Houweling Nurseries Oxnard Inc. v. Saskatoon Boiler Mfg. Co., (2011) 370 Sask.R. 1 (QB)

• Judge: R.S. Smith, J.
• Court: Court of Queen's Bench of Saskatchewan (Canada)
• Case Date: March 14, 2011
• Jurisdiction: Saskatchewan
• Citations: (2011), 370 Sask.R. 1 (QB);2011 SKQB 112

Houweling Nurseries v. Saskatoon Boiler (2011), 370 Sask.R. 1 (QB)

MLB headnote and full text

Temp. Cite: [2011] Sask.R. TBEd. MR.064

Houweling Nurseries Oxnard Inc. (plaintiff) v. Saskatoon Boiler Mfg. Co. Ltd. (defendant)

Saskatoon Boiler Mfg. Co. Ltd. (plaintiff by counterclaim) v. Houweling Nurseries Oxnard Inc. (defendant by counterclaim)

(2003 Q.B. No. 113; 2011 SKQB 112)

Indexed As: Houweling Nurseries Oxnard Inc. v. Saskatoon Boiler Mfg. Co.

Saskatchewan Court of Queen's Bench

Judicial Centre of Saskatoon

R.S. Smith, J.

March 14, 2011.

Summary:

The plaintiff operated a commercial greenhouse in California. It required boilers that would generate an input firing rate of 52.3 million BTUs/hr with emissions of nitrous oxide (Nox) of less than 30 ppm. In 1996, the defendant agreed to supply four such boilers. None of the boilers performed as required. The plaintiff sued the defendant, seeking damages of $17,859,471 (Cdn) for lost production, increased maintenance costs, losses due to excess fuel consumption and for the future replacement of the boilers (necessary to meet regulatory requirements regarding Nox emissions).

The Saskatchewan Court of Queen's Bench granted the plaintiff judgment for $4,570,578 (US) (total damages before prejudgment interest and costs).

Contracts - Topic 2126

Terms - Express terms - Exclusionary clauses - Interpretation - The plaintiff operated a commercial greenhouse in California - It required boilers that would generate an input firing rate of 52.3 million BTUs/hr with emissions of nitrous oxide (Nox) of less than 30 ppm - In 1996, the defendant agreed to supply four such boilers - The agreement included a clause limiting the defendant's liability to the terms and amount of its insurance ($2 million) - None of the boilers performed as required - The plaintiff sued the defendant, seeking damages for lost production, increased maintenance costs, losses due to excess fuel consumption and for the future replacement of the boilers (necessary to meet regulatory requirements regarding Nox emissions) - The defendant asserted that, according to the agreement, its liability was limited to the terms and amount of its insurance - The Saskatchewan Court of Queen's Bench rejected the defendant's position - It was inconceivable that the parties agreed that the defendant would not be liable for breach of contract unless the breach resulted in bodily injury or property damage as contemplated by its insurance policies - That result would be absurd - The clause limiting liability did not operate to alleviate the defendant from liability for breach of contract - See paragraphs 199 to 213.

Contracts - Topic 3523

Performance or breach - Breach - What constitutes a breach - [See Sale of Goods - Topic 4103 ].

Contracts - Topic 3826

Performance or breach - Frustration or impossibility - Application of doctrine - [See second Sale of Goods - Topic 4108 ].

Contracts - Topic 4023

Remedies for breach - Damages - Extent of liability - Losses attributable to breach - [See Damages - Topic 5832 ].

Contracts - Topic 5305

Impossibility or frustration of performance - Frustration - What constitutes frustration - [See second Sale of Goods - Topic 4108 ].

Contracts - Topic 7401

Interpretation - General principles - Intention of parties (incl. reasonable expectations) - [See Contracts - Topic 2126 ].

Contracts - Topic 7408

Interpretation - General principles - Understanding of the parties - [See Contracts - Topic 2126 ].

Damages - Topic 531

Limits of compensatory damages - Remoteness - Torts - Recoverable damages - Purely economic loss - The plaintiff operated a commercial greenhouse in California - It required boilers that would generate an input firing rate of 52.3 million BTUs/hr with emissions of nitrous oxide (Nox) of less than 30 ppm - In 1996, the defendant agreed to supply four such boilers - None of the boilers performed as required - The plaintiff sued the defendant, seeking damages for lost production, increased maintenance costs, losses due to excess fuel consumption and for the future replacement of the boilers (necessary to meet regulatory requirements regarding Nox emissions) - The Saskatchewan Court of Queen's Bench rejected the defendant's argument that the plaintiff's claims regarding negligent design and manufacture were for pure economic loss such that recovery was precluded unless the goods were dangerous - Pure economic loss was loss that did not arise from physical injury or damage inflicted on the plaintiff or its property by the defendant - The crucial question was whether the plaintiff's losses were accompanied by or causally connected to property damage - That was not the case here - The loss complained of by the plaintiff was consequential economic loss - In the case of lost production, it was for damage done to the plaintiff's tomato plants - The other heads of damages flowed naturally from the breach of contract or the breach of the defendant's duty of care - See paragraphs 190 to 197.

Damages - Topic 532

Limits of compensatory damages - Remoteness - Torts - Recoverable damages - Consequential economic loss - [See Damages - Topic 531 ].

Damages - Topic 5832

Contracts - Sale of goods - Breach by seller - Measure of damages - The plaintiff operated a commercial greenhouse in California - It required boilers that would generate an input firing rate of 52.3 million BTUs/hr with emissions of nitrous oxide (Nox) of less than 30 ppm - In 1996, the defendant agreed to supply four such boilers - None of the boilers performed as required - The plaintiff sued the defendant, seeking damages of $17,859,471 (Cdn) for lost production, increased maintenance costs, losses due to excess fuel consumption and for the future replacement of the boilers (necessary to meet regulatory requirements regarding Nox emissions) - The Saskatchewan Court of Queen's Bench granted the plaintiff judgment for $4,570,578 (US) (total damages before prejudgment interest and costs) - Regarding lost production, the court reduced the plaintiff's claim by one third to adjust for "sundry concerns and deficiencies" in the evidence - Regarding increased maintenance costs, the court was unable to attribute 100% of those costs to the boilers' deficient burners - A reduction in the claim of 25% was appropriate - The claim for the loss due to early boiler replacement was reduced from $1,097,606 (Cdn) to $606,000 (U.S.) (approximately $742,000 Cdn) - Although chronic underachievers, the boilers had been of service to the plaintiff - See paragraphs 125 to 189.

Estoppel - Topic 1389

Estoppel in pais (by conduct) - Circumstances where doctrine not applicable - Lack of prejudice or detrimental reliance by person raising estoppel - The plaintiff operated a commercial greenhouse in California - It required boilers that would generate an input firing rate of 52.3 million BTUs/hr with emissions of nitrous oxide (Nox) of less than 30 ppm - In 1996, the defendant agreed to supply four such boilers - None of the boilers performed as required - The plaintiff sued the defendant, seeking damages for lost production, increased maintenance costs, losses due to excess fuel consumption and for the future replacement of the boilers (necessary to meet regulatory requirements regarding Nox emissions) - The defendant asserted, inter alia, that it should be relieved of its contractual obligation respecting the 30 ppm Nox limit due to estoppel - The Saskatchewan Court of Queen's Bench rejected this argument - There was no manifestation by the plaintiff to the defendant of anything other than that it expected, eventually, contractual compliance with the 30 ppm Nox limit - Further, the defendant had not acted in reliance on any such representation but continued to the end to hope for eventual compliance - Estoppel did not arise - See paragraphs 104 and 105.

Evidence - Topic 7000.1

Opinion evidence - Expert evidence - General - Expert witness - Disqualification - Conflict of interest - The plaintiff operated a commercial greenhouse in California - In 1996, the plaintiff purchased four boilers from the defendant - None performed as required - The plaintiff sued the defendant, seeking damages for lost production, increased maintenance costs, losses due to excess fuel consumption and for the future replacement of the boilers - At trial, the plaintiff's experts included Voogt, an expert in greenhouse tomato production - The defendant objected to Voogt's evidence, asserting that Voogt had been employed by the plaintiff and that, as a consultant, roughly 50% of Voogt's current business was with the plaintiff - The Saskatchewan Court of Queen's Bench dismissed the objection - While there was no question Voogt's sympathies lay with the plaintiff, his evidence, particularly as it dealt with the minutiae of growing tomatoes in a greenhouse, was not marked by any animus toward the defendant, but rather the enthusiasm of an expert speaking to that which he knew well - If Voogt's testimony strayed into an area of questionable probative value, it was when he moved from growing tomatoes to statistical analysis - The court factored that into the weight attached to his evidence - See paragraphs 80 to 84.

Evidence - Topic 7000.2

Opinion evidence - Expert evidence - General - Expert witness - Disqualification - Bias (incl. police expert) - The plaintiff operated a commercial greenhouse in California - In 1996, the plaintiff purchased four boilers from the defendant - None performed as required - The plaintiff sued the defendant, seeking damages for lost production, increased maintenance costs, losses due to excess fuel consumption and for the future replacement of the boilers - At trial, the plaintiff's experts included two engineering experts - The defendant objected to the admission of the experts' evidence because, in their preparation for trial, they had been given all of the documents that had been disclosed in the action and had also reviewed all of the transcripts of examination for discovery as well as the pleadings - The defendant asserted that this raised a reasonable apprehension of bias and that the experts had become advocates of the plaintiff - The Saskatchewan Court of Queen's Bench dismissed the objection - The preparation of the experts was not so out of the ordinary as to render their evidence inadmissible - The evidence was admitted and weighed with regard to the method of preparation - See paragraphs 85 to 89.

Evidence - Topic 7002

Opinion evidence - Expert evidence - General - Acceptance, rejection and weight to be given to expert opinion - [See Evidence - Topic 7000.1 and Evidence - Topic 7000.2 ].

Sale of Goods - Topic 4103

Conditions and warranties - Implied or statutory terms as to quality or fitness - Where applicable - The plaintiff operated a commercial greenhouse in California - It required boilers that would generate an input firing rate of 52.3 million BTUs/hr with emissions of nitrous oxide (Nox) of less than 30 ppm - In 1996, the defendant agreed to supply four such boilers - The agreement included a one year warranty to repair or replace defective material or workmanship - None of the boilers performed as required - The plaintiff sued the defendant, seeking damages for lost production, increased maintenance costs, losses due to excess fuel consumption and for the future replacement of the boilers (necessary to meet regulatory requirements regarding Nox emissions) - The Saskatchewan Court of Queen's Bench held that there was a breach of contract - The court rejected the defendant's assertion that the warranty clause, which stated that "[t]his express warranty is in lieu of any implied warranties", excluded the implied conditions of the Sale of Goods Act - The law was well settled that, in order to exclude the Act, the exclusion clause had to be express - The wording of the clause here was equivocable - Therefore, the Act applied - See paragraphs 90 to 93.

Sale of Goods - Topic 4106

Conditions and warranties - Implied or statutory terms as to quality or fitness - Fitness or suitability of goods - The plaintiff operated a commercial greenhouse in California - It required boilers that would generate an input firing rate of 52.3 million BTUs/hr with emissions of nitrous oxide (Nox) of less than 30 ppm - In 1996, the defendant agreed to supply four such boilers - None of the boilers performed as required - The plaintiff sued the defendant, seeking damages for lost production, increased maintenance costs, losses due to excess fuel consumption and for the future replacement of the boilers (necessary to meet regulatory requirements regarding Nox emissions) - The Saskatchewan Court of Queen's Bench granted judgment for the plaintiff - There was a breach of contract - The boilers failed to meet the Sale of Goods Act's implied conditions - The boilers were extremely high maintenance and chronic under-achievers - They fell well short of any reasonable test for fitness for purpose - The sad litany of operational problems more than met the test of breach of the implied condition of merchantable quality - See paragraphs 94 to 98.

Sale of Goods - Topic 4108

Conditions and warranties - Implied or statutory terms as to quality or fitness - Merchantable quality - [See Sale of Goods - Topic 4106 ].

Sale of Goods - Topic 4108

Conditions and warranties - Implied or statutory terms as to quality or fitness - Merchantable quality - The plaintiff operated a commercial greenhouse in California - It required boilers that would generate an input firing rate of 52.3 million BTUs/hr with emissions of nitrous oxide (Nox) of less than 30 ppm - In 1996, the defendant agreed to supply four such boilers - None of the boilers performed as required - The plaintiff sued the defendant, seeking damages for lost production, increased maintenance costs, losses due to excess fuel consumption and for the future replacement of the boilers (necessary to meet regulatory requirements regarding Nox emissions) - The defendant asserted, inter alia, that it should be relieved of its contractual obligation respecting the 30 ppm Nox limit due to frustration - The defendant argued that neither of the parties knew that the 30 ppm Nox limit could not be met with an input firing rate of 52.3 million BTUs/hr - Because neither party knew that the boiler burners, which were supplied by another manufacturer, were incapable of this, the contract was frustrated - The Saskatchewan Court of Queen's Bench rejected this argument - The doctrine of frustration could not be contorted so as to relieve the defendant of its duty to ensure the quality and performance of the component parts of the product that it had contracted to deliver - See paragraphs 99 to 101.

Sale of Goods - Topic 4117

Conditions and warranties - Implied or statutory terms as to quality or fitness - Exclusionary clause - Validity of - [See Sale of Goods - Topic 4103 ].

Sale of Goods - Topic 6403

Breach - General - What constitutes - [See Sale of Goods - Topic 4103 ].

Sale of Goods - Topic 6503

Breach - Remedies of buyer - Damages - General - [See Damages - Topic 5832 ].

Torts - Topic 58

Negligence - Causation - Independent or severable causes - [See Torts - Topic 61 ].

Torts - Topic 61

Negligence - Causation - Causal connection - The plaintiff operated a commercial greenhouse in California - It required boilers that would generate an input firing rate of 52.3 million BTUs/hr with emissions of nitrous oxide (Nox) of less than 30 ppm - In 1996, the defendant agreed to supply four such boilers - The boilers were manufactured with burners from a third party supplier - None of the boilers performed as required - The plaintiff sued the defendant, seeking damages for lost production, increased maintenance costs, losses due to excess fuel consumption and for the future replacement of the boilers (necessary to meet regulatory requirements regarding Nox emissions) - The Saskatchewan Court of Queen's Bench, having found both negligence and a breach of contract, discussed causation - On either basis (negligence or contract), the evidence led to the conclusion that the chronic under-performance or periodic non-performance of the boilers impacted the plaintiff's greenhouse operation, negatively affecting plant production as well as maintenance and other costs - While there were "many perils that beset a commercial greenhouse" that could affect production, the evidence did not establish negligence or a breach of contract by any other party - Even if it could be said that other parties contributed to the plaintiff's loss, that was "not an answer for the defendant" - See paragraphs 115 to 124.

Torts - Topic 77

Negligence - Duty of care - Relationship required to raise duty of care - The plaintiff operated a commercial greenhouse in California - It required boilers that would generate an input firing rate of 52.3 million BTUs/hr with emissions of nitrous oxide (Nox) of less than 30 ppm - In 1996, the defendant agreed to supply four such boilers - The boilers were manufactured with burners from a third party supplier - None of the boilers performed as required - The plaintiff sued the defendant, seeking damages for lost production, increased maintenance costs, losses due to excess fuel consumption and for the future replacement of the boilers (necessary to meet regulatory requirements regarding Nox emissions) - The Saskatchewan Court of Queen's Bench held that the plaintiff had made out its case in negligence - There was sufficient proximity - The defendant had expertise and the plaintiff relied on that - The nature of the relationship was such that a duty of care arose - A manufacturer was responsible for its product, including components sourced from third parties - The defendant's "sanguine acceptance" that the burners from the third party would perform at the contracted specifications was regrettable and a breach of its duty of care - Basic testing of a prototype would have been a logical step before offering the product for sale - From the beginning, there were obvious and troubling performance problems - The defendant, nonetheless, proceeded to deliver the boilers to the plaintiff - See paragraphs 106 to 114.

Torts - Topic 4326

Suppliers of goods - Negligence - Manufacturers - Standard of care - [See Torts - Topic 77 ].

Torts - Topic 4332

Suppliers of goods - Negligence - Manufacturers - Defective design or manufacture - [See Torts - Topic 77 ].

Torts - Topic 4333

Suppliers of goods - Negligence - Manufacturers - Liability of manufacturer for negligence of supplier of component parts - [See Torts - Topic 77 ].

Torts - Topic 4334

Suppliers of goods - Negligence - Manufacturers - Causation - [See Torts - Topic 61 ].

Torts - Topic 4340

Suppliers of goods - Negligence - Manufacturers - Damages - Measure of - [See Damages - Topic 5832 ].

Cases Noticed:

Murray v. Saskatoon (City), [1952] 2 D.L.R. 499 (Sask. C.A.), refd to. [para. 84].

Marshall v. Ryan Motors Ltd. (1922), 15 Sask. L.R. 118 (C.A.), refd to. [para. 93].

Gregorio v. Intrans-Corp. and Paccar of Canada Ltd. (1994), 72 O.A.C. 51; 18 O.R.(3d) 527 (C.A.), refd to. [para. 93].

Syncrude Canada Ltd. et al. v. Hunter Engineering Co. and Allis-Chalmers Canada Ltd. et al., [1989] 1 S.C.R. 426; 92 N.R. 1, refd to. [para. 93].

Western Tractor Ltd. v. Dyck (1969), 70 W.W.R.(N.S.) 215 (Sask. C.A.), refd to. [para. 95].

Alcraft Industries Inc. v. Zeta Oilfield Rentals Ltd. (2000), 192 Sask.R. 188; 2000 SKQB 183, refd to. [para. 95].

Naylor Group Inc. v. Ellis-Don Construction Ltd., [2001] 2 S.C.R. 943; 277 N.R. 1; 153 O.A.C. 341; 2001 SCC 58, refd to. [para. 100].

R. v. Saxe (1921), 21 Ex. C.R. 60, refd to. [para. 102].

Ryan v. Moore et al., [2005] 2 S.C.R. 53; 334 N.R. 355; 247 Nfld. & P.E.I.R. 286; 735 A.P.R. 286, refd to. [para. 104].

Odhavji Estate et al. v. Woodhouse et al., [2003] 3 S.C.R. 263; 312 N.R. 305; 180 O.A.C. 201, refd to. [para. 107].

Cooper v. Registrar of Mortgage Brokers (B.C.) et al., [2001] 3 S.C.R. 537; 277 N.R. 113; 160 B.C.A.C. 268; 261 W.A.C. 268, refd to. [para. 107].

Cooper v. Hobart - see Cooper v. Registrar of Mortgage Brokers (B.C.) et al.

Farro v. Nutone Electrical Ltd. et al. (1990), 40 O.A.C. 233; 68 D.L.R.(4th) 268 (C.A.), refd to. [para. 110].

Athey v. Leonati et al., [1996] 3 S.C.R. 458; 203 N.R. 36; 81 B.C.A.C. 243; 132 W.A.C. 243, refd to. [para. 121].

Viridian Inc. v. Dresser Canada Inc. et al. (1999), 247 A.R. 23; 1999 ABQB 415, refd to. [para. 122].

Wood v. Grand Valley Railway Co. (1915), 51 S.C.R. 283, refd to. [para. 149].

Penvidic Contracting Co. v. International Nickel Co. of Canada Ltd., [1976] 1 S.C.R. 267; 4 N.R. 1, refd to. [para. 149].

New Brunswick Power Corp. v. Westinghouse Canada Inc. et al. (2008), 337 N.B.R.(2d) 138; 864 A.P.R. 138; 300 D.L.R.(4th) 523; 2008 NBCA 70, refd to. [para. 190].

Keefer Laundry Ltd. v. Pellerin Milnor Corp. et al., [2008] B.C.T.C. Uned. 743; 2008 BCSC 1119, refd to. [para. 190].

Ontario v. Fatehi, [1984] 2 S.C.R. 536; 56 N.R. 62; 6 O.A.C. 270, refd to. [para. 191].

D'Amato et al. v. Badger et al., [1996] 2 S.C.R. 1071; 199 N.R. 341; 79 B.C.A.C. 110; 129 W.A.C. 110, refd to. [para. 193].

Design Services Ltd. et al. v. Canada, [2008] 1 S.C.R. 737; 374 N.R. 77; 2008 SCC 22, refd to. [para. 193].

Tercon Contractors Ltd. v. British Columbia (Minister of Transportation and Highways), [2010] 1 S.C.R. 69; 397 N.R. 331; 281 B.C.A.C. 245; 457 W.A.C. 245; 2010 SCC 4, appld. [para. 200].

SaskPower International Inc. et al. v. UMA/B&V Ltd. et al. (2007), 293 Sask.R. 66; 397 W.A.C. 66; 2007 SKCA 40, appld. [para. 200].

Stevenson Estate v. Siewert et al., [2001] 10 W.W.R. 401; 286 A.R. 181; 253 W.A.C. 181; 2001 ABCA 180, refd to. [para. 220].

Brown & Root Services Corp. v. Aerotech Herman Nelson Inc. et al., [2004] 11 W.W.R. 23; 184 Man.R.(2d) 188; 318 W.A.C. 188; 2004 MBCA 63, refd to. [para. 220].

Authors and Works Noticed:

Berenblut, Mark L., and Rosen, Howard N., Proving Economic Loss (1987-2003), p. 19-13 [para. 194].

Feldthusen, Bruce, Economic Negligence (5th Ed. 2008), p. 1 [para. 196].

McWilliams, Peter K., Canadian Criminal Evidence (4th Ed.) (2010 Looseleaf Update), vol. 1, pp. 12-59, 12-60 [para. 81].

Theall, Lawrence G., Maidment, J. Scott, Dufort, Theresa M., and Brown, Jeffrey A., Product Liability: Canadian Law and Practice (2006) (Looseleaf), generally [para. 95]; pp. L4-14 [para. 96]; L4-15 [paras. 96, 97].

Waddams, Stephen M., The Law of Damages (2nd Ed.) (2009 Looseleaf), para. 13.30 [para. 150].

Counsel:

R.W. Thompson, Q.C., A.D. Grosse and R.J. Kruger, for the plaintiff;

G.G.W. Semenchuck, Q.C., A.T. Ailsby and M.J. Penny, for the defendant.

This action was heard by R.S. Smith, J., of the Saskatchewan Court of Queen's Bench, Judicial Centre of Saskatoon, who delivered the following judgment on March 14, 2011.