New Brunswick Power Corp. v. Westinghouse Canada Inc. et al., (2008) 337 N.B.R.(2d) 138 (CA)

• Judge: Robertson, Daigle and Larlee, JJ.A.
• Court: Court of Appeal (New Brunswick)
• Case Date: October 02, 2008
• Jurisdiction: New Brunswick
• Citations: (2008), 337 N.B.R.(2d) 138 (CA);2008 NBCA 70

N.B. Power v. Westinghouse (2008), 337 N.B.R.(2d) 138 (CA);

    337 R.N.-B.(2e) 138; 864 A.P.R. 138

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Sommaire et texte intégral

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

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Temp. Cite: [2008] N.B.R.(2d) TBEd. OC.005

Renvoi temp.: [2008] N.B.R.(2d) TBEd. OC.005

New Brunswick Power Corporation (appellant) v. Westinghouse Canada Inc. and Asea Brown Boveri Inc. (respondents)

(142/06/CA; 2008 NBCA 70)

Indexed As: New Brunswick Power Corp. v. Westinghouse Canada Inc. et al.

Répertorié: New Brunswick Power Corp. v. Westinghouse Canada Inc. et al.

New Brunswick Court of Appeal

Robertson, Daigle and Larlee, JJ.A.

October 2, 2008.

Summary:

Résumé:

The plaintiff alleged that the power transformers that it purchased from the defendant Westinghouse contained a design defect. The plaintiff commenced an action alleging breach of contract and negligence.

The New Brunswick Court of Queen's Bench, Trial Division, in a decision reported at 309 N.B.R.(2d) 299; 799 A.P.R. 299, dismissed the action. The trial judge held that the warranty and limitation of liability clauses in the sales contracts insulated Westinghouse from liability in both contract and tort and that the doctrine of fundamental breach did not alter the outcome. The plaintiff appealed. Westinghouse cross-appealed.

The New Brunswick Court of Appeal dismissed the appeal and allowed the cross-appeal as it pertained to the trial judge's cost award.

Editor's Note: for a related case involving these parties see 263 N.B.R.(2d) 279; 689 A.P.R. 279.

Contracts - Topic 2107

Terms - Express terms - Warranty clauses - NB Power alleged that the power transformers that it purchased in the 1970s from Westinghouse contained a design defect - NB Power commenced an action alleging, inter alia, breach of contract - The contractual warranty period had expired - NB Power argued that, given the design defect, the express warranty in the contracts did not apply - The trial judge rejected the argument - NB Power appealed - The New Brunswick Court of Appeal held that the trial judge did not err in concluding that the warranty clause was effective for the purposes of immunizing Westinghouse from contractual liability for breach of its obligation to provide NB Power with transformers free of design defects - The trial judge correctly held that the warranty clause had to be read as a whole and not disjunctively - The court rejected NB Power's argument that, as the design defect was present ab initio, the transformers proved to be defective within the applicable warranty period - That argument would mean there was no contractual requirement that the defect manifest itself within one year - To accept the argument, would mean that time-limited warranties did not protect sellers against defects that existed before but were not discovered until after the warranty period expired - See paragraphs 16 to 29.

Contracts - Topic 2126

Terms - Express terms - Exclusionary clauses - Interpretation - NB Power alleged that the power transformers that it purchased in the 1970s from Westinghouse contained a design defect - NB Power commenced an action alleging, inter alia, breach of contract and negligence - The contracts contained a limitation of liability clause - NB Power argued that the words "any tortious acts or omissions of their respective employees or agents" in the clause should not be interpreted to include negligence - The trial judge held that the words were wide enough to include the tort of negligence by implication - The design defect did not render the transformers dangerous - Therefore, the clause protected Westinghouse from the consequences of its negligence - NB Power appealed, arguing that the trial judge erred in finding that the transformers were not dangerous - The New Brunswick Court of Appeal rejected the argument - NB Power did not appeal the finding that tort liability was excluded by virtue of the limitation of liability clause - Therefore, its arguments as to whether Westinghouse had supplied it with dangerous transformers and failed in its duty to warn NB Power were of "no moment" - Alternatively, the trial judge did not commit a palpable and overriding error in concluding that the design defect did not render the transformers dangerous - An argument based on a breach of a duty to warn could be rejected on the basis that any breach of the duty did not result in consequential damages - See paragraphs 30 to 36.

Contracts - Topic 2126

Terms - Express terms - Exclusionary clauses - Interpretation - NB Power alleged that the power transformers that it purchased in the 1970s from Westinghouse contained a design defect - NB Power commenced an action alleging, inter alia, breach of contract and negligence - The contracts contained a limitation of liability clause - The trial judge held that the clause excluded Westinghouse's liability for breach of contract and tortious acts - NB Power appealed, arguing that the exclusion applied only to the exclusion of damages that qualified as "special or consequential damages" - As the cost of repairing or replacing the transformers qualified as "general damages" the trial judge erred in finding that the cost of repairing or replacing the transformers qualified as "special damages" within the meaning of the limitation of liability clause - The New Brunswick Court of Appeal rejected the argument - The warranty clause expressly provided that "any" liability ceased after the expiration of the warranty period - The use of the word "any" was sufficient to embrace damages in both contract and tort and of all types - In any event, the court agreed with the trial judge in her finding that repair and replacement costs could not be properly characterized as "general damages" - See paragraphs 37 and 38.

Contracts - Topic 3726

Performance or breach - Fundamental breach - General - The New Brunswick Court of Appeal provided an overview respecting the doctrine of fundamental breach - See paragraphs 6 to 14.

Contracts - Topic 3730

Performance or breach - Fundamental breach - What constitutes a fundamental breach - NB Power alleged that the power transformers that it purchased in the 1970s from Westinghouse contained a design defect - NB Power commenced an action alleging, inter alia, breach of contract - The contractual warranty period had expired - NB Power argued that, given the design defect, the express warranty in the contracts did not apply and amounted to a fundamental breach of the contract - The trial judge rejected the argument - NB Power had been able to use most of the transformers for at least 15 years - It had not been deprived of substantially the whole benefit under the contract - Therefore, the design defect did not amount to a fundamental breach - The New Brunswick Court of Appeal opined that the fact that NB Power made use of the transformers for between 15 to 25 years before the defect materialized, coupled with the fact that the transformers had an expected life span of 30 years, fully supported the trial judge's finding that the design defect did not qualify as a "fundamental breach" - See paragraph 15.

Practice - Topic 6924

Costs - General principles - Duty to provide reasons for cost award - The plaintiff alleged that the power transformers that it purchased from the defendant Westinghouse contained a design defect - The plaintiff commenced an action alleging breach of contract and negligence - The trial judge dismissed the action - The trial judge stated at the end of her reasons that Westinghouse was entitled to costs of $35,000 plus disbursements - Westinghouse cross-appealed respecting costs, arguing that the trial judge denied counsel an opportunity to make submissions on costs, failed to provide reasons, and made an award of costs that was markedly below the cost of the five-week trial - The New Brunswick Court of Appeal allowed the cross-appeal - As the trial judge gave no reasons for her cost award and departed from Tariff "A" under Rule 59 of the Rules of Court, this was a proper case for remitting the matter to the trial judge for her full consideration - See paragraphs 41 to 43.

Sale of Goods - Topic 4069

Conditions and warranties - Warranties - Persons liable under warranty - [See Contracts - Topic 2107 ].

Sale of Goods - Topic 4117

Conditions and warranties - Implied or statutory terms as to quality or fitness - Exclusionary clause - Validity of - [See Contracts - Topic 2107 and first Contracts - Topic 2126 ].

Contrats - Cote 2107

Clauses - Clauses expresses - Clauses de garantie - [Voir Contracts - Topic 2107 ].

Contrats - Cote 2126

Clauses - Clauses expresses - Clauses d'exclusion - Interprétation - [Voir Contracts - Topic 2126 ].

Contrats - Cote 3726

Exécution ou rupture - Rupture fondamentale - Généralités - [Voir Contracts - Topic 3726 ].

Contrats - Cote 3730

Exécution ou rupture - Rupture fondamentale - Éléments constitutifs - [Voir Contracts - Topic 3730 ].

Procédure - Cote 6924

Dépens - Principes généraux - Obligation d'indiquer les motifs - [Voir Practice - Topic 6924 ].

Vente d'objets - Cote 4069

Conditions et garanties - Garanties - Personnes responsables aux termes de la garantie - [Voir Sale of Goods - Topic 4069 ].

Vente d'objets - Cote 4117

Conditions et garanties - Conditions implicites ou légales quant à la qualité ou à l'adaptation - Clause d'exclusion - Validité - [Voir Sale of Goods - Topic 4117 ].

Cases Noticed:

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. 6].

Suisse Atlantique Société d'Armement Maritime S.A. v. N.V. Rotterdamsche Kolen Centrale, [1967] 1 A.C. 361 (H.L.), refd to. [para. 7].

Photo Production Ltd. v. Securicor Transport Ltd., [1980] A.C. 827 (H.L.), refd to. [para. 7].

Linton (B.G.) Construction Ltd. v. Canadian National Railway Co., [1975] 2 S.C.R. 678; 3 N.R. 151, refd to. [para. 8].

Beaufort Realties (1964) Inc. v. Belcourt Construction (Ottawa) Ltd. and Chomedey Aluminum Co., [1980] 2 S.C.R. 718; 33 N.R. 460, refd to. [para. 8].

Guarantee Co. of North America v. Gordon Capital Corp., [1999] 3 S.C.R. 423; 247 N.R. 97; 126 O.A.C. 1, refd to. [para. 11].

Domtar Inc. v. ABB Inc. et al., [2007] 3 S.C.R. 461; 369 N.R. 152; 2007 SCC 50, refd to. [para. 12].

Pompey (Z.I.) Industrie et al. v. Ecu-Line N.V. et al., [2003] 1 S.C.R. 450; 303 N.R. 201; 2003 SCC 27, refd to. [para. 13].

Fraser Jewellers (1982) Ltd. v. Dominion Electric Protection Co. (1997), 101 O.A.C. 56; 34 O.R.(3d) 1 (C.A.), refd to. [para. 14].

Plas-Tex Canada Ltd. et al. v. Dow Chemical of Canada Ltd. et al. (2004), 357 A.R. 139; 334 W.A.C. 139 (C.A.), refd to. [para. 14].

Canso Chemicals Ltd. v. Canadian Westinghouse Co. (1974), 10 N.S.R.(2d) 306; 2 A.P.R. 306; 54 D.L.R.(3d) 517 (C.A.), dist. [para. 26].

Hydro Electric Board (Man.) v. Inglis (John) Co. et al. (1999), 142 Man.R.(2d) 1; 212 W.A.C. 1 (C.A.), dist. [para. 26].

Central Trust Co. v. Rafuse and Cordon, [1986] 2 S.C.R. 147; 69 N.R. 321; 75 N.S.R.(2d) 109; 186 A.P.R. 109, refd to. [para. 31].

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. 31].

Bow Valley Husky (Bermuda) Ltd. et al. v. Saint John Shipbuilding Ltd. et al., [1997] 3 S.C.R. 1210; 221 N.R. 1; 158 Nfld. & P.E.I.R. 269; 490 A.P.R. 269, refd to. [para. 31].

Winnipeg Condominium Corp. No. 36 v. Bird Construction Co. et al., [1995] 1 S.C.R. 85; 176 N.R. 321; 100 Man.R.(2d) 241; 91 W.A.C. 241, dist. [para. 34].

Hadley v. Baxendale (1854), 156 E.R. 145 (Ex. Ct.), refd to. [para. 38].

Authors and Works Noticed:

McCamus, John D., The Law of Contracts (2005), p. 754 ff. [para. 7].

Counsel:

Avocats:

Kenneth B. McCullogh, Q.C., and Jeffrey Parker, for the appellant;

David S. Morritt and Sonia Bjorkquist, for the respondents.

This appeal and cross-appeal were heard on April 22 and 23, 2008, by Robertson, Daigle and Larlee, JJ.A., of the New Brunswick Court of Appeal. The following decision of the Court of Appeal was delivered in both official languages by Robertson, J.A., on October 2, 2008.