, and that additional revenue through a control of labour
costs would not be a basis for anticipating similar growth and future profits, unless
the purchaser could cut labour costs even further.

[484] Finally, Glass explained Power-Stack’s selected maintainable EBITDA

approach for Merrymeeting Road (which served to increase Power-Stack’s valuation
of loss) was opposite to the approach when calculating the maintainable EBITDA
for Bay Bulls. Power-Stack ignored the declining trend in adjusted EBITDA, and
focused on the results of prior years (which also served to increase her valuation of
loss). Power-Stack assessed the maintainable EBITDA in the range of $160,000 to
$175,000. As Glass noted, this is higher than the averages and much higher than the
most recent results.
 Page 110

No Losses Established on either Share Sale

[485] The Walshes have failed to establish losses associated with the sale of their
shares in either of the Bay Bulls or Merrymeeting Road Corporations.

Bay Bulls

[486] Mr. Walsh testified that he felt no need for a professional valuation of the Bay
Bulls business, and admitted that he felt fairly treated in the sale and that he achieved
fair market value. The expert evidence is consistent with Mr. Walsh’s own view.

[487] Regardless of whether the consideration for the shares is as I have found
$1,625,000 (confirmed by the testimony of Mr. Walsh), or if the consideration is
$1,500,000 (as the Closing Submission of the Walshes assert), there is nil loss.

[488] Power-Stack’s Gross Margin Approach, which I accept as a reliable approach

because it avoids the double-count concern, valued the shares at $1,300,000,
resulting in a nil loss.

[489] If I had found Power-Stack’s Allowance Analysis to be admissible, the loss

for Bay Bulls would still be nil considering the concerns Glass expressed and I
accept with the grouping of bulk sales with grocery and the double count. Table 6.2
of the Glass Report puts the notional fair market value at $1,341,500 when the
calculated adjustments are made for mix-adjusted gross margin ($367,000) and
allowance double count ($550,000).

[490] Power-Stack’s valuation adjusted for these two items brings the value under
the Gross Margin Approach to be $933,000 and the value under the Allowance
Approach at $1,750,000. Consistent with the approach of Power-Stack in averaging
the two values puts it at the $1,341,500, and thus a loss of nil arises even compared
to sale proceeds of $1.5M.
 Page 111

Merrymeeting Road

[491] Power-Stack assessed the loss for Merrymeeting Road at $1,415,000 with
$415,000 as past loss and $1,000,000 for future loss. Glass assessed the loss at
$400,000 with $190,000 as past loss and $210,000 in future loss.

[492] Since I made two consequential findings: (1) that the future losses are not
recoverable; and (2) that the payments under the Joint Consulting Agreement were
part of the consideration for the shares, the loss for Merrymeeting Road is also nil.

[493] If however I am wrong in either conclusion, in assessing the expert opinion

on the loss, I must still consider the double count and issues with Power-Stack’s
product mix categories, failure to address notional salary for services rendered, and
the treatment of estimates for maintainable EBITDA.

[494] For the reasons succinctly stated in paragraph 220 of the Glass Report (the
material matters I have explored above), I accept her opinion that a total loss of
$400,000 represents the maximum potential loss, and likely overstates any actual
loss to the Walshes.

[495] Based on my findings on the losses, I would make no award of damages to

the Walshes for the sale of their shares in the Corporations.

COSTS

[496] Costs are in the discretion of the Court, and I am exercising my discretion to
make no order as to costs: s. 53(1) of Judicature Act, R.S.N.L. 1990, c. J-4.
 Page 112

[497] Costs follow the cause or event and in the usual course, the successful party
would be entitled to costs (Rule 55.03(1) and Hiscott v. Hall, 2015 NLCA 1, at para.
29). Given the complexity, duration of the litigation, seniority of counsel, and
amount involved in this case, the Defendants could realistically expect an award for
two counsel taxed on the Rules of Supreme Court, Rule 55, Column 5 of the Scale
of Costs. I am also quite mindful the Walshes have made serious and unproven
allegations of fraud against the Defendants, which can justify an award of increased
costs.

[498] How then can I justify on principled grounds making no order against the
Walshes to pay costs to the Defendants?

[499] The reason is the Defendants are not without fault. While the fault does not
give rise to liability, it does justify the awarding of no costs.

[500] While TRA and Sobeys spent considerable resources on their experienced
litigation counsel and got the result they so ably advocated, they may have been able
to avoid all of this if they had instructed their corporate counsel to draft and
document the Supply Arrangement agreed to with the Walshes’ Corporations. TRA
and Sobeys were obviously attuned to the uncertainty and confusion that could give
rise to supply arrangements as early as 1984, since they made sure to do so in the
1984 Sobeys Supply Agreement. They could have clarified and defined terms such
as “net costing,” “true landed cost,” and “Sobeys equivalent cost.” Of course, there
is no guarantee that Mr. Walsh would not have contested the terms and meaning of
the Supply Arrangement. But, it would have been a more focused dispute on
contractual terms than simply trying to defend allegations of what was promised and
said to the Walshes 37 years ago.

[501] Although there is no duty at law to document commercial transactions

between parties, Sobeys had the resources available and ought to have done so to
avoid misapprehension on the part of the Walshes on promises made to them.
 Page 113

[502] Evidence from Tiller confirms that TRA, through Tiller as TRA’s
representative, knew that the Walshes might misconstrue what he told them in the
Foodland presentation meeting about receiving Sobeys’ prices. Tiller testified he
“didn’t dwell on cost that much” because “it’s like opening a can of worms.” He
confirmed he moved on from costs “as quick as possible” knowing that it could not
“be avoided forever.” A documented Supply Arrangement presumably would not
have been able to avoid the promised costing arrangement.

[503] Even though impecuniosity of the Walshes is not a ground on which to deny
the Defendants their costs, it explains why the Defendants did not vigorously contest
costs. When I pressed Seviour, Q.C. in closing oral submissions on whether I had
justification for denying the Defendants their costs, he conceded an award of costs
against the Walshes would have little practical effect or pecuniary benefit to the
Defendants. I held in the Defendants Pre-trial Security for Costs Application that
the Walshes are impecunious: Walsh v. TRA Company Limited, 2019 NLSC 167.

[504] Finally, if I had been prepared to make an award of costs, I would not have
awarded costs in any circumstance against Mrs. Walsh. Mr. Walsh was the
“directing mind” of the Corporations for this litigation, and Mrs. Walsh was a
nominal plaintiff and bystander. She stood by Mr. Walsh all these years as he wanted
to see the case through to the end, and I would not burden her with an order to pay
costs.

CONCLUSION

[505] To summarize, I have concluded:

1. The Walshes have not established the elements necessary to prove negligent
or fraudulent misrepresentations.

2. The Walshes’ claims for negligence, negligent misrepresentation, and personal

losses for fraudulent misrepresentation are statute-barred by s. 5(a) and (b) of
 Page 114

the Limitations Act. The only claim not time-barred (but dismissed for no
liability) is for economic losses arising from fraudulent misrepresentation
governed by s. 6(c) of the Limitations Act.

3. The Walshes failed to establish (i) an independent and separate wrong to them
personally as shareholders, and (ii) the claims for loss of share value are
damages sustained by the Corporations and not a direct loss to them as
shareholders. The common law rule in Foss v. Harbottle precludes their
claims, and denying the claims cannot be considered “too flagrantly opposed
to justice.”

4. The Walshes did not sustain any direct personal losses for which they can
recover damages.

5. The Walshes’ expert-opinion evidence is inadmissible, and the admissible

evidence failed to prove the Walshes suffered losses associated with the sale
of their shares in either of the Bay Bulls or Merrymeeting Road Corporations.

POSTSCRIPT

[506] I know the Walshes will be extremely disappointed with this result. I will
never convince Mr. Walsh that his understanding of the Supply Arrangement and
perception of TRA and Sobeys’ mistreatment of them is not grounded in the
evidence and law. Nevertheless, I hope I have given the Walshes a full and fair
hearing of their case and clearly articulated my reasons for my findings and
conclusion.

[507] I would be remiss if I did not thank counsel on both sides for their thorough
submissions, professionalism, and dedication to this case and their clients. It is a
pleasure to adjudicate cases where counsel show civility to each other and respect to
all participants and the Court. While my job in deciding the issues and producing
 Page 115

these reasons was difficult, the exceptional performance and work product of
counsel certainly made it much easier.

ORDER

[508] The Walshes’ action is dismissed against all Defendants with no order as to
costs.

_____________________________
GLEN L.C. NOEL
Justice
 APPENDIX ‘A’

1. Walsh v. TRA, 2005 NLTD 139 (unpublished)

2. Walsh v. TRA Co., 2006 CarswellNfld 376, [2006] N.J. No. 389 (by Orsborn J)
3. Walsh v. TRA Co., 2007 NLCA 50
4. Walsh v. TRA Co., 2009 NLTD 9
5. Walsh v. T.R.A. Co., 2015 NLTD(G) 27
6. Walsh v. T.R.A. Co., 2016 NLTD(G) 119
7. Walsh v. T.R.A. Company Limited, 2018 NLSC 178
8. Walsh v. TRA Company Limited, 2019 NLSC 131
9. Walsh v. TRA Company Limited, 2019 NLSC 167
10. Walsh v. TRA Company Limited, 2019 NLSC 168