Guarantee Co. of North America v. Beasse et al., (1992) 124 A.R. 161 (QB)

• Judge: Rooke, J.
• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: April 13, 1992
• Citations: (1992), 124 A.R. 161 (QB)

Guarantee Co. of North Am. v. Beasse (1992), 124 A.R. 161 (QB)

MLB headnote and full text

The Guarantee Company of North America (plaintiff) v. Roger Beasse, Shirley Beasse, Robdale Contractors Ltd., 239223 Alberta Ltd., Henlo Enterprises Ltd., Robdale Roadbuilders Ltd., Lester Sorenson, Greg Charette and Beasse Charette Sorenson Equipment Leasing Ltd. (defendants)

(Action No. 8701-16630)

Robdale Contractors Ltd. (plaintiff) v. The Guarantee Company of North America (defendant)

(Action No. 8703-12813)

Indexed As: Guarantee Co. of North America v. Beasse et al.

Alberta Court of Queen's Bench

Judicial District of Calgary

Rooke, J.

April 13, 1992.

Summary:

Guarantee Co. issued a Performance Bond and Labour and Material Payment Bond to Robdale (obligor) in favour of Public Works Canada (obligee) respecting a highway construction project. Robdale went into receivership before completion. Guarantee Co. was required by Public Works Canada to step in to complete the contract under the Performance Bond and to respond to claims under the Labour and Material Payment Bond. Guarantee Co. brought an action for indemnity against the indemnitors under a Deed of Indemnity. Robdale brought an action against Guarantee Co. claiming that Guarantee Co. failed to claim against Public Works Canada for extras owing to Robdale, failed to complete at the lowest cost possible and failed to properly defend the Labour and Material Payment Bond claims. The two actions were consolidated for trial.

The Alberta Court of Queen's Bench allowed Guarantee Co's. action, awarding joint and several liability against the indemnitors. The court dismissed Robdale's claims.

Building Contracts - Topic 2621

Payment - Compensation to builder - Extras - General - Guarantee Co. was obligated under a Performance Bond to complete a contract with Public Works Canada - The defaulting contractor claimed that Guarantee Co. was obliged to claim for extras allegedly owed to it and to account for the monies - The Alberta Court of Queen's Bench stated that Guar­antee Co. had a right, but no obligation, to claim for extras - Alternatively, if such duty existed, the contractor failed to prove entitlement to the claimed extras and, therefore, no damages were proved - The contractor did not submit a claim directly to Public Works Canada and failed to provide sufficient information to allow Guarantee Co. to make a claim - See paragraphs 150 to 195.

Building Contracts - Topic 7565

Performance Bonds - Duties of surety - Investigatory duties - Guarantee Co. issued a Performance Bond and Labour and Material Payment Bond to Robdale (obligor) in favour of Public Works Canada (obligee) respecting a highway construction project - The indemnitors executed a Deed of Indemnity in favour of Guarantee Co. - Robdale went into re­ceivership and did not complete the con­tract - Guarantee Co. incurred the cost of completion and sued the indemnitors for recovery - The indemnitors claimed that Guarantee Co. failed to investigate the default, should have determined that the failure to complete was Public Works Canada's fault and, accordingly, should not have paid out the claims - The Alberta Court of Queen's Bench rejected the defence - Noncompletion was caused by Robdale's impecuniosity, without any fault attributed to Guarantee Co. or Public Works Canada - See paragraphs 29 to 33.

Building Contracts - Topic 7566

Performance Bonds - Duties of surety - Mitigation of loss - Guarantee Co. issued a Performance Bond and Labour and Material Payment Bond to Robdale (obligor) in favour of Public Works Canada (obligee) respecting a highway construction project - The indemnitors executed a Deed of Indemnity in favour of Guarantee Co. - Robdale went into re­ceivership and did not complete the con­tract - Guarantee Co. incurred the cost of completion and sued the indemnitors for recovery - The indemnitors claimed that Guarantee Co. failed to investigate the claims and failed to properly adjust and mitigate its losses under the Bonds - The Alberta Court of Queen's Bench rejected the defence - See paragraphs 34 to 43.

Building Contracts - Topic 7568

Performance Bonds - Duties of surety - Duty to act in good faith - Guarantee Co. claimed reimbursement of monies paid under a Performance Bond and Labour and Material Payment Bond by suing the indemnitors under a Deed of Indemnity - The Alberta Court of Queen's Bench agreed that "a surety has a duty to act in good faith and to take no action contrary to the preservation of indemnitor's rights" - The court stated that there was no breach of the duty of good faith by Guar­antee Co. and no acts prejudicing the indemnitors' rights - There were also no damages or losses caused to the indemnitors by any of Guarantee Co's. actions - See paragraphs 53 to 58.

Building Contracts - Topic 7569

Performance Bonds - Duties of surety - Claim for extras - [See Building Con­tracts - Topic 2621 ].

Building Contracts - Topic 7945

Labour and Material Payment Bonds - Payments - Burden of proof respecting - Guarantee Co. paid claims under a Labour and Material Payment Bond - Guarantee Co. claimed it received the claims, liti­gated or settled them in good faith and that, accordingly, the payments were prima facie reasonable and proper - Guarantee Co. claimed judgment against indemnitors under a Deed of Indemnity - The Alberta Court of Queen's Bench agreed that once Guarantee Co. established a prima facie case the indemnitors had to prove on a balance of probabilities that the payments were improper - The court held that the indemnitors failed to discharge that onus of proof - See paragraphs 59 to 68.

Estoppel - Topic 386

By record (res judicata) - Res judicata as a bar to subsequent proceedings - Issues decided in prior proceedings - Guarantee Co. paid claims under a Labour and Material Payment Bond and sued indemnitors under a Deed of Indemnity for reimbursement - Guarantee Co. had already obtained judgment against the indemnitors for certain claims arising out of third party claims against the indemnitors in actions commenced by several Labour and Material Payment Bond claimants - The Alberta Court of Queen's Bench held that these judgments under the Deed of Indemnity were res judicata and not open to challenge in a subsequent action by Guarantee Co. against the indemnitors respecting other claims - See paragraphs 59 to 60.

Evidence - Topic 2401

Presumptions - Inference from failure to call available evidence - Defendants claimed that an adverse inference should be drawn from the plaintiff's failure to call certain potential witnesses - The Alberta Court of Queen's Bench refused to draw an adverse inference, where the witnesses would not have given uniquely new evi­dence; the evidence had already been introduced via another source - Addition­ally, there was no property in a witness and the defendants could have called them - Finally, the claim of adverse inference was made in a vacuum, where the evi­dence that would have been called would not have assisted the defendants - See paragraphs 44 to 51.

Evidence - Topic 7003

Opinion evidence - Expert evidence - Procedural prerequisites to admission - Notice - Rule 218.1(1) required 90 days' notice of a party's intention to call an expert witness and a statement of the substance of the opinion - Rule 218.1(2) provided that noncompliance with rule 218.1(1) precluded calling the witness absent leave of the court - The Alberta Court of Queen's Bench denied leave where the party had ample opportunity to comply with rule 218.1(1), but made no attempt to do so - The mere absence of prejudice to the party opposing leave was not sufficient to justify granting leave - The court stated that while there may be relief from the strict requirement of rule 218.1(1), such relief will be very sparingly granted - See paragraphs 230 to 247.

Guarantee and Indemnity - Topic 7048

Indemnity - Duties of indemnitee - Duty of good faith - [See Building Contracts -Topic 7568 ].

Guarantee and Indemnity - Topic 7083

Indemnity - Extent of - Legal fees - A Deed of Indemnity entitled Guarantee Co. to indemnification for any "counsel fee" - Guarantee Co. claimed solicitor-client costs under the Deed of Indemnity - The Alberta Court of Queen's Bench held that reasonable solicitor-client costs were properly chargeable under the Deed of Indemnity subject to the exception of certain motions for production of informa­tion by Guarantee Co. - See paragraphs 203 to 211.

Guarantee and Indemnity - Topic 7123

Indemnity - Validity of - Bars - Breach of indemnity contract by indemnitee - A contractor was declared in default by Public Works Canada and Guarantee Co. was called upon to complete the contract under a Performance Bond - Guarantee Co. chose another contractor by tender, approved by Public Works Canada, and the project was completed - Guarantee Co. sued the indemnitors under a Deed of Indemnity to recover the completion costs - The indemnitors claimed that Guarantee Co. failed to mitigate, incurred extra expenses in choosing a contractor other than one of the indemnitors and failed to complete in a timely fashion - The Alberta Court of Queen's Bench stated that none of the indemnitors were capable of complet­ing the contract; the choice of replacement contractor was appropriate - The time for completion had no effect on monies claimed by Guarantee Co., except for limited costs for which adjustments were made - See paragraphs 70 to 126.

Practice - Topic 4494

Discovery - Use of examination in court - Evidence of authorized spokesman of corporation - Rule 214(1) permitted a party to use evidence given by a witness at discovery - The Alberta Court of Queen's Bench stated that where the discovery evidence concerned admissions by a wit­ness, on his own behalf or as an officer of a corporation, the procedure was as fol­lows: (1) counsel should summarize the admissions in the transcript and have the witness confirm the admissions in cross-examination; (2) if the admissions are confirmed a read-in of the discovery evidence is not needed; (3) if the admis­sions are denied the witness should be questioned on the alleged admissions and, if still denied, the admissions should be read in - See paragraphs 216 to 228.

Practice - Topic 4500

Discovery - Use of examination in court - Reading of opposite party's discovery evidence into the record - [See Practice - Topic 4494 ].

Practice - Topic 4501

Discovery - Use of examination in court - Use on cross-examination - Rule 214(1) permitted a party to use evidence given by a witness at discovery - The Alberta Court of Queen's Bench stated that where the discovery evidence was intended to chal­lenge the credibility of a witness, the proper procedure was to challenge the witness on any alleged previous inconsis­tent statement in cross-examination - See paragraphs 217 to 222.

Practice - Topic 7467

Costs - Solicitor and client costs - Enti­tlement to - By agreement - What consti­tutes - [See Guarantee and Indemnity - Topic 7083 ].

Cases Noticed:

Truro v. Toronto General Insurance Co., [1974] S.C.R. 1129, refd to. [para. 35].

Alberta Concrete Products v. Simcoe & Erie General Insurance Co. (1978), 15 A.R. 437 (Dist. Ct.), refd to. [para. 35].

Thomas Fuller Construction Co. v. Conti­nental Insurance Co. (1970), 36 D.L.R.(3d) 336 (Ont. H.C.), refd to. [para. 42].

Murray v. Saskatoon (1951), 4 W.W.R.(N.S.) 234 (Sask. C.A.), refd to. [para. 44].

Baumann v. Springer Construction et al. (1967), 58 W.W.R.(N.S.) 592 (Alta. S.C.T.D.), refd to. [para. 44].

Panarctic Oils Ltd. v. Menasco Co. (1983), 41 A.R. 451 (C.A.), refd to. [para. 44].

Kamitomo et al. v. Pasula et al. (1983), 50 A.R. 280; 29 Alta. L.R.(2d) 375, refd to. [para. 44].

Rottacker Farms Ltd. v. C & M Farms Ltd. (1975), 65 D.L.R.(3d) 305 (Alta. Q.B.), refd to. [para. 48].

Atlantic Insurance Co. Ltd. v. Bruce (1990), 84 Nfld. & P.E.I.R. 333; 262 A.P.R. 333 (Nfld. T.D.), refd to. [para. 55].

Canadian General Insurance Co. v. Dube Ready-Mix et al. (1984), 52 N.B.R.(2d) 66; 137 A.P.R. 66 (C.A.), refd to. [para. 56].

Safeco Insurance Co. of America v. Cri­terion Investment Corp. et al. (1989), 732 Fed. Supp. 834 (U.S.D.C.), refd to. [para. 56].

Chicago R.I. & P.R. Co. v. Dorby Flour Mills Inc. (1954), 211 F. 2d 785 (U.S.C.A.), refd to. [para. 56].

Horton v. United States Fidelity & Guar­antee Co. (1990), 392 S.E. 2d 25 (Ga. C.A.), refd to. [para. 56].

McDougall v. Gariepy, [1923] 1 W.W.R. 422 (Alta. C.A.), refd to. [para. 56].

Insurance Co. of North America v. Bath (1989), 726 F. Supp. 1247 (U.S.D.C.), refd to. [para. 56].

Dominion Construction Co. v. Modular Windows of Canada Ltd. et al. (1988), 30 C.L.R. 30 (Alta. Q.B.), refd to. [para. 57].

New Amsterdam v. Lundquist (1972), 198 N.W. 2d 543, refd to. [para. 57].

Abacus Cities Ltd. (Bankrupt) v. Bank of Montreal, [1988] 1 W.W.R. 78; 80 A.R. 254 (C.A.), refd to. [para. 60].

Fidelity Insurance Co. of Canada v. Wilson, [1986] B.C.J. No. 2408 (S.C.), refd to. [para. 61].

Western Casualty & Surety Co. v. Strib­ling Bros. Machinery Co. et al. (1962), 139 S.R. 2d 838 (Miss. S.C.), refd to. [para. 66].

J.F. White Engineering Corp. v. General Insurance Co. (1965), 351 F. 2d 231 (U.S.C.A.), refd to. [para. 78].

British America Assurance Co. v. Rede­kopp, [1974] I.L.R. 771; 54 D.L.R.(3d) 619 (Man. Q.B.), refd to. [para. 100].

Rees v. Barrington (1775), 2 Ves. Jun. 543, refd to. [para. 100].

Convert-A-Wall Ltd. v. Brampton Hydro-Electric (1988), 32 C.L.R. 289 (Ont. S.C.), refd to. [para. 100].

Kraft Construction Co. (1978) Ltd. v. Guardian Insurance Co. of Canada and Wayne's Electric Ltd. (1984), 57 A.R. 118; 14 C.L.R. 277 (Q.B.), refd to. [para. 126].

Citadel General Insurance Co. v. Johns-Manville Canada Inc. et al., [1983] I.L.R. 6379; 47 N.R. 280 (S.C.C.), refd to. [para. 154].

La Riviere Inc. v. Canadian Surety Co., [1973] C.A. 150 (Que.), refd to. [para. 154].

Canadian Indemnity Co. v. Hooiveld, [1990] B.C.J. No. 987 (B.C.S.C.), refd to. [para. 204].

Etobicoke (City) v. Masino Construction Ltd. (1989), 35 C.L.R. 138 (Ont. H.C.), refd to. [para. 204].

Bowen v. Hermsen and Manitoba Public Insurance Corp. (1983), 22 Man.R.(2d) 295; 146 D.L.R.(3d) 516 (Q.B.), refd to. [para. 220].

Stout v. Carter; Hedberg v. Carter (1965), 54 D.L.R.(3d) 384 (B.C.S.C.), refd to. [para. 220].

Sterling Trusts Corp. v. Postma, [1965] S.C.R. 324, refd to. [para. 220].

Commonwealth Construction Co. Ltd. v. Syncrude Canada Ltd. (1985), 64 A.R. 132; 40 Alta. L.R.(2d) 89 (Q.B.), refd to. [para. 237].

Big Country Gas Co-op Ltd. et al. v. Plastex Pipelines Systems Ltd. et al. (1986), 44 Alta. L.R.(2d) 339 (Q.B.), refd to. [para. 241].

Schwartzenberger v. Lawrence (1988), 87 A.R. 1 (Q.B.), refd to. [para. 241].

Gore Mutual Insurance Co. v. Fairview Cycle Ltd. (1987), 75 A.R. 198; 49 Alta. L.R.(2d) 395 (C.A.), refd to. [para. 241].

Ritcey v. Cohos Evamy, [1986] A.J. No. 507, refd to. [para. 241].

McVey v. Petruk et al. (1990), 111 A.R. 36; 44 C.P.C.(2d) 237 (Q.B.), refd to. [para. 241].

Wilson v. Walton et al. (No. 1) (1987), 79 A.R. 97 (Q.B.), refd to. [para. 242].

Chalinor v. Brown (1989), 98 A.R. 225; 69 Alta. L.R.(2d) 88 (C.A.), refd to. [para. 243].

Dezwart v. Misericordia Hospital et al. (1988), 96 A.R. 183; 64 Alta. L.R.(2d) 72 (Q.B.), refd to. [para. 244].

Alberta Motor Association Insurance Co. v. Lenzo (1990), 74 Alta. L.R.(2d) 218 (C.A.), refd to. [para. 246].

Statutes Noticed:

Judgment Interest Act, S.A. 1984, c. J-0.5, sect. 4 [para. 212].

Rules of Court (Alta.), rule 214(1) [para. 217]; rule 218.1 [para. 230].

Authors and Works Noticed:

Alberta, Law Reform Institute, Report on Referees, Paper No. 18 (1990), p. 22 [para. 16, footnote 6].

American Jurisprudence (2d), p. 754, para. 12 [para. 66].

Appleman, Insurance Law and Practice (1981), pp. 358 to 377 [para. 57].

Goldsmith, Building Contracts (Looseleaf Ed.), pp. 6-3 to 6-11 [para. 100]; 9-7 [para. 126].

Halsbury's Laws of England (4th Ed.), vol. 20, p. 170, para. 313 [para. 55]; 172, para. 314 [para. 204].

Hudson's Building and Engineering Con­tracts (1970), p. 859 [para. 16, footnote 6].

Insurance Institute of Canada, Claims 2, Course 46 (1988), p. 11 [para. 65, foot­note 17].

McGuinness, The Law of Guarantee (1986), pp. 301-304, 311-317 [para. 55].

Sopinka and Lederman, The Law of Evi­dence in Civil Cases (1974), pp. 513-514 [para. 220].

Stevenson and Côté, Civil Procedure Guide (1989), p. 565 [para. 220].

Supreme Court Practice (1988), vol. 1, part 1, 18/12/29 [para. 16, footnote 6].

Counsel:

J.C. van der Lee and G.M. Law, for Guar­antee Co. of North America;

W.G. Geddes, for Roger Beasse, Shirley Beasse, Robdale Contractors Ltd., 239223 Alberta Ltd. and Henlo Enter­prises Ltd.

These actions were heard before Rooke, J., of the Alberta Court of Queen's Bench, Judicial District of Calgary, who delivered the following judgment on April 13, 1992.