Geophysical Services Inc. v. Sable Mary Seismic Inc. et al., 2012 NSCA 33

• Judge: MacDonald, C.J.N.S., Fichaud and Beveridge, JJ.A.
• Court: Court of Appeal of Nova Scotia (Canada)
• Case Date: October 03, 2011
• Jurisdiction: Nova Scotia
• Citations: 2012 NSCA 33;(2012), 315 N.S.R.(2d) 201 (CA)

Geophysical v. Sable Mary Seismic (2012), 315 N.S.R.(2d) 201 (CA);

    998 A.P.R. 201

MLB headnote and full text

Temp. Cite: [2012] N.S.R.(2d) TBEd. MR.069

Sable Mary Seismic Incorporated and Matthew Kimball (appellants) v. Geophysical Services Incorporated (respondent)

(CA 325703; 2012 NSCA 33)

Indexed As: Geophysical Services Inc. v. Sable Mary Seismic Inc. et al.

Nova Scotia Court of Appeal

MacDonald, C.J.N.S., Fichaud and Beveridge, JJ.A.

March 29, 2012.

Summary:

Geophysical Services Inc. (GSI) and Sable Mary Seismic Inc. (SMS) entered into a contract, or more specifically a series of contracts, for the provision by SMS and its principal, Kimball, of services to GSI respecting marine seismic activities between January 1998 and October 8, 2002. The services included management of GSI's seismic vessel; obtaining, managing and paying the crew; and securing provisions, supplies and other services for the vessel's operation. After SMS resigned and GSI took direct responsibility for these services, GSI determined that it had been overcharged about $1,800,000 and sued for recovery. SMS denied GSI's claim and countersued for profit or "success" sharing promised by GSI.

The Nova Scotia Supreme Court, in a decision reported at 287 N.S.R.(2d) 50; 912 A.P.R. 50, granted GSI judgment for $1,764,251.70 against SMS for over billing, holding that GSI's interpretation of the words "cost plus 5%" in the agreement was correct. Further, the court found that the crewing invoices included claims for wages and benefits for Kimball's family members and persons working for GSI under another contract with another company (also owned by Kimball), and these claims were fraudulent misrepresentations. The court held that GSI was entitled to judgment against SMS and Kimball jointly and severally for $451,885.41, the amount of the fraudulent misrepresentation. Finally, while GSI intended to establish a success sharing respecting the marine seismic operation and intended that SMS would share in its success when GSI was in a profit position, GSI's intentions expressed in the letter agreements were no more than a statement of intention and did not constitute a legally binding contract. Alternatively, the court was not satisfied that GSI was "in a profit position" at the time that SMS terminated the agreement. GSI claimed solicitor-client costs or, in the alternative, a lump sum costs award approximating "substantial indemnity" of its actual costs. The defendants argued that costs should be party and party costs per Tariff A of Civil Procedure Rule 77.

The Nova Scotia Supreme Court, in a decision reported at 299 N.S.R.(2d) 42; 947 A.P.R. 42, awarded a total of $407,882.94 costs to GSI, comprised as follows: lump sum fees of $275,000, being 50% of reasonable legal fees; $39,043.50 for legal disbursements by counsel; $40,825.65 HST on the preceding amounts; and $53,013.79 for disbursements paid directly by the plaintiff. The court also awarded prejudgment interest at 5% per year (Civil Procedure Rule 70.07) from November 22, 2002 (when the action was commenced) to February 4, 2010 (the date of the order). The defendants appealed.

The Nova Scotia Court of Appeal dismissed the appeal. The court awarded $32,500 costs of the appeal, inclusive of disbursements.

Editor's Note: Other decisions in this proceeding, relevant to the present decision, are reported at (2003), 213 N.S.R.(2d) 303; 667 A.P.R. 303 (S.C.) (ex parte Anton Piller Order to gain access to premises owned or controlled by the defendants was set aside) and [2007] N.S.R.(2d) Uned. 164 (S.C.), affd. (2008), 269 N.S.R.(2d) 69; 860 A.P.R. 69 (C.A.) (jury notice struck).

Courts - Topic 583

Judges - Duties - Re reasons for decisions - GSI and SMS entered into a contract for the provision by SMS, and its principal and directing mind (Kimball), of services to GSI respecting marine seismic activities - After SMS resigned and GSI took direct responsibility for the services, GSI determined that it had been overcharged about $1,800,000 - It sued for recovery - The key to the outcome of the trial was a resolution of the credibility of the two very divergent views as to what was or was not orally agreed to between Kimball and Einarsson of GSI - The trial judge resolved most of the issues by accepting Einarsson's evidence and not Kimball's - The trial judge allowed the action - SMS and Kimball appealed, submitting, inter alia, that the trial judge erred in his credibility findings and provided inadequate reasons for those findings - The Nova Scotia Court of Appeal dismissed the appeal - The trial judge was well aware of the law respecting assessing credibility - He gave extensive reasons for every important aspect of the case he had to decide - His reasons were far from generic - It was clear why he found Kimball's evidence not to be credible - See paragraphs 73 to 94.

Courts - Topic 599

Judges - Duties - Duty to render judgment within reasonable time - Appellants pointed out that the decision rendered by the trial judge was outside the direction in s. 34(d) of the Judicature Act, which permitted a judge to reserve judgment, but for no longer than six months - They complained that the delay resulted in the trial judge forgetting or not accurately recalling or misunderstanding key evidence - The appellants referred to some of the leading authorities on s. 34(d), which clearly established that the time limit was not mandatory but strongly directory - The appellants said that the delay impacted on the integrity of the trial judge's fact finding process - They claimed that he made 90 factual errors or omissions caused by forgetting, misunderstanding, misapprehending, mischaracterizing evidence, making findings not based on evidence and otherwise making contradictory findings - The Nova Scotia Court of Appeal held that if the trial judge made any such errors, they were open to review on the appropriate standard of review - Accordingly, the court dismissed this ground of appeal - See paragraphs 71 and 72.

Courts - Topic 691

Judges - Disqualification - Bias - Reasonable apprehension of bias - The appellants asserted that Warner, J., prejudged certain aspects of the issues that would have to be determined at trial when he gave reasons allowing an application to strike the jury notice - The appellants contended that when he gave his reasons he assured them that he would not be the trial judge - The respondent answered that the appellants should not be allowed to complain given the procedural history concerning Warner, J., becoming the trial judge - Warner, J., gave his decision striking the jury notice on March 19, 2008 - The trial was then scheduled for November 2008 in Kentville - LeBlanc, J., was to sit in Kentville that month - Scheduling difficulties led to Warner, J., replacing LeBlanc, J., on the rota for November 2008 - The appellants brought a motion requesting Warner, J., to recuse himself - Warner, J., heard the motion on September 3, 2008 - The motion was dismissed - An order confirming the dismissal was taken out on September 29, 2008, and the trial was adjourned by consent to March 2, 2009 - The respondents argued that the appellants, having failed to appeal Warner, J.'s September 3, 2008 interlocutory decision, could not do so now - The Nova Scotia Court of Appeal found much force to the respondents' position - However, it did not have to decide the issue, as the appellants had not demonstrated a reasonable apprehension of bias - Nothing indicated a prejudgment of any issue yet to be determined at trial - No fully informed person viewing the matter realistically would conclude any lack of impartiality by Warner, J. - See paragraphs 61 to 69.

Courts - Topic 692

Judges - Disqualification - Bias - Arising out of expressed opinions on legal issues - [See Courts - Topic 691 ].

Damage Awards - Topic 767

Torts - Fraud and misrepresentation - Fraudulent misrepresentation - GSI and SMS entered into a contract, or more specifically a series of contracts, for the provision by SMS and its principal, Kimball, of services to GSI respecting marine seismic activities - The services included management of GSI's seismic vessel; obtaining, managing and paying the crew; and securing provisions, supplies and other services for the vessel's operation - After SMS resigned and GSI took direct responsibility for these services, GSI determined that it had been overcharged about $1,800,000 and sued for recovery - Einarsson was GSI's principal - The trial judge awarded GSI damages of $1,764,251.70 for over billing (based on an erroneous interpretation of the contract (wages plus 30%)) - The judge further found that a deceit or fraud was completed by SMS and Kimball respecting those portions of the crewing invoices that exceeded the actual wages of the seismic crew listed on the bi-monthly invoices plus 30% - The judge found that SMS invoiced fraudulently (a) for relatives who were not seismic crew named on the crewing invoices, (b) for some navigators working under a contract with another company owned by Kimball, (c) a mark up on the salary taken by Kimball from SMS, and (d) a mark up greater than that which GSI/ Einarsson was aware of - The court found that the minimal quantifiable amount established by SMS's fraudulent misrepresentation was $451,885.41, and it found both SMS and Kimball liable for that amount - SMS and Kimball appealed the award of $451,885.41 - The Nova Scotia Court of Appeal dismissed the appeal - There were errors by the trial judge, but if corrected, they would have made the award even higher - See paragraphs 122 to 141.

Damages - Topic 7076

Contracts - Contracts for services - Evidence and proof - GSI and SMS entered into a contract, or more specifically a series of contracts, for the provision by SMS and its principal, Kimball, of services to GSI respecting marine seismic activities - The services included management of GSI's seismic vessel; obtaining, managing and paying the crew; and securing provisions, supplies and other services for the vessel's operation - After SMS resigned and GSI took direct responsibility for these services, GSI determined that it had been overcharged about $1,800,000 and sued for recovery - At issue was the interpretation of the words "cost plus 5%" in the agreement between GSI and SMS for crewing services - The trial judge held that SMS was entitled to be paid for the seismic crew whose names appeared on the invoices on the basis of the actual wages of the named crew, the actual cost of their benefits, plus 5% - The court held that SMS's principal intentionally disposed of the worksheets and backup information that it was required to maintain to substantiate its crewing invoices - Based on the plaintiff's expert report, the court awarded GSI damages of $1,764,251.70 for over billing - The Nova Scotia Court of Appeal upheld the decision - See paragraphs 95 to 107.

Fraud and Misrepresentation - Topic 404

Fraudulent misrepresentation (deceit) - Remedies - Damages - [See Damage Awards - Topic 767 ].

Practice - Topic 8326

Costs - Appeals - Costs of appeal - General principles - The Nova Scotia Court of Appeal dismissed an appeal and awarded costs to the respondent - The court stated that "Costs at trial were just over $400,000. Despite the complexity of the appeal, the parties recognize that an award 40% of that amount would be $160,000, and would over compensate the respondent for its involvement in the appeal. In my opinion, an award of $32,500, inclusive of disbursements, would be appropriate." - See paragraph 141.

Practice - Topic 8339

Costs - Appeals - Costs of appeal - Special orders - [See Practice - Topic 8326 ].

Practice - Topic 8800

Appeals - General principles - Duty of appellate court regarding findings of fact - The Nova Scotia Court of Appeal stated that "Admissibility of evidence is a question of law. A trial judge must be correct in his or her identification and application of the law on the admissibility of evidence, but deference is afforded to trial judges with respect to issues such as discretionary rulings or factual findings that may impact on ultimate admissibility ..." - See paragraph 116.

Practice - Topic 8800.2

Appeals - General principles - Duty of appellate court regarding findings of law - [See Practice - Topic 8800 ].

Practice - Topic 8804

Appeals - General principles - Duty of appellate court regarding discretionary orders - [See Practice - Topic 8800 ].

Cases Noticed:

McPhee v. Gwynne-Timothy (2005), 232 N.S.R.(2d) 175; 737 A.P.R. 175; 2005 NSCA 80, refd to. [para. 59].

MacNeil v. Nova Scotia (Attorney General) et al. (2000), 183 N.S.R.(3d) 119; 568 A.P.R. 119; 2000 NSCA 31, refd to. [para. 60].

Mitsui & Co. (Point Aconi) Ltd. v. Jones Power Co. et al. (2001), 196 N.S.R.(2d) 118; 613 A.P.R. 118; 2001 NSCA 112, refd to. [para. 64].

Goodine v. Milk Marketing Board (N.B.) (2002), 251 N.B.R.(2d) 5; 654 A.P.R. 5; 2002 NBCA 38, refd to. [para. 64].

R. v. R.D.S., [1997] 3 S.C.R. 484; 218 N.R. 1; 161 N.S.R.(2d) 241; 477 A.P.R. 241, refd to. [para. 65].

Langille v. Midway Motors Ltd. (2002), 202 N.S.R.(2d) 398; 632 A.P.R. 398; 2002 NSCA 39, refd to. [para. 71].

Toronto Dominion Bank v. Lienaux - see 2301072 Nova Scotia Ltd. v. Lienaux et al.

2301072 Nova Scotia Ltd. v. Lienaux et al. (2005), 234 N.S.R.(2d) 185; 745 A.P.R. 185; 2005 NSCA 97, refd to. [para. 71].

R. v. Sheppard (C.), [2002] 1 S.C.R. 869; 284 N.R. 342; 211 Nfld. & P.E.I.R. 50; 633 A.P.R. 50; 2002 SCC 26, refd to. [para. 73].

Laurel Oak Marketing Ltd. v. Royal Canadian Golf Association, [2010] O.A.C. Uned. 32; 2010 ONCA 62, refd to. [para. 73].

McAleer v. Farnell (2009), 274 N.S.R.(2d) 348; 874 A.P.R. 348; 2009 NSCA 14, refd to. [para. 74].

Faryna v. Chorny, [1952] 2 D.L.R. 354 (B.C.C.A.), refd to. [para. 75].

Royal & Sun Alliance v. Baltzer et al. (2009), 283 N.S.R.(2d) 344; 900 A.P.R. 344; 2009 NSCA 110, refd to. [para. 88].

MacRae v. Hubley, [2011] N.S.R.(2d) Uned. 30; 2011 NSCA 25, refd to. [para. 88].

Davison et al. v. Nova Scotia Government Employees Union (2005), 231 N.S.R.(2d) 245; 733 A.P.R. 245; 2005 NSCA 51, refd to. [para. 95].

Indian Molybdenum Ltd. v. Canada, [1951] 3 D.L.R. 497 (S.C.C.), refd to. [para. 105].

Eli Lilly & Co. et al. v. Novopharm Ltd. et al., [1998] 2 S.C.R. 129; 227 N.R. 201, refd to. [para. 105].

Merks Poultry Farms Ltd. v. Wittenberg et al., [2009] N.S.R.(2d) Uned. 96; 2009 NSCA 70 [para. 105].

R. v. West (W.F.) (2010), 288 N.S.R.(2d) 293; 914 A.P.R. 293; 2010 NSCA 16, refd to. [para. 116].

2703203 Manitoba Inc. v. Parks et al. (2007), 253 N.S.R.(2d) 85; 807 A.P.R. 85; 2007 NSCA 36, refd to. [para. 123].

Purdy Estate v. Morash, [2011] N.S.R.(2d) Uned. 295; 2011 NSCA 123, refd to. [para. 123].

Huff v. Price (1990), 76 D.L.R.(4th) 138 (B.C.C.A.), refd to. [para. 125].

Statutes Noticed:

Judicature Act, R.S.N.S. 1989, c. 240, sect. 34(d) [para. 71].

Authors and Works Noticed:

Fridman, G.H.L., The Law of Contract in Canada (5th Ed. 2006), pp. 293, 294 [para. 125].

Counsel:

Derrick J. Kimball and Sharon Cochrane, for the appellant, Sable Mary Seismic Incorporated;

Nash T. Brogan, for the appellant, Matthew Kimball;

Colin D. Piercey and Karen N. Bennett-Clayton, for the respondent.

This appeal was heard in Halifax, N.S., on October 3, 2011, by MacDonald, C.J.N.S., Fichaud and Beveridge, JJ.A., of the Nova Scotia Court of Appeal. Beveridge, J.A., delivered the following decision for the court on March 29, 2012.