Petromec Inc v Petroleo Brasiliero SA Petrobras & Anor

Deceit requires a false representation of fact, made fraudulently and intended to induce reliance, which in fact causes loss. The meaning of a statement depends on its context and on what a reasonable recipient, possessing the relevant background knowledge, would understand. In commercial negotiations, each party may generally pursue its own interests and no duty of fair or rational consideration arises without a specific obligation. Statements that a proposal remains under consideration, that a board will determine any payment, or that an individual hopes for an outcome may be true statements of position or intention rather than fraudulent representations. A claim fails where the statements were not false or the claimant would have acted in the same way without them.

Petromec claimed damages in deceit arising from letters sent by Petrobras shortly before an upgraded production platform left Canada for Brazil. Petromec alleged that the letters falsely represented that a proposed global payment agreement remained under active consideration by Petrobras’s Executive Board and would be finalised. It said that, relying on those representations, it allowed the platform to leave Quebec and later Sept Iles instead of detaining it.

The action followed a preliminary trial before Moore-Bick J, which had held that no binding global payment agreement or estoppel had been established. The issues were whether the October letters contained fraudulent misrepresentations, whether Petromec relied on them, and whether any recoverable loss resulted.

1. Claim dismissed. Petromec failed to establish deceit in relation to either the 11 October or 25 October letter. The alternative negligent-misstatement claim also failed.
2. The court applied the ordinary elements of deceit: a false representation, made by or on behalf of the defendant, fraudulently, with an intention that it should be acted upon, actual influence or reliance, and resulting loss. Statements had to be construed in their commercial context and as a reasonable recipient with Petromec’s knowledge would understand them.
3. The 11 October letter did not falsely state that the global payment proposal would be considered. The Executive Board had retained the proposal on its agenda rather than rejected it or shelved it indefinitely. Nor did the statement that the agreed amount would be paid represent that any amount had already been agreed. It meant that any sum determined by the Executive Board would be paid.
4. The 25 October letter was likewise not false. The proposal had been before the Board during the previous week and remained under consideration. The statement that the matter would hopefully be finalised expressed the writer’s hope, not an objective representation about the likelihood of approval. The statement that Petrobras would pursue payment was a vague expression of SEGEN’s intention to monitor or follow up the matter.
5. In any event, Petromec had not relied on either letter. Mr Efromovich already understood that Board approval was required and believed that the proposal would be approved. He would not have detained the platform had the 11 October letter, or any reply, not been sent. The 25 October letter was received after loading had begun and was regarded only as additional comfort.
6. The court declined to determine hypothetical issues concerning the legal remedies available in Canada or the proper measure of loss. Even if detention had occurred, Petrobras would probably have obtained the platform’s release and Petromec would not have secured the alleged global payment agreement. The claim was dismissed.

The judgment records that this was the second trial. Preliminary issues had been tried before Moore-Bick J, who gave judgment on 2 February 2004. The present trial determined the subsequent deceit and negligent-misstatement claims.