Westlaw Delivery Summary Report for SCHUETT,ROBERT

Date/Time of Request: Wednesday, June 20, 2012 10:25 Central Client Identifier: COURSE Database: CAN-ALLCASES Lines: 408 Documents: 1 Images: 0

The material accompanying this summary is subject to copyright. Usage is governed by contract with Thomson Reuters, West and their affiliates.

Page 2012 CarswellAlta 815, 2012 ABCA 132

2012 CarswellAlta 815, 2012 ABCA 132

Online Constructors Ltd. v. Speers Construction Inc.

Online Constructors Ltd., Appellant (Plaintiff) (Defendant by Counterclaim) and Speers Construction Inc., Respondent (Defendant) (Plaintiff by Counterclaim)

In the Matter of the Builders' Lien Act, R.S.A. 2000, c. B-7 and Amendments Thereto Speers Construction Inc., Applicant and Online Constructors Ltd. and Viper Concrete 2000 Limited Partnership, Respondents (Not parties to this appeal)

Alberta Court of Appeal

Gerard Hawco J.A., Peter Martin J.A., Marina Paperny J.A.

Heard: February 8, 2012 Judgment: May 11, 2012 Docket: Calgary Appeal 1101-0104-AC

Proceedings: affirming Online Constructors Ltd. v. Speers Construction Inc. (2011), 2011 ABQB 43, 2011 CarswellAlta 104, 99 C.L.R. (3d) 198 (Alta. Q.B.)

Counsel: P.R. Biggar, Q.C., K. Smith, for Appellant

T.W. Kathol, J.H. Freeman, for Respondent

Subject: Contracts; Corporate and Commercial; Insolvency; Torts

Construction law --- Contracts — Subcontracts — Incorporation of terms of principal contract

Defendant company entered into contract with golf course for replacement of earth dam — Plaintiff entered into subcontract with defendant to pour concrete and complete irrigation line and grout work — Plaintiff was not told of specific concrete measurement terms in primary contract; method of measurement affected plaintiff's remuneration — Subcontract clearly referenced terms in primary contract, but plaintiff was not provided with copy of primary contract prior to execution of subcontract — Plaintiff assumed payment would be based on total amount of concrete poured, while primary contract specified that payment was based on neat line volume, which was significantly less — Plaintiff brought claim against defendant for payment for work completed under contract — Claim was dismissed — Plaintiff appealed — Appeal dismissed — Plaintiff should have made more inquiries than it did — Plaintiff did not do so despite fact that material provided by defendant was clearly incomplete for purposes of

Page 2012 CarswellAlta 815, 2012 ABCA 132 preparing bid — Plaintiff took serious risk in preparing bid without having obtained necessary additional information.

Construction law --- Contracts — Payment of contractors and subcontractors — Entire contract — Failure to complete project — General principles

Defendant company entered into contract with owner of golf course for replacement of earth dam — Plaintiff entered into subcontract with defendant to pour concrete and complete irrigation line and grout work — Work suffered several delays totalling approximately two weeks due to mistakes by defendant — Plaintiff completed only concrete pour portion of work before inclement weather forced further delay until weather improved — Defendant, under pressure from golf course, had outstanding items completed in plaintiff's absence — Plaintiff brought claim against defendant for payment for work completed under contract; defendant brought counterclaim for compensation for work completed on plaintiff's behalf — Plaintiff was entitled to payment in full for work completed; defendant was entitled to damages related to work which had to be completed by third parties due to plaintiff's absence — Calculating damages owed by both parties, defendant owed plaintiff net payment of $34,858.26 — Plaintiff appealed — Appeal dismissed — Plaintiff had not demonstrated any basis on which trial judge's findings of fact regarding concrete deficiencies should be overturned — Defendant had no choice but to have deficiency repair done by others, and was entitled to charge cost back to plaintiff.

Construction law --- Contracts — Breach of terms of contract — Miscellaneous

Cases considered:

Cardinal Construction Ltd. v. Brockville (City) (1984), 25 M.P.L.R. 116, 4 C.L.R. 149, 1984 CarswellOnt 517 (Ont. H.C.) — referred to

Condominium Corp. No. 0321365 v. 970365 Alberta Ltd. (2012), 2012 ABCA 26, 2012 CarswellAlta 58, 57 Alta. L.R. (5th) 1, 14 R.P.R. (5th) 184, 15 C.P.C. (7th) 297 (Alta. C.A.) — considered

Housen v. Nikolaisen (2002), 10 C.C.L.T. (3d) 157, 211 D.L.R. (4th) 577, 286 N.R. 1, [2002] 7 W.W.R. 1, 2002 CarswellSask 178, 2002 CarswellSask 179, 2002 SCC 33, 30 M.P.L.R. (3d) 1, 219 Sask. R. 1, 272 W.A.C. 1, [2002] 2 S.C.R. 235 (S.C.C.) — followed

Northey-Taylor v. Casey (2008), 2008 ABCA 149, 2008 CarswellAlta 500, 92 Alta. L.R. (4th) 1, [2008] 9 W.W.R. 112, 46 B.L.R. (4th) 48, 421 W.A.C. 302, 429 A.R. 302 (Alta. C.A.) — considered

Page 2012 CarswellAlta 815, 2012 ABCA 132

Opron Construction Co. v. Alberta (1994), 151 A.R. 241, 14 C.L.R. (2d) 97, 1994 CarswellAlta 470 (Alta. Q.B.) — considered

Québec (Commission hydroélectrique) c. Banque de Montréal (1992), 3 C.L.R. (2d) 1, 1992 CarswellQue 117, 1992 CarswellQue 2073, ( sub nom. Bank of Montreal v. Bail Ltée) 93 D.L.R. (4th) 490, ( sub nom. Bank of Montreal v. Bail Ltée) [1992] 2 S.C.R. 554, ( sub nom. Bank of Montreal v. Bail Ltée) [1992] R.R.A. 673, ( sub nom. Banque de Montréal c. Hydro-Québec) 138 N.R. 185, ( sub nom. Bank of Montreal v. Bail Ltée) 48 Q.A.C. 241 (S.C.C.) — considered

Queen v. Cognos Inc. (1993), 1993 CarswellOnt 801, 1993 CarswellOnt 972, D.T.E. 93T-198, 45 C.C.E.L. 153, 93 C.L.L.C. 14,019, 99 D.L.R. (4th) 626, 60 O.A.C. 1, 14 C.C.L.T. (2d) 113, [1993] 1 S.C.R. 87, 147 N.R. 169 (S.C.C.) — considered

Rodaro v. Royal Bank (2002), 49 R.P.R. (3d) 227, 157 O.A.C. 203, 22 B.L.R. (3d) 274, 59 O.R. (3d) 74, 2002 CarswellOnt 1047 (Ont. C.A.) — referred to

Sumner v. PCL Constructors Inc. (2011), [2012] 1 W.W.R. 649, 2011 ABCA 326, 2011 CarswellAlta 1934, 95 C.C.E.L. (3d) 255, 51 Alta. L.R. (5th) 266, 515 A.R. 231, 532 W.A.C. 231, 93 B.L.R. (4th) 138 (Alta. C.A.) — considered

APPEAL by sub-contractor from judgment reported at Online Constructors Ltd. v. Speers Construction Inc. (2011), 2011 ABQB 43, 2011 CarswellAlta 104, 99 C.L.R. (3d) 198 (Alta. Q.B.), which held that sub-contractor was entitled to payment for work completed, and also that contractor was entitled to damages related to work which had to be completed by third parties due to sub-contractor's absence.

Per curiam:

I. Introduction

1 The Appellant, Online Constructors Ltd. (Online), was a subcontractor hired by the Respondent, Speers Construction Inc. (Speers), to provide cement work in the 2006 repair and improvement of the dam at the Priddis Greens Golf and Country Club (the Project). The scope of the Project was set out in the "Prime Contract" between Speers and Priddis Greens, and referred to in the subcontract signed by Online. Online prepared its successful bid for the Project without ever having seen the Prime Contract, being told by a Speers employee that it was "probably standard info".

2 In the course of the Project, significant delays were encountered and additional costs were incurred which Online attributed to Speers, and Speers attributed to Online. On December 6, 2006, immediately following the final cement pour, Online left the job site and did not return.

3 Online brought a claim against Speers for the additional costs incurred in attempting to complete the concrete work, and to be paid for the concrete that was poured. Speers counterclaimed for the expense required to complete the work after Online left the job site, as well as the cost of repairing deficiencies in the concrete, and the value of deductions under the Prime Contract for failing to meet specifications.

II. Decision at Trial

Page 2012 CarswellAlta 815, 2012 ABCA 132

4 The trial judge found that the subcontract between Speers and Online clearly incorporated the Prime Contract by reference. As such, payment for the concrete used in the project was to be done on a "neat line" basis (that is, for the amount indicated by measurements), rather than for the amount actually poured as Online had assumed it would be.

5 Although negligent misrepresentation was not specifically pled by Online in its Statement of Claim, the trial judge considered whether Speers had committed that tort in failing to ensure that Online was aware that payment would be for neat line volumes of concrete. After reviewing the law on negligent misrepresentation, the trial judge noted that Speers was providing documents to Online to elicit a bid that Speers needed, and that the bid was required on short notice. She found that these circumstances created the "special relationship" that is required for the tort of negligent misrepresentation to be made out.

6 The trial judge also found that Speers made a misrepresentation by indicating that the terms of the Prime Contract were "probably standard info", and by omitting to provide all relevant information to Online, in particular that part of the contract that set out how concrete was to be measured. Neat line tenders are apparently a common practise in Alberta, but Online was a British Columbia contractor who had never been involved with that method of payment before. Nevertheless, the trial judge concluded that the tort of negligent misrepresentation was not proven against Speers. Online had greater expertise than Speers in concrete, and could easily have requested from Speers all the details of the Prime Contract and concrete specifications. The trial judge concluded that it was not reasonable for Online to rely on Speers for all relevant information.

7 The trial judge then considered the legal effect of the disintegration of relations between Speers and Online in the course of the Project. A variety of events caused the Project to be delayed several months beyond the substantial completion date agreed to between Speers and Priddis Greens, to March 27, 2007. Contrary to the submissions of Speers, the trial judge found that Online did not abandon the job site when it departed on December 6, 2006, and "clearly intended to return". Speers nonetheless took on the task of completing grouting and irrigation work in Online's absence, without proper notice to Online. As a result, the trial judge found that Online was entitled to be compensated for the work it had done prior to Speers taking over.

8 Responsibility for deficiencies in the concrete was also at issue between the parties. The trial judge found that, despite late payments from Speers under the subcontract, Online was not at liberty to withdraw from the Project without repairing substantial concrete deficiencies. Speers was entitled to the amount spent remedying these deficiencies in Online's absence.

9 The trial judge went on to determine responsibility for a lengthy list of further errors and delays raised by the parties. These included concerns regarding scheduling, excavation and site preparation, rebar subcontractors, lack of job site access, lack of a lay down area, mix approvals, responsibility for cut off walls, cold weather costs, interference in concrete pouring by site engineers, and crew experience.

10 The trial judge also considered one final counterclaim advanced by Speers, namely, for the amount of the deduction by Priddis Greens for failure to meet concrete specifications. The trial judge found that the problems with the concrete were the responsibility of Online, and ordered that Speers be compensated for the deducted amount.

11 The net result of the claims and counterclaims advanced by the parties, was that Online was entitled to judgment against Speers in the amount of $34,858.26.

III. Issues

Page 2012 CarswellAlta 815, 2012 ABCA 132

12 The issues on this appeal may be summed up as follows:

Did the trial judge err in concluding that:

a. the tort of negligent misrepresentation was not proven against Speers;

b. the Prime Contract was incorporated into the Online subcontract, such that payment for concrete was limited to "neat line" volume;

c. Speers had proven that it was entitled to deduct the cost of completing concrete deficiencies; and

d. Online bore the onus of proving that Speers was in breach of the subcontract?

IV. Standard of Review

13 The trial judge said that this lawsuit is "driven by the factual findings". We agree. For several of the issues on appeal, significant deference is owed to the decision of the trial judge. The trial judge's findings on the issue of negligent misrepresentation, as well as the concrete deficiencies, involve mixed fact and law and are subject to review on the standard of palpable and overriding error: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235 (S.C.C.) at para 36.

14 The trial judge's interpretation of the subcontract raises a question of law for which the standard of review is correctness: Housen v. Nikolaisen, at para 8.

V. Analysis

A. Negligent misrepresentation

15 A finding of liability on a ground not pled is an error of law reviewable on a standard of correctness: Northey-Taylor v. Casey, 2008 ABCA 149, 429 A.R. 302 (Alta. C.A.) at para 9 citing Rodaro v. Royal Bank (2002), 59 O.R. (3d) 74 (Ont. C.A.). Although the trial judge in this case ultimately found no liability, she undertook a negligent misrepresentation analysis in the absence of pleadings or argument on that issue. This Court has held that it is generally inappropriate for a trial judge to decide a case on a basis not pled by the parties: Sumner v. PCL Constructors Inc., 2011 ABCA 326, 515 A.R. 231 (Alta. C.A.) at para 26.

16 In any event, for the reasons that follow, we are satisfied that a claim in negligent misrepresentation could not succeed on these facts.

17 In Condominium Corp. No. 0321365 v. 970365 Alberta Ltd., 2012 ABCA 26 (Alta. C.A.), para 65 this Court summarized the five elements of a successful negligent misrepresentation claim originally set out in Queen v. Cognos Inc., [1993] 1 S.C.R. 87, 99 D.L.R. (4th) 626 (S.C.C.):

First, there must be a duty of care based on a "special relationship" between the representor and the representee. Second, the representation in question must be untrue, inaccurate or misleading. Third, the representor must have acted negligently in making the representation. Fourth, the representee must have relied, in a reasonable

Page 2012 CarswellAlta 815, 2012 ABCA 132

manner, on the negligent misrepresentation. And fifth, the reliance must have been detrimental to the representee in the sense that damages resulted.

18 In the context of this case only the second and fourth of these elements need be addressed.

19 Regarding the second element, given the deferential standard of review, we would not interfere with the trial judge's finding of an omission or misrepresentation. We note that the evidence does not necessarily compel such a finding but there was evidence to support her conclusion. Online may have assumed something which was not correct, but this alone does not necessarily amount to a misrepresentation on the part of Speers.

20 The trial judge's consideration of the fourth element, reasonableness of reliance, was informed primarily by the decisions in Opron Construction Co. v. Alberta (1994), 151 A.R. 241, [1994] A.J. No. 224 (Alta. Q.B.), and Québec (Commission hydroélectrique) c. Banque de Montréal, [1992] 2 S.C.R. 554, 93 D.L.R. (4th) 490 (S.C.C.).

21 Banque de Montréal sets out the "general theory of the duty to inform" as it arises in the civil law context. This duty arises if it would be impossible for the party to whom the duty to inform is owed to obtain the necessary information itself. The Opron Construction decision repeatedly emphasizes that there is no basis in common law for a requirement that an individual investigate and verify the information represented and relied upon: paras 555 - 557. This is an accurate statement of the common law.

22 This does not mean, however, that reliance will always be reasonable. In some circumstances it will be clear that the representee was compelled, if only by common sense, to make further inquiries. This may be the case where the provided information lacks specificity, there is a question as to the correct interpretation of the necessary information, or there is a clear warning that the information provided may be inaccurate: Opron Construction, at para 549, citing Cardinal Construction Ltd. v. Brockville (City) (1984), 4 C.L.R. 149 (Ont. H.C.) at p 188ff.

23 In this case, Online should have made more inquiries than it did. Speers did indicate to Online that the contract contained "all the standard items", but then went on to say: "but you should at least see it before you tender a price". Online did not do so despite the fact that the material provided by Speers was clearly incomplete for the purposes of preparing a bid. Online took a serious risk in preparing a bid without having obtained the necessary additional information. We agree with the finding of the trial judge that:

... it was open to Online to request the whole of the specifications and the prime contract documents, and check the details. Online had far more knowledge of concrete contracts and specifications than Speers. It also should know that the terms of the prime contract may be important: at para 31.

24 This ground of appeal is dismissed.

B. Failure to incorporate terms of Prime Contract

25 Online argues that the terms of the Prime Contract, which included the "neat line" measurement specification to which we have referred above, were not incorporated into the subcontract. Rather, it argues, it was clear that this was a unit price contract and therefore Speers should be liable to pay Online a certain amount of money for every cubic metre of concrete delivered to the site.

26 The trial judge was unequivocal in her rejection of this argument. Drawing attention to the fact that it was Online that drafted the subcontract, she held:

Page 2012 CarswellAlta 815, 2012 ABCA 132

The method of measurement of concrete in the prime contract was clear, it was an essential detail, and was clearly incorporated by reference into the subcontract. It would have been hard to do so in a clearer way. The plain meaning of the subcontract is that neat line measurements are to be used as the method for compensation of the subcontractor: at para 20.

27 In our view, the trial judge's interpretation of the subcontract was correct. The Prime Contract was clearly incorporated into the subcontract. This ground of appeal is dismissed.

C. Deficiencies

28 Online also argued that the trial judge erred in deducting the cost of completing the concrete deficiencies. In support of this argument, Online suggests that Speers took over remedying the deficiencies without notice to Online, and without giving Online the opportunity to carry out the deficient work themselves. Online also argues that the trial judge's reasoning in refusing to allow a deduction for irrigation and grouting work done in Online's absence is inconsistent with her findings on the concrete deficiencies. May 10, 2012

29 The trial judge's finding that no deduction could be allowed for the irrigation and grouting work is supported by different considerations and findings of fact than those supporting her conclusion regarding the concrete deficiency work.

30 Regarding the irrigation and grouting work, the trial judge found that there was no formal deadline set between Speers and Online for the completion of those tasks. Speers went ahead and completed these projects without sufficient notice to Online when Online "clearly intended to return" to do this work.

31 Regarding the concrete deficiency work, in contrast, the trial judge found that Online was made aware of the work to be done and given ample opportunity to do it. Online chose not to. The fact is that Online was advised that deductions were being made by the owner for deficiencies. Online took issue with some of the deficiencies and what had caused them, but it never brought a concrete expert to the site to rebut anything which the engineers had said with respect to the deficiencies. Online left the site on December 6, 2006, asserting that the deficiencies were nothing more than cosmetic and that Online had no obligation to repair them. It was clear that Online did not intend to return for the purposes of remedying those deficiencies. The deficiency work was carried out by Speers during January, February and March of 2007.

32 Online has not demonstrated any basis on which the trial judge's findings of fact regarding the concrete deficiencies should be overturned. In the circumstances, Speers had no choice but to have the deficiency repair done by others, and is entitled to charge this cost back to Online. This ground of appeal is dismissed.

D. Online bore the onus of proving that Speers was in breach of the subcontract

33 Online argues that the trial judge erred in reversing the onus of proof on the issue of Speers' counterclaim for damages in relation to the concrete deficiencies. Rather than the onus being on Speers to prove damages, it is argued that the trial judge improperly placed the onus upon Online to prove that it had failed to perform the work properly.

34 We do not read the trial judge's reasons in this way. The trial judge engaged in a detailed analysis of the evidence on the concrete deficiencies, and appreciated who was required to prove what in the claim, defence, and counterclaim.

Page 2012 CarswellAlta 815, 2012 ABCA 132

35 Online sued Speers for some $332,000 as monies due and owing under the subcontract. Online claimed an additional $140,000 for delays and loss of productivity, which it alleged was caused by Speers. Online argued that, in failing to pay, Speers had breached the subcontract.

36 Speers' Statement of Defence denied any wrong-doing and sought, by way of counterclaim, the amount of some $290,000 as a cost of completing work which Online had contracted to carry out. Speers also claimed the sum of $126,000 for the cost of remedying the deficiencies which Online failed to remedy.

37 The trial judge concluded that Online had not proven that Speers defaulted on the subcontract such that Online was entitled to unilaterally abandon the project. The trial judge rejected the argument that the deficiencies were the result of interference by an on-site engineer. Online was responsible for the concrete deficiencies, and would be charged back for the cost of repairs attributable to their deficient work.

38 With regards to the assessment of damages for the concrete deficiencies, the trial judge stated that:

... the onus is on Speers to prove these damages. It is not sufficient to say that they were assessed against Speers, the issue is what amounts can Speers prove as reasonable due to the failure of Online to meet contract specifications.

39 The trial judge accepted the evidence of Speers with respect to the deficient work carried out. She reviewed the invoices. She deducted work which she considered to not have been deficient work. She disallowed claims for a sub-contractor who she considered did not have any particular expertise in concrete. She allowed Speers' charge of $48,391.58 with respect to the deficiencies.

40 Online must prove its claim. It failed to do so. Speers must prove its counterclaim. The trial judge was satisfied that Speers had done so, up to the amount which she accepted. The trial judge placed the onuses where they belonged. She made no error.

41 In the end result, the appeal is dismissed.

Appeal dismissed.

END OF DOCUMENT