Matheson (D.W.) & Sons Contracting Ltd. v. Canada (Attorney General), 2000 NSCA 44

• Judge: Glube, C.J.N.S., Bateman and Cromwell, JJ.A.
• Court: Court of Appeal of Nova Scotia (Canada)
• Case Date: April 05, 2000
• Jurisdiction: Nova Scotia
• Citations: 2000 NSCA 44;(2000), 187 N.S.R.(2d) 62 (CA)

Matheson & Sons v. Can. (A.G.) (2000), 187 N.S.R.(2d) 62 (CA);

 585 A.P.R. 62

MLB headnote and full text

Temp. Cite: [2000] N.S.R.(2d) TBEd. OC.022

The Attorney General of Canada (appellant) v. D.W. Matheson & Sons Contracting Limited (respondent)

(C.A. No. 156692; 2000 NSCA 44)

Indexed As: Matheson (D.W.) & Sons Contracting Ltd. v. Canada (Attorney General)

Nova Scotia Court of Appeal

Glube, C.J.N.S., Bateman and Cromwell, JJ.A.

April 5, 2000.

Summary:

A contractor agreed to construct a breakwater for the federal government in 18 weeks. The engineer appointed under the contract had the power to make decisions affecting both parties, including the exten­sion of time for completion and the right to compel the contractor to provide extras. Near the end of the 18 weeks, the breakwater was only 50% complete because of unusually bad weather and problems obtaining suffi­cient suitable rock from the designated quarry. Without the engineer making a decision on a request to extend the time for completion, the government repudi­ated the contract, removed the contractor and called upon the contractor's bonding com­pany to complete the project. The contractor com­pleted the breakwater under a subcon­tract with the bonding company. The con­tractor sued the government for breach of contract, claiming it was wrongfully removed. The contractor also claimed that the government improperly ordered extras to defeat the contractor's right to renegotiate prices based on cost.

The Nova Scotia Supreme Court, in a judgment reported 175 N.S.R.(2d) 201; 534 A.P.R. 201, allowed the action. The govern­ment breached the contract by usurping the func­tion of the engineer, by removing the con­tractor while a request for an extension was outstanding and by ordering extras to defeat the con­tractor's contractual right to renegotiate prices based on cost. The court assessed damages accordingly. Two engi­neers witnessed the events giving rise to the action and were paid for their trial prepara­tion (as fact witnesses, not expert witnesses) and for assisting counsel for the contractor. The contractor claimed the monies paid to the engineers as reasonable disbursements. The contractor also sought increased costs under Scale 5 of Tariff A plus a $25,000 lump sum.

The Nova Scotia Supreme Court, in a subsequent judgment reported at 179 N.S.R.(2d) 260; 553 A.P.R. 260, held that the money paid to the engineers was not a reasonable disbursement. The government appealed the trial judge's award of statutory and contractual interest. The contractor cross-appealed the dismissal of its claim for loss of future profits on the basis that such claim was too remote. The contractor also appealed the trial judge's disallowance of the fees paid to the engineers as a disbursement.

The Nova Scotia Court of Appeal dis­missed the government's appeal and the contractor's cross-appeal respecting damages for lost future profits. However, the court allowed the contractor's appeal respecting costs to the extent of remitting the matter for a decision on whether the trial judge should exercise his discretion to allow or not allow the allowance of a preparation fee as a disbursement.

Damages - Topic 552

Limits of compensatory damages - Re­moteness - Contracts - Recoverable dam­ages - The contractor agreed to build a breakwater for the federal government - The contractor, unable to meet the com­pletion deadline, had requested from the engineer an extension of time to complete - The government breached the contract by, inter alia, removing the contractor while the request was outstanding - The government called on the contractor's bonding company to complete the project -The contractor finished the breakwater under a subcontract with the bonding company - The trial judge rejected a claim for loss of profits on future contracts on the basis that it was too remote - The Nova Scotia Court of Appeal held that the trial judge did not err in finding the claim too remote - The financial vulnerability of the contractor and the likely impact of the breach of contract (inability to bid on future jobs because of bonding problems) were not within the reasonable contempla­tion of the parties at the time of contract­ing - See paragraphs 63 to 75.

Interest - Topic 5119

Interest as damages (prejudgment interest) - Breach of contract - Crown - Claims against - A contractor was awarded dam­ages for the federal government's breach of a construction contract - The action was commenced in 1997, eight years after work was completed - The government claimed that interest should be limited to four years because of the undue delay in bringing the action (Judicature Act, s. 41(h)(iii)) - The trial judge held that there was no undue delay, given the contractor's financial inability to bring an action until its finan­cial health improved - For interest payable by statute, prejudgment interest was pre­cluded prior to February 1, 1992, under s. 31 of the federal Crown Liability and Proceedings Act - For interest payable under the contract (damages for promises to pay under the contract), interest was payable from the date the work was com­pleted (December 1988) - The Nova Scotia Court of Appeal held that the trial judge did not err respecting interest - See para­graphs 38 to 62.

Interest - Topic 5525

Interest as damages (prejudgment interest) - Bars - Delay - [See Interest - Topic 5119 ].

Practice - Topic 7133.2

Costs - Party and party costs - Disburse­ments - Monies paid to ordinary witnesses - Two engineers testified as witnesses for the plaintiff and also assisted the plaintiff in preparing for trial - The engineers had witnessed the events giving rise to the cause of action, but testified as ordinary fact witnesses, not experts - The plaintiff sought to recover the monies paid to the engineers as reason­able disbursements - The trial judge rejected the claim on two grounds: (1) because they testified as fact witnesses (not experts) and had a duty to give evidence under subpoena and (2) there was a danger of double recovery through an overlapping with counsel fees awarded - The Nova Scotia Court of Appeal held that the Rules provided a discretion to allow recovery of an allow­ance for preparation time for a fact wit­ness, particularly where such preparation time far exceeded the burden imposed by the civic duty to give evidence - Allowing such disbursements acknowledged the practical necessity of detailed preparation in complex matters - The court remitted the matter to the trial judge to exercise his discretion to allow or not allow such dis­bursement - See paragraphs 76 to 91.

Practice - Topic 7133.2

Costs - Party and party costs - Disburse­ments - Monies paid to ordinary witnesses - The Nova Scotia Court of Appeal held that the Rules provided a discretion to allow recovery of an allowance for prep­aration time for a fact witness - The court stated that "(1) Such a disbursement should generally be allowed only in exceptional or unusual circumstances. A party and party award of costs is not full indemnification and any fee paid to [a] fact witness for routine preparation is generally not re­coverable. (2) As with other disburse­ments, no award should be made unless it is established that the expense, or liability for it, has actually been incurred. The obliga­tion to pay the fee must not be contingent on success in the litigation or on an award of costs. (3) The amount of the allowance should reflect the nature of the preparation that was reasonably required and the nature of the evidence given. A physician who is a major fact witness in a civil fraud case, for example, is not necessarily entitled to his or her professional rates of compensa­tion for preparing to give evidence unre­lated to his or her area of professional expertise. On the other hand, where the witness's in­volvement as a fact witness arises from his or her professional activi­ties, an allowance closer to the normal professional charges of the witness may be appropriate. (4) It may be appropriate to consider whether any compensation paid to the witness for services which are the subject matter of the evidence implicitly includes an allow­ance for testifying if required. If so, this may tend to reduce, or perhaps even elim­inate, the claim for preparation time." - See paragraph 90.

Practice - Topic 7150.4

Costs - Party and party costs - Disburse­ments - Items not recoverable as disburse­ments - [See first Practice - Topic 7133.2 ].

Cases Noticed:

Robb (K.W.) & Associates Ltd. v. Wilson (1998), 169 N.S.R.(2d) 201; 508 A.P.R. 201 (C.A.), refd to. [para. 42].

Award Industries (Mechanical) Ltd. v. Canada, [1985] F.C.J. No. 14 (C.A.), refd to. [para. 57].

Enterprises Blanchet Ltée v. Canada (1986), 8 F.T.R. 31 (T.D.), affd. (1988), 95 N.R. 75 (F.C.A.), refd to. [para. 61].

Baud Corp. N.V. v. Brook, [1979] 1 S.C.R. 633; 23 N.R. 181; 12 A.R. 271, refd to. [para. 68].

Hofstrand Farms Ltd. v. B.D.C. Ltd., [1986] 1 S.C.R. 228; 65 N.R. 261, refd to. [para. 68].

BG Checo International Ltd. v. British Columbia Hydro and Power Auth­ority, [1993] 1 S.C.R. 12; 147 N.R. 81; 20 B.C.A.C. 241; 35 W.A.C. 241, refd to. [para. 68].

Amar Cloth House Ltd. v. LA Van & Co., [1997] B.C.T.C. Uned. 657; [1997] 6 W.W.R. 382 (S.C.), refd to. [para. 69].

Houweling Nurseries Ltd. v. Fisons West­ern Corp. (1988), 49 D.L.R.(4th) 205 (B.C.C.A.), refd to. [para. 69].

Canlin Ltd. v. Thiokol Fibres Canada Ltd. (1983), 142 D.L.R.(3d) 450 (Ont. C.A.), dist. [para. 70].

Rose (T.) Construction Ltd. v. Omex In­ternational Inc. et al. (1994), 122 Nfld. & P.E.I.R. 280; 379 A.P.R. 280 (Nfld. T.D.), dist. [para. 71].

General Securities Ltd. v. Don Ingram Ltd., [1940] S.C.R. 670, refd to. [para. 73].

Andre Knight Ltd. v. Presement, [1967] 2 O.R. 289, refd to. [para. 73].

Northland Properties Ltd. v. Equitable Trust Co. (1992), 10 C.P.C.(3d) 245 (B.C.S.C.), refd to. [para. 82].

Webb v. Page (1843), 1 Car. & K. 23, refd to. [para. 83].

North Carolina v. McCormick (1979), 259 S.E. 880, refd to. [para. 84].

Statutes Noticed:

Crown Liability and Proceedings Act, R.S.C. 1985, c. C-50, sect. 31(1), sect. 31(6) [para. 39].

Judicature Act, R.S.N.S. 1989, c. 240, sect. 41(i), sect. 41(k) [para. 39].

Authors and Works Noticed:

Mewett, Alan W., Witnesses (1999 Loose­leaf)(release 2), p. 6-1 [para. 84].

Counsel:

John D. MacIsaac, Q.C., for the appellant;

Aidan J. Meade, for the respondent.

This appeal and cross-appeal were heard on January 24, 2000, before Glube, C.J.N.S., Bateman and Cromwell, JJ.A., of the Nova Scotia Court of Appeal.

On April 5, 2000, Cromwell, J.A., delivered the following judgment for the Court of Appeal.