Trizec Equities Ltd. v. Ellis-Don Management Services Ltd. et al., (1998) 227 A.R. 1 (QB)

• Judge: Mason, J.
• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: February 13, 1998
• Citations: (1998), 227 A.R. 1 (QB);1998 ABQB 1133

Trizec Equities Ltd. v. Ellis-Don Mgt. (1998), 227 A.R. 1 (QB)

MLB headnote and full text

Temp. Cite: [1998] A.R. TBEd. MR.019

Trizec Equities Limited (plaintiff) v. Ellis-Don Management Services Ltd., Ellis-Don Limited, Ellis-Don Inc., Hardy BBT Limited, Hardy Associates (1978) Ltd., Jablonsky Consultants Ltd., GAG Consultants Limited, PFA Consultants Limited, carrying on business under the firm name and style of Jablonsky Associates or Jablonsky, Ast and Partners Consulting Engineers, and the said Jablonsky Consultants Ltd., GAG Consultants Limited and PFA Consultants Limited, Jerry Jablonsky, Paul F. Ast, and Gerald A. Garshon, carrying on business under the firm name and style of Jablonsky Associates or Jablonsky, Ast and Partners Consulting Engineers, and the said Jerry Jablonsky, Paul F. Ast, and Gerald A. Garshon and Western Caissons Limited (defendants) and The Cohos Evamy Partnership, Hardy BBT Limited, Hardy Associates (1978) Ltd., Jablonsky Consultants Ltd., GAG Consultants Ltd., PFA Consultants Ltd., carrying on business under the firm name and style of Jablonsky Associates or Jablonsky, Ast and Partners Consulting Engineers, and the said Jablonsky Consultants Ltd., GAG Consultants Limited and PFA Consultants Limited, Jerry Jablonsky, Paul F. Ast, and Gerald A. Garshon, carrying on business under the firm name and style of Jablonsky Associates or Jablonsky, Ast and Partners Consulting Engineers, and the said Jerry Jablonsky, Paul F. Ast, and Gerald A. Garshon, Western Caissons Limited, Arkwright Mutual Insurance Company and Zurich Insurance Company (third parties) and Trizec Equities Limited, Ellis-Don Management Services Ltd., Ellis-Don Limited, Ellis-Don Inc., Hardy BBT Limited, Hardy Associates (1978) Ltd., Jablonsky Consultants Ltd., GAG Consultants Ltd., PFA Consultants Limited, carrying on business under the firm name and style of Jablonsky Associates or Jablonsky, Ast and Partners Consulting Engineers, and the said Jablonsky Consultants Ltd., GAG Consultants Limited and PFA Consultants Limited, Jerry Jablonsky, Paul F. Ast and Gerald A. Garshon, carrying on business under the firm name and style of Jablonsky Associates or Jablonsky, Ast and Partners Consulting Engineers and the said Jerry Jablonsky, Paul F. Ast and Gerald A. Garshon and Western Caissons Limited (fourth parties)

Hardy BBT Limited (plaintiff by counterclaim) v. Trizec Equities Limited, Arkwright Mutual Insurance Company and Zurich Insurance Company (defendants by counterclaim)

Western Caissons Limited (plaintiff by counterclaim) v. Trizec Equities Limited, Zurich Insurance Company and Arkwright Mutual Insurance Company, formerly known as Arkwright-Boston Manufacturers Mutual Insurance Company and John Buysschaert (defendants by counterclaim)

(Action No. 8901-05540; 1998 ABQB 1133)

Indexed As: Trizec Equities Ltd. v. Ellis-Don Management Services Ltd. et al.

Alberta Court of Queen's Bench

Judicial District of Calgary

Mason, J.

February 13, 1998.

Summary:

Trizec undertook to develop an office building. The site required excavation to a 60 foot depth to accommodate five parking levels. Hardy was the geotechnical engineering consultant on subsurface soil conditions in charge of recommending appropriate soldier pile and lagging systems for excavation. Jablonsky was the structural engineer. Ellis-Don was the general contractor. Western was the subcontractor that designed and built the shoring walls. The excavation site suffered water problems and the south shoring wall moved, resulting in a 116 day project delay (shoring wall redesigned) and the loss of one level of parking. Trizec sued Hardy and Ellis-Don for negligence and breach of contract, and sued Western for negligence and breach of quasi-contract.

The Alberta Court of Queen's Bench dismissed the action against all defendants.

Building Contracts - Topic 578

The contract - Implied terms - Retrospective application of contractual obligations -The Alberta Court of Queen's Bench stated that "work in the construction and other industries commonly commences prior to the finalization of formal written contracts. In the construction industry, matters are usually dealt with informally by letters of intent with an attached standard form of construction contract - including general conditions, specifications and plans. Parties are free to enter into agreements which govern their relationship both prospectively and retrospectively, especially with respect to work already performed or matters arising therefrom. ... However, very specific wording is required to impose contractual responsibility for retrospectivity relating to past events that have raised issues of tort and contractual liability and are currently the subject of threatened litigation. Implying such a term goes well beyond the scope of business efficacy or any suggestion that it conforms to what the parties truly intended and would have accepted as a matter of course." - See paragraphs 587 to 591.

Building Contracts - Topic 3427

Liability of builder - Defective workmanship or design - Site preparation - Trizec undertook construction of an office building - The site required excavation to a 60 foot depth to accommodate five parking levels - Hardy was the geotechnical engineering consultant on subsurface soil conditions in charge of recommending appropriate soldier pile and lagging systems for excavation - Jablonsky was the structural engineer - Ellis-Don was the general contractor - Western was the subcontractor that designed and built the shoring walls - The excavation site suffered water problems and the south shoring wall moved, resulting in a 116 day project delay (shoring wall redesigned) and the loss of one level of parking - Trizec sued Hardy and Ellis-Don for negligence and breach of contract, and sued Western for negligence and breach of quasi-contract - The Alberta Court of Queen's Bench dismissed the action against all defendants - The shoring wall failure resulted from soil erosion behind the wall due to supplemental ground water flow and "stoping" (i.e., no overall stability failure) - It was a unique excavation site and none of the defendants were negligent or in breach of their contracts for damage caused by unforeseen soil conditions (i.e., unique soil conditions not reasonably foreseeable) - See paragraphs 11 to 639.

Building Contracts - Topic 3579

Liability of builder - Damages - Measure of - Foreseeability - Construction of the developer's office building was delayed - The anchor tenant was contractually committed to the project, but alternative office space became fortuitously available - The anchor tenant used an offer from the other office building owner to negotiate a better financial deal with the developer (five months' free rent plus other inducements) -The developer claimed damages against the defendants it sued in contract and tort - The Alberta Court of Queen's Bench held that whether the claim was in contract or tort, the damages claimed were too remote to be recovered (i.e., not a reasonably foreseeable result of the delay) - The construction delay, said to be the fault of the defendants, was not the proximate cause of the anchor tenant entertaining a competitive bid to its financial advantage - See paragraphs 762 to 807.

Building Contracts - Topic 5006

Architects and engineers - General principles - Standard or level of competence - The Alberta Court of Queen's Bench discussed the professional standard of care of architects and engineers - The court agreed that "unless they undertake to exercise a higher standard of care, what is required of architects and engineers is reasonable skill, care and diligence as judged generally by standards of competence in the profession in which they practice. ... the architect or engineer is to be judged by the professional standards prevailing at the time ... Provided that they have exercised reasonable judgment, competence and diligence in doing the work, the fact that the work proves unsatisfactory in some way will not render them liable to the client for breach of contract or negligence." - Errors in judgment were not necessarily negligent - See paragraphs 419 to 424.

Building Contracts - Topic 5506

Architects and engineers - Duties to owner - Soil suitability - [See Building Contracts - Topic 3427 ].

Contracts - Topic 7408

Interpretation - General principles - Understanding of the parties - At issue was the true contractual agreement between two parties - The parties' clearly expressed intentions explicitly contradicted certain contractual elements - The Alberta Court of Queen's Bench stated that where written contracts did not reflect the declarations and actions of the parties, extrinsic evidence was admissible to prove the true nature of the agreement, or the legal relationship of the parties, even though that evidence may add to or vary the written document - See paragraphs 615 to 620.

Contracts - Topic 7430

Interpretation - Ambiguity - Admissibility of extrinsic evidence - [See Contracts - Topic 7408 ].

Damages - Topic 201

Entitlement - Requirement of loss - An office development originally planned five parking levels - Construction problems forced a redesign, leaving only four levels - The loss of one level resulted in less parking revenue and left the developer with insufficient parking spaces to meet city bylaw requirements, thereby making the developer liable to pay the city cash in lieu of parking spaces - However, the developer purchased a parkade across the street, thereby avoiding the cash in lieu of parking obligation - The Alberta Court of Queen's Bench held that the decision to purchase the arcade was not an independent purchase that would have occurred even if the one parking level was not lost -The purchase mitigated the lost parking level and, in fact, actually over-mitigated the loss - Accordingly, the developer suffered no compensable loss in relation to the cash in lieu of parking (where nothing actually paid) and whether there was a compensable loss for parking revenues depended upon the difference between net revenues recovered from the parkade stalls and the net revenues that would have been received from the fifth level of parking - See paragraphs 813 to 853.

Damages - Topic 510

Limits of compensatory damages - General - Prohibition against double recovery - The plaintiff sued the defendant for losses incurred - The plaintiff had obtained insurance monies from its insurer (covering a portion of the loss) - During the trial, the plaintiff and insurer entered an agreement whereby the plaintiff obtained the rights to all of the proceeds of the insurer's subrogation rights for valuable consideration - The defendant submitted that to allow the plaintiff to recover its total loss, including the insurance monies, violated the principle against double recovery - The Alberta Court of Queen's Bench stated that the principle against double recovery applied only where an insured was totally indemnified for the loss to the insured property - Absent total indemnification, as in this case, there was no double recovery - See paragraphs 690 to 697.

Damages - Topic 528

Limits of compensatory damages - Remoteness - Torts - Foreseeability - [See Building Contracts - Topic 3579 ].

Damages - Topic 558

Limits of compensatory damages - Remoteness - Contracts - Damages within reasonable contemplation of parties - [See Building Contracts - Topic 3579 ].

Damages - Topic 1044

Mitigation - In contract - Exception - Recovery from subsequent transaction unrelated to breach - [See Damages - Topic 201 ].

Damages - Topic 1745

Deductions for payments or assistance by third parties - Contractually - Insurance - General - [See Damages - Topic 510 ].

Equity - Topic 3606

Fiduciary or confidential relationships - What constitutes a fiduciary relationship - The owner of a construction project undertook to obtain insurance for itself, the contractor and subcontractors - A loss occurred and the owner settled the loss with the insurer without input from the co-insureds - The owner then sued the co-insureds - The co-insureds submitted that the owner owed them a fiduciary duty in placing insurance and adjusting the loss and breached that duty by failing to maximize recovery - The Alberta Court of Queen's Bench held that a fiduciary relationship existed - The owner had the discretion to place insurance and exercised that discretion unilaterally, affecting the legal rights and liabilities of the co-insureds - The co-insureds were vulnerable, given the power dependency relationship - Finally, the owner undertook to act in the interests of the co-insureds - The owner's unilateral dealings with the insurer, without consulting with or informing the co-insureds respecting the loss adjustment, breached that fiduciary duty, especially where at the time it was proposed to bring legal action against the co-insureds for the loss not covered by insurance - Given that the owner's action against the co-insureds was dismissed, the court found it unnecessary to resolve whether damage resulted from that breach of fiduciary duty - See paragraphs 698 to 761.

Equity - Topic 3641

Fiduciary or confidential relationships - Breach of fiduciary relationship - General -[See Equity - Topic 3606 ].

Evidence - Topic 7002

Opinion evidence - Expert evidence - General - Acceptance, rejection and weight to be given to expert opinion - The Alberta Court of Queen's Bench discussed a trial judge's duty when faced with diametrically opposed opinions by expert witnesses - The court stated that the trial judge must weigh the opinions and select the opinion most consistent with all of the evidence to determine which theory was more probable - See paragraphs 292 to 293.

Insurance - Topic 6584

Multi-peril property insurance - Contractor's or builder's policies - Persons insured - At issue was whether the owner in a construction project was obligated, by a duty of care, by fiduciary relationship or by law, to include its geotechnical engineering consultant in its insurance coverage - Although the owner inquired into such coverage, consultants were never named as insureds - The consultant admitted that it did not rely on the owner to provide insurance coverage, but submitted that reliance was not necessary to find that the owner owed it a duty of care to provide such insurance - The Alberta Court of Queen's Bench held that reliance was required - The only contractual provision mentioning the provision for insurance for both contractors and consultants was a drafting error - The evidence clearly established that the owner's obligation was to insure only itself, its general contractor and all subcontractors, which accorded with standard practice in the industry at the time - See paragraphs 633 to 681.

Insurance - Topic 6584

Multi-peril property insurance - Contractor's or builder's policies - Persons insured - The geotechnical engineering consultant on a construction project, although not a named insured under the owner's insurance, submitted it was entitled by operation of law to coverage under the owner's Builder's All Risk Policy - The Alberta Court of Queen's Bench rejected the submission - The owner's policy was basically property-based insurance (based on who had an insurable interest in the property), while insurance for professionals was based on legal liability arising from error, omission or negligence - The two risks were different and involved different underwriting considerations - The court stated that "this distinction provides a principled basis for refusing to extend project insurance coverage to consultants in the absence of clear and express language indicating such coverage" - See paragraphs 682 to 686.

Torts - Topic 25

Negligence - Standard of care - Effect of customary trade practice - A professional engineering firm submitted that it was not negligent where it followed standard practice in the industry - The Alberta Court of Queen's Bench stated that conformity with general practice or local customs was not, per se, determinative of negligence - Notwithstanding general practice, the firm must still act reasonably and competently in the circumstances - See paragraph 426.

Cases Noticed:

Tiesmaki v. Wilson, [1975] 6 W.W.R. 639 (Alta. C.A.), refd to. [para. 292].

University of Regina v. Pettick et al. (1991), 90 Sask.R. 241 (C.A.), refd to. [para. 293].

White Rock Lodge Properties Ltd. v. British Columbia Hydro and Power Authority (1993), 9 C.L.R.(2d) 250 (B.C.S.C.), agreed with [para. 378].

BG Checo International Ltd. v. British Columbia Hydro and Power Authority (1993), 147 N.R. 81; 20 B.C.A.C. 241; 35 W.A.C. 241; 99 D.L.R.(4th) 577 (S.C.C.), refd to. [para. 403].

Trident Construction Ltd. v. Wardrop (W.L.) and Associates Ltd. et al., [1979] 6 W.W.R. 481; 1 Man.R.(2d) 268 (Q.B.), refd to. [para. 420].

Brantford (Town) v. Kemp et al. (1960), 23 D.L.R.(2d) 640 (Ont. C.A.), refd to. [para. 421].

Whitehouse v. Jordan, [1981] 1 All E.R. 267 (H.L.), refd to. [para. 422].

Trollope & Colls Ltd. et al. v. Atomic Power Construction Ltd., [1962] 3 All E.R. 1035 (Q.B.), refd to. [para. 590].

Wake v. Harrop (1861), 6 H. & N. 768; 158 E.R. 317 (Ex. Ct.), refd to. [para. 617].

Mendelssohn v. Normand Ltd., [1970] 1 Q.B. 177 (C.A.), refd to. [para. 619].

Canadian Acceptance Corp. v. Mid-Town Motors Ltd. (1970), 72 W.W.R.(N.S.) 365 (Sask. Dist. Ct.), refd to. [para. 620].

Evans (J.) & Son (Portsmouth) Ltd. v. Andrea Merzario Ltd., [1976] 1 W.L.R. 1078 (C.A.), refd to. [para. 620].

Findlay v. Couldwell (1976), 69 D.L.R.(3d) 320 (B.C.S.C.), refd to. [para. 620].

Davidson v. Three Spruce Realty Co. (1977), 79 D.L.R.(3d) 481 (B.C.S.C.), refd to. [para. 620].

Roberts v. Montex Development Corp. (1979), 100 D.L.R.(3d) 660 (B.C.S.C.), refd to. [para. 620].

Hedley Byrne & Co. v. Heller & Partners Ltd., [1963] 2 All E.R. 575 (H.L.), refd to. [para. 669].

Spring v. Guardian Assurance plc et al., [1994] 3 All E.R. 129; 174 N.R. 164 (H.L.), refd to. [para. 669].

White et al. v. Jones et al., [1995] 1 All E.R. 691; 179 N.R. 197 (H.L.), refd to. [para. 669].

Queen (D.J.) v. Cognos Inc. (1993), 147 N.R. 169; 60 O.A.C. 1; 99 D.L.R.(4th) 626 (S.C.C.), refd to. [para. 669].

Sherritt Gordon Ltd. v. Dresser Canada Ltd. et al. (1996), 187 A.R. 1; 127 W.A.C. 1 (C.A.), refd to. [para. 671].

Imperial Oil Ltd. and Wellman-Lord (Alberta) Ltd. v. Commonwealth Construction Ltd. (1976), 12 N.R. 113; 69 D.L.R.(3d) 558 (S.C.C.), refd to. [para. 683].

Simcoe & Erie General Insurance Co. v. Royal Insurance Co. of Canada and Federal Insurance Co., [1982] 3 W.W.R. 628; 36 A.R. 553 (Q.B.), refd to. [para. 684].

Canadian Pacific Ltd. v. Base-Fort Security Services (B.C.) Ltd. (1989), 40 B.C.L.R.(2d) 107 (S.C.); 77 D.L.R.(4th) 178 (C.A.), refd to. [para. 684].

Ratych v. Bloomer, [1990] 1 S.C.R. 940; 107 N.R. 335; 39 O.A.C. 103, dist. [para. 691].

Cooper v. Miller (No. 1), [1994] 1 S.C.R. 359; 164 N.R. 81; 41 B.C.A.C. 1; 66 W.A.C. 1, dist. [para. 691].

Cunningham v. Wheeler - see Cooper v. Miller (No. 1).

Confederation Life Insurance Co. v. Causton (1989), 60 D.L.R.(4th) 372 (B.C.C.A.), refd to. [para. 692].

Yorkshire Insurance Co. v. Nisbet Shipping Co., [1961] 2 All E.R. 487 (Q.B.), refd to. [para. 695].

Burnett v. New Brunswick Electric Power Commission (1965), 51 M.P.R. 350 (N.B.C.A.), refd to. [para. 695].

Kanne v. Connecticut General Life Insurance Co. (1985), 607 F.Supp. 899 (Cal. D.C.), refd to. [para. 702].

Hodgkinson v. Simms et al., [1994] 3 S.C.R. 377; 171 N.R. 245; 49 B.C.A.C. 1; 80 W.A.C. 1; [1994] 9 W.W.R. 609; 22 C.C.L.T.(2d) 1; 117 D.L.R.(4th) 161, refd to. [para. 713].

Frame v. Smith and Smith, [1987] 2 S.C.R. 99; 78 N.R. 40; 23 O.A.C. 84, refd to. [para. 715].

American Home Assurance Co. v. Shea (J.F.) Co. (1978), 445 F.Supp. 365, refd to. [para. 740].

Benson & Hedges (Canada) Ltd. v. Hartford Fire Insurance Co. et al., [1978] 2 S.C.R. 1088; 21 N.R. 279, refd to. [para. 747].

Office Garages Ltd. et al. v. Phoenix Insurance Co. of Hartford et al. (1966), 59 D.L.R.(2d) 81 (Ont. H.C.), refd to. [para. 750].

Canadian General Electric Co. v. Liverpool & London & Globe Insurance Ltd. et al. (1981), 36 N.R. 541; 123 D.L.R.(3d) 513 (S.C.C.), refd to. [para. 755].

Hadley v. Baxendale (1854), 156 E.R. 145 (Ex. Ct.), refd to. [para. 798].

Brown & Root Ltd. v. Chimo Shipping Ltd. (1967), 63 D.L.R.(2d) 1 (S.C.C.), refd to. [para. 799].

Hofstrand Farms Ltd. v. B.D.C. Ltd., [1986] 1 S.C.R. 228; 65 N.R. 261; 26 D.L.R.(4th) 1, refd to. [para. 799].

Keneric Tractor Sales Ltd. v. Langille, [1987] 2 S.C.R. 440; 79 N.R. 241; 82 N.S.R.(2d) 361; 207 A.P.R. 361; 43 D.L.R.(3d) 171, refd to. [para. 799].

Vorvis v. Insurance Corp. of British Columbia, [1989] 1 S.C.R. 1085; 94 N.R. 321; 58 D.L.R.(4th) 193, refd to. [para. 799].

Pawluk et al. v. Bank of Montreal et al. (1994), 154 A.R. 243; 20 Alta. L.R.(3d) 76 (Q.B.), refd to. [para. 800].

Overseas Tankship (U.K.) Ltd. v. Morts Dock & Engineering Co. (The Wagon Mound), [1961] 1 All E.R. 404 (P.C.), refd to. [para. 801].

Overseas Tankship (U.K.) Ltd. v. Miller Steamship Co. (Wagon Mound No. 2), [1966] 2 All E.R. 709 (P.C.), refd to. [para. 802].

Queen v. Cote (1974), 51 D.L.R.(3d) 244 (S.C.C.), refd to. [para. 803].

Baud Corp., N.V. v. Brook (1978), 23 N.R. 181; 12 A.R. 271; 89 D.L.R.(3d) 1 (S.C.C.), refd to. [para. 804].

Asamera Oil Corp. v. Sea Oil & General Corp. et al. - see Baud Corp., N.V. v. Brook.

Ultramares Corp. v. Touche (1931), 174 N.E. 441 (N.Y.C.A.), refd to. [para. 805].

British Westinghouse Electric and Manufacturing Co. v. Underground Electric Railways Co. of London Ltd., [1912] A.C. 673 (H.L.), refd to. [para. 827].

Hussey v. Eels, [1990] 1 All E.R. 449 (C.A.), refd to. [para. 827].

Staniforth v. Lyall (1830), 7 Bing. 169 (Ch.), refd to. [para. 829].

Karas v. Rowlett, [1944] 1 S.C.R. 1, refd to. [para. 837].

Authors and Works Noticed:

Chitty on Contracts (27th Ed. 1994), vol. 1, pp. 141, para. 2-088 [para. 589]; 609, para. 12-098 [para. 615].

McLachlin, B.M., Wallace, W.J., and Grant, A.M., The Canadian Law of Architecture and Engineering (2nd Ed. 1994), pp. 101 [para. 419]; 102 [paras. 419, 426].

Shorter Oxford English Dictionary (3rd Ed.) [para. 745].

Waddams, S.M., The Law of Contracts (3rd Ed. 1993), pp. 225 to 228, para. 339 [para. 616].

Waddams, S.M., The Law of Damages (1995 Looseleaf Ed.), paras. 15.680 [para. 826]; 15.800 [para. 839]; 15.880 [para. 693].

Counsel:

B.G. Nemetz, J.N. Craig and E.B. Mellett, for Trizec Equities Ltd. and Arkwright Mutual Insurance Co.;

T.C. Ferguson, Q.C., and C.J. Meagher, for Hardy BBT Ltd.;

A.J. McConnell and T.D. Moller, for Western Caissons Ltd.;

C. Jensen, for Ellis-Don Management Services Ltd. et al.;

G.N. McDermid, Q.C., and Z. Verjee, for Zurich Insurance Co.

This action was heard before Mason, J., of the Alberta Court of Queen's Bench, Judicial District of Calgary, who delivered the following judgment on February 13, 1998.