Marigold Holdings Ltd. and Riverview Place Apartment Ltd. v. Norem Construction Ltd., Pendergast (Barry) Architect Ltd. and Sovereign General Insurance Co. et al., (1988) 89 A.R. 81 (QB)

• Judge: Conrad, J.
• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: July 20, 1988
• Citations: (1988), 89 A.R. 81 (QB);1988 CanLII 3490 (AB QB);[1988] 5 WWR 710;60 Alta LR (2d) 289;89 AR 81;31 CLR 51

Marigold Holdings Ltd. v. Norem Constr. (1988), 89 A.R. 81 (QB)

MLB headnote and full text

Marigold Holdings Ltd. and Riverview Place Apartment Ltd. (plaintiffs) v. Norem Construction Ltd. and Barry Pendergast Architect Limited and The Sovereign General Insurance Company (defendants) and Eugene Hrudko, Minesh Modi, and Raul Bustos, carrying on business under the firm name and style of HMB Consulting Engineers, HMB Consulting Engineers, Alberta Mortgage and Housing Corporation, Barry Pendergast Architect Limited and Ming Chen Architect Limited (third parties)

(No. 8401-18314)

Indexed As: Marigold Holdings Ltd. and Riverview Place Apartment Ltd. v. Norem Construction Ltd., Pendergast (Barry) Architect Ltd. and Sovereign General Insurance Co. et al.

Alberta Court of Queen's Bench

Judicial District of Calgary

Conrad, J.

July 20, 1988.

Summary:

Marigold Holdings Ltd. (Marigold) and Riverview Place Apartments Ltd. (Riverview) were the original limited and general partners, respectively, in a limited partnership to develop an apartment complex. Marigold was to cause the complex to be built and entered a building contract with a builder, Norem Construction, and a prime architect, Barry Pendergast Architect Ltd. (Pendergast), for completion of the project. Pendergast hired another architectural firm to work on the project, Ming Chen Architect Ltd. A performance bond was provided respecting the project by Sovereign General Insurance.

The apartment complex leaked. Marigold and Riverview commenced an action against the builder, Norem Construction; the architect, Pendergast; and Sovereign General Insurance Co. Marigold sued Norem and Pendergast for damages for breach of contract and negligent performance of their duties. Riverview on behalf of itself and the limited partnership sued both Norem and Pendergast for damages for negligence. Both Marigold and Riverview sued Sovereign General Insurance to recover indemnity pursuant to the performance bond. Pendergast commenced a third party action against Ming Chen Architect Ltd. All other party actions did not proceed at this time.

The Alberta Court of Queen's Bench dismissed the partnership's tort action. The court, however, allowed Marigold's action a gainst, the builder Norem and the architect Pendergast, holding them jointly and severally liable for the damage suffered by Marigold. The court held that Marigold was entitled to judgment for $12,328.40 and a declaration of indemnity of $175,000.00 in favour of the partnership. The court held that Pendergast was entitled to recover indemnity on its third party claim against Ming Chen Architect Ltd. to the extent of 50%. The court held that the performance bond was discharged and therefore Sovereign General Insurance was not liable under the bond.

Building Contracts - Topic 3341

Liability of builder - Negligence - General - A newly constructed apartment complex leaked - The Alberta Court of Queen's Bench held the building contractor and prime architect jointly and severally liable for damages - The court held, inter alia, that the building contractor breached its duty to the owner to provide a waterproof building and to build in accordance with the plans - See paragraphs 1 to 118.

Building Contracts - Topic 5500

Architects and engineers - Duty to owner - Inspection of work - A newly constructed apartment complex leaked - The Alberta Court of Queen's Bench held the building contractor and prime architect jointly and severally liable for the damages - The court held that the prime architect breached its obligations by failing to inspect in accordance with accepted practices, in acquiescing to changes by the contractor and in changing the balconies of the building without a change order - The court held that the prime architect was entitled to receive indemnity to the extent of 50% from an architect hired by it to complete the project - See paragraphs 1 to 118.

Building Contracts - Topic 5512

Architects and engineers - Duty to owner - Respecting changes in contract - [See Building Contracts - Topic 5500 above].

Damages - Topic 531

Limits of compensatory damages - Remoteness - Torts - Recoverable damages - Purely economic loss - Riverview was a general partner and Marigold the original limited partner in a limited partnership formed to develop an apartment complex - Marigold entered a building contract with a builder and architect for construction of the complex - The complex leaked - Riverview commenced a negligence action against the builder and architect on behalf of itself and the partnership - The Alberta Court of Queen's Bench dismissed Riverview's negligence action against the builder and architect, holding that damages for the cost of repairs and economic loss were not available to Riverview in a negligence action against the builder and architect of the defective building - See paragraphs 153 to 162.

Damages - Topic 1006

Mitigation - General principles - Excuses for failure to mitigate - Impecuniosity - The Alberta Court of Queen's Bench discussed whether impecuniosity is a defence to the failure to mitigate losses - See paragraphs 213 to 218.

Damages - Topic 1042

Mitigation - In contract - Reasonable remedial measures - What constitute - Riverview was the general partner and Marigold the original limited partner in a limited partnership formed to develop an apartment complex - Marigold entered a building contract with a builder and architect to construct the complex - The building leaked - Marigold caused certain repairs to be done by a different contractor, but the building needed further repair - Marigold sued the builder and the architect - The Alberta Court of Queen's Bench discussed Marigold's duty to mitigate in these circumstances - The court held that Marigold acted unreasonably in having a different contractor partially repair the building and could not recover these expenses - Also the court held that the building should have been repaired within a set period of time and disallowed Marigold's claim for damages arising after this set time - See paragraphs 205 to 212.

Damages - Topic 1594

General damages - Breach of contract - Where damages uncertain, contingent or speculative - The Alberta Court of Queen's Bench referred to the general rule that "general damages which are uncertain, contingent or speculative cannot be made the basis of recovery" - See paragraph 195.

Damages - Topic 1594

General damages - Breach of contract - Where damages uncertain, contingent or speculative - Riverview was the general partner and Marigold was the original limited partner in a partnership formed to develop an apartment complex - Marigold entered a building contract with a builder and architect to construct the complex - The building leaked - Marigold claimed against the builder and architect for damages respecting claims against it from Riverview for Marigold's failure to provide a waterproof building pursuant to the development agreement - An issue arose whether Marigold's damages were uncertain, contingent or speculative in that Riverview had not sued under the development agreement - The Alberta Court of Queen's Bench held that Marigold's claim was not uncertain and could have been reasonably contemplated by the parties - The court held that Marigold was entitled to a declaration of indemnity in favour of the partnership, notwithstanding that the Marigold-Riverview action was not before the court - See paragraphs 194 to 204.

Guarantee and Indemnity - Topic 2632

Discharge and other defences of surety - Acts of parties after default - Notice of default to surety - A building contractor and a prime architect on a large apartment complex posted a performance bond obtained from Sovereign General Insurance and issued in favour of the owner - The building leaked and some repairs were carried out by a different contractor; however, Sovereign General Insurance was not notified by the owner of the default until the owner issued a statement of claim against the contractor and architect - The Alberta Court of Queen's Bench held: (1) that the lack of notice resulted in the total discharge of the bond, and alternatively (2) there was a material variation in the principal contract discharging the surety (i.e. calling in a contractor not named in the original contract to repair the building) - See paragraphs 119 to 146.

Guarantee and Indemnity - Topic 2991

Discharge and other defences of surety - Changes in the principal contract - What constitute - [See Guarantee and Indemnity - Topic 2632 above].

Partnership - Topic 6

General - Nature of limited partnership - The Alberta Court of Queen's Bench discussed the nature of a limited partnership - See paragraphs 169 to 179.

Partnership - Topic 6

General - Nature of a limited partnership - The Alberta Court of Queen's Bench opined that "the limited partnership, while not enjoying all the rights of a person, enjoys a statutory existence apart from the persona of the limited partner and that is so primarily due to his liability being limited" - See paragraph 174.

Partnership - Topic 329

Tests of existence - Limited partnership - Where general partner is salaried partner - A limited partnership was established whereby the general partner was to receive a fee for managing the partnership - It was argued that because the general partner was a "salaried partner", it was not engaged in business with an intention to profit and therefore no partnership existed - The Alberta Court of Queen's Bench rejected this argument - See paragraphs 182 to 193.

Partnership - Topic 3926

Relations between partners and third parties - Legal action by limited partnership or partners - General - The Alberta Court of Queen's Bench discussed where rights of action exist in a limited partnership (i.e. in the general or limited partners) - The court also discussed whether, in a case where the general partner has the right to sue for the partnership itself, it is necessary to show the specific damages to each and every limited partner - See paragraphs 166 to 181.

Partnership - Topic 5003

Relations between partners - Transfer of limited partnership interest - Riverview was the general partner and Marigold the original limited partner in a limited partnership formed to develop an apartment complex - Marigold entered a building contract with a builder and architect to construct the complex - During construction Scottsdale purchased the entire limited partnership interest, but Mari gold repurchased the interest for $10.00 - The building leaked and Marigold sued the builder and architect for breach of contract - Marigold argued that it should recover from the builder and architect for claims against Marigold by the partnership under the development agreement for breach of Marigold's obligation to deliver a waterproof building - The Alberta Court of Queen's Bench allowed Marigold's action, notwithstanding the temporary transfer of the limited partnership interest to Scottsdale - The court held that Marigold was entitled to a declaration of indemnity in favour of the partnership - See paragraphs 163 to 181.

Partnership - Topic 5144

Relations between partners - Right to indemnity - Where transfer of limited partnership interest takes place - [See second Damages - Topic 1594 above].

Partnership - Topic 5145

Relations between partners - Right to indemnity - Where lawsuit carried by limited partner - [See Partnership - Topic 5003 above].

Practice - Topic 180

Persons who can sue and be sued - Partnerships - Limited partnerships - [See Partnership - Topic 3926 above].

Professional Occupations - Topic 3465

Architects - Contracts - Breach - What constitutes - [See Building Contracts - Topic 5500 above].

Professional Occupations - Topic 3484

Architects - Negligence - What constitutes - [See Building Contracts - Topic 5500 above].

Cases Noticed:

Thomas Fuller Construction Co. (1958) Ltd. v. Continental Insurance Co. (1970), 36 D.L.R.(3d) 336 (Ont. H.C.), consd. [paras. 126, 128, 129].

Doe et al. v. Canadian Surety Co. [1937] S.C.R. 1, refd to. [para. 140].

Holme v. Brunskill (1878), 3 Q.B.D. 495 (C.A.), refd to. [para. 140].

Citadel General Assurance Company v. John Mansfield Canada Inc., [1983] 1 S.C.R. 513; 47 N.R. 280, refd to. [para. 143].

Rivtow Marine Limited v. Washington Iron Works and Walkem Machinery & Equipment, [1973] 6 W.W.R. 692 (S.C.C.), appld. [paras. 153 to 162].

Ontario v. Fatehi, [1984] 2 S.C.R. 536; 56 N.R. 62, refd to. [para. 158].

Barnard, Martins Bank v. Trustee, Re, [1932] 1 Ch. 269, refd to. [para. 169].

Robert Porter & Sons Ltd. v. J.M. Armstrong, [1926] S.C.R. 328, refd to. [para. 178].

Molchan v. Omega Oil and Gas Ltd., Omega Oil and Gas Fund #1, Omega Hydrocarbons Ltd. and Hall (1988), 83 N.R. 25, refd to. [para. 179].

Stekel v. Ellice, [1973] 1 W.L.R. 191 (Ch. D.), refd to. [para. 186].

Kranz v. McCutcheon (1920), 18 O.W.N. 395 (H. Ct.), refd to. [para. 195].

Chaplin v. Hicks, [1911-1913] All E.R. 224 (C.A.), refd to. [para. 195].

Sapwell v. Bass, [1910] 2 K.B. 486, refd to. [para. 194].

W.B. Wood et al. v. The Grant Valley Railway et al. (1915), 51 S.C.R. 283, refd to. [para. 195].

Biggin & Co. v. Permanite Ltd., [1950] 2 All E.R. 859 (K.B.); [1951] 2 All E.R. 191 (C.A.), refd to. [para. 196].

Trans Trust SPRL v. Danubian Trading Co., [1952] 1 All E.R. 970, refd to. [para. 200].

British Westinghouse Co. v. Under ground Railway, [1912] A.C. 673 (H.L.), refd to. [para. 206].

Michaels et al. v. Red Deer College (1976), 5 N.R. 99; 57 D.L.R.(3d) 386 (S.C.C.), refd to. [para. 209].

Liesbosch Dredger v. S.S. Edison, [1933] A.C. 449 (H.L.), consd. [para. 213].

Western Processing and Cold Storage Ltd. v. Hamilton Construction Co. (1964), 47 W.W.R.(N.S.) 150 (Man. Q.B.); 51 W.W.R.(N.S.) 354 (Man. C.A.), refd to. [para. 214].

R.G. McLean Ltd. v. Canadian Vickers Ltd., [1971] 1 O.R. 207 (C.A.), refd to. [para. 214].

Freedhoff v. Pomalift Industries Ltd., [1971] 2 O.R. 773 (C.A.), refd to. [para. 214].

Pelletier v. Pe Ben Industries Co., [1976] 6 W.W.R 640 (B.C.S.C.), refd to. [para. 214].

Alberta Caterers Ltd. v. R. Vollan (Alta.) Ltd., Western Arch Rib Structures Ltd., M. Strzelecki Consulting Engineers Ltd. and Strzelecki (1978), 10 A.R. 501, refd to. [para. 215].

Statutes Noticed:

Partnership Act, R.S.A. 1980, c. P-2, sect. 1(d) [para. 182]; sect. 50(2) [para. 188]; sect. 51 [para. 186]; sect. 56, sect. 59 [para. 173]; sect. 58 [paras. 174, 177]; sect. 64, sect. 65 [para. 169]; sect. 67 [paras. 169, 170]; sect. 80 [para. 172].

Authors and Works Noticed:

Lindley on Partnerships (15th Ed. 1984), p. 34 [para. 168].

McGinnis, The Law of Guarantees, p. 253 [para. 141].

McGregor on Damages (14th Ed. 1980), p. 214 [para. 206].

Wexler, S.M., The Impecunious Plaintiff: Liesbosch Reconsidered, 66 Can. Bar Rev. 129 [para. 213].

Counsel:

A.Z. Breitman, B.L. Armitage, for Marigold Holdings Ltd. and Riverview Place Apartment Ltd.;

A.D. Macleod, and J.P. McMahon, for Barry Pendergast Architect Limited;

T.F. McMahon, Q.C., and J.C. Van Der Lee, for Sovereign General Insurance Company;

R.V.T. Boyden and K.C. Manko, for Ming Chen Architect Ltd.

This case was heard before Conrad, J., of the Alberta Court of Queen's Bench, Judicial District of Calgary, who delivered the following decision on July 20, 1988.