Welcon (1976) Ltd. v. South River (Town) et al., (2009) 291 Nfld. & P.E.I.R. 25 (NLCA)

• Judge: Wells, Welsh and Mercer, JJ.A.
• Court: Court of Appeal (Newfoundland)
• Case Date: May 22, 2009
• Jurisdiction: Newfoundland and Labrador
• Citations: (2009), 291 Nfld. & P.E.I.R. 25 (NLCA);2009 NLCA 59

Welcon Ltd. v. South River (2009), 291 Nfld. & P.E.I.R. 25 (NLCA);

    898 A.P.R. 25

MLB headnote and full text

Temp. Cite: [2009] Nfld. & P.E.I.R. TBEd. OC.039

Welcon (1976) Limited (appellant) v. Town Council of the Town of South River (first respondent) and Newlab Engineering Limited (second respondent)

(06/71; 2009 NLCA 59)

Indexed As: Welcon (1976) Ltd. v. South River (Town) et al.

Newfoundland and Labrador Supreme Court

Court of Appeal

Wells, Welsh and Mercer, JJ.A.

October 21, 2009.

Summary:

Welcon bid $350,000 to construct a water and sewer system in the town of South River, and was awarded the contract (unit price). There was no information in the tender package respecting soil conditions. Soon after the job commenced, Welcon encountered difficulties with the subsurface soil conditions and conveyed this to the town's consulting engineer, Newlab Engineering. Newlab's position was that the excavated soil was suitable for reuse as backfill. Disputes arose. Grievances were filed and representations made to the government's dispute resolution board. The final decision was adjourned for some time. Welcon ultimately sued South River for extra costs incurred ($222,750 for imported backfill). Newlab was joined as a defendant as Welcon claimed negligence by one of their engineers.

The Newfoundland and Labrador Supreme Court, Trial Division, in a decision reported at [2006] Nfld. & P.E.I.R. Uned. 28, dismissed Welcon's claim except $4,887.50 for rock underbedding. The soil conditions were not extraordinary circumstances that went beyond the work contemplated by the contract. The problems encountered might have attracted additional compensation from the board, but Welcon never completed that process. The claim against Newlab also failed. Newlab did not hold themselves out to the bidders as someone who they could rely on regarding soil conditions. The contract pointed out that this was the responsibility of the bidders. Newlab carried out its supervising role correctly. Welcon appealed.

The Newfoundland and Labrador Court of Appeal, Wells, J.A., dissenting, dismissed the appeal. The trial judge committed no palpable and overriding error in his findings. Wells, J.A., would have ordered that Welcon recover from the town $217,862.15 for breach of contract and recover from Newlab $5,000 for breach of duties.

Building Contracts - Topic 557

The contract - Terms - Soil conditions - [See both Building Contracts - Topic 2624 ].

Building Contracts - Topic 2624

Payment - Compensation to builder - Extras - What constitutes an extra - A contractor (Welcon) claimed recovery for the costs of alleged "extra work" occasioned by unexpected adverse soil conditions encountered in the performance of a municipal water and sewer project - Welcon had submitted that the key question was whether it had encountered extraordinary adverse soil conditions and, if so, the extent thereof - The trial judge found that the soil conditions should have been expected and dismissed the claim except in respect of a minor item - The Newfoundland and Labrador Court of Appeal stated that the "trial judge's review of the applicable principles of contract law ... was in accordance with Welcon's submission. The trial judge ... properly proceeded on the basis that Welcon could only recover if the soil conditions encountered were materially different than that which could reasonably have been anticipated, and that Welcon bore the burden of proving the assertion that the soil conditions were materially different. The trial judge obviously did not accept Welcon's submissions respecting the factual findings to be drawn from the evidence" - The court saw no error that, from the extensive evidence respecting soil conditions, the trial judge chose to accord greater weight to certain evidence in reaching his findings - See paragraphs 21 to 27.

Building Contracts - Topic 2624

Payment - Compensation to builder - Extras - What constitutes an extra - A contractor (Welcon) claimed recovery for the costs of alleged "extra work" occasioned by unexpected adverse soil conditions encountered in the performance of a municipal water and sewer project - The trial judge found that the soil conditions should have been expected and dismissed the claim except in respect of a minor item - The Newfoundland and Labrador Court of Appeal, Wells, J.A., dissenting, dismissed the appeal - Wells, J.A., opined that the trial judge failed to apply relevant provisions of the contract - In particular, GC 35 was fundamental; i.e., "after prompt investigation, should the Engineer/Architect determine that conditions do differ materially, he shall issue appropriate instructions for changes in the work" - That failure led to incorrect conclusions as to, among other things, what constituted materially different adverse soil conditions - Those incorrect conclusions, in turn, led to incorrect factual conclusions - The trial judge having so erred in law and having made palpable and overriding errors in his assessment of the evidence, and having decided the claims of Welcon on the basis of those errors, the decision could not stand - See paragraphs 78 to 150.

Building Contracts - Topic 2784

Payment - Compensation to builder - For changed conditions - What constitutes a changed condition - [See first Building Contracts - Topic 2624 ].

Building Contracts - Topic 2797

Payment - Compensation to builder - For changed conditions - Evidence and proof - [See first Building Contracts - Topic 2624 ].

Building Contracts - Topic 5447

Architects and engineers - Liability to contractor - Nondisclosure of information - [See first Building Contracts - Topic 5449 ].

Building Contracts - Topic 5449

Architects and engineers - Liability to contractor - Misrepresentation - This action arose out of a municipal water and sewer project in which Welcon was the contractor, the town was the owner and Newlab Engineering Ltd. was the town's engineering consultant - Welcon claimed that Newlab failed to disclose material facts in tender documents; misled Welcon regarding soil conditions; and was negligent in failing to authorize necessary materials/work - The trial judge found that Newlab did not hold themselves out to the bidders as someone who they could rely on regarding soil conditions and that the contract pointed out that this was the responsibility of the bidders - The Newfoundland and Labrador Court of Appeal stated that it could not allow the appeal on the basis that Newlab misrepresented soil conditions and that Welcon relied on the same - There was limited evidence respecting pre-tender communication between Welcon and Newlab - Given the conflicts in the testimony, the explicit language in the tender documents and the evidence respecting industry practice, there was a solid evidentiary basis for the trial judge's findings - Further, allegations of misrepresentation and improprieties in Newlab's contract administration were "obviously" linked to the contention (rejected by the trial judge) that Welcon encountered unexpected adverse soil conditions - As the court upheld the findings respecting soil conditions, it followed that Welcon could not recover compensation from Newlab - See paragraphs 28 and 29.

Building Contracts - Topic 5449

Architects and engineers - Liability to contractor - Misrepresentation - Negligent Misrepresentation - This action arose out of a municipal water and sewer project in which Welcon was the contractor, the town was the owner and Newlab was the town's engineering consultant - The trial judge dismissed the majority of Welcon's claim for extras occasioned by unexpected adverse soil conditions - The Newfoundland and Labrador Court of Appeal, Wells, J.A., dissenting, dismissed the appeal - Wells, J.A., opined that Newlab had been made aware that removal of unsuitable material and importing common fill might be involved - "It was, therefore, a negligent breach of the Engineer's duty to fail to provide that information to the bidders, including Welcon, and then seek to offload the cost of dealing with the problem onto Welcon. Newlab is liable to Welcon for any damages suffered by Welcon as a result of Newlab's negligence in failing to provide Welcon with relevant information Newlab possessed" - Wells, J.A., would have found that Newlab also breached its duty to act judicially in deciding questions that arose under the contract - In the result, Wells, J.A., would have ordered that both Newlab and the town were liable for the damages suffered by Welcon - See paragraphs 159 to 182.

Building Contracts - Topic 5450

Architects and engineers - Liability to contractor - Respecting claims covered in contract between the owner and the contractor - [See first Building Contracts - Topic 5449 ].

Building Contracts - Topic 5450

Architects and engineers - Liability to contractor - Respecting claims covered in contract between the owner and the contractor - This action arose out of a municipal water and sewer project in which Welcon was the contractor, the town was the owner and Newlab was the town's engineering consultant - The trial judge dismissed the majority of Welcon's claim for extras occasioned by unexpected adverse soil conditions - The Newfoundland and Labrador Court of Appeal, Wells, J.A., dissenting, dismissed the appeal - Wells, J.A., opined that the trial judge erred by failing to determine that Newlab breached duties owed to Welcon - In particular, that the trial judge erred by ignoring relevant provisions of the contract that specified duties of the engineer and the manner of determining compensation payable to Welcon, and by ignoring jurisprudence relating to the duty of an engineer administering such a contract - Instead, the trial judge drew conclusions as to the engineer's duty and whether or not there was a breach of that duty, and determined liability on the basis of legal conclusions expressed by an engineer (Kendall) engaged by counsel for the town to provide "an objective assessment of the information provided to the Court, to date" - The trial judge was diverted from a full assessment of the law and the evidence on this issue by his adoption of the erroneous assertions of the town and Newlab, expressed in the Kendall report - See paragraphs 152 to 158.

Crown - Topic 1108

Contracts with Crown - Building contracts - Extras - [See first Building Contracts - Topic 2624 ].

Evidence - Topic 252

Inferences and weight of evidence - Weight - Expert evidence - [See both Evidence - Topic 465 ].

Evidence - Topic 465

Functions of counsel, judge and jury - Acceptance of opinion evidence - A contractor (Welcon) claimed costs of alleged "extra work" occasioned by unexpected adverse soil conditions encountered in the performance of a municipal water and sewer project - Expert witnesses opined respecting soil conditions - Kavanagh, an engineer engaged by the government to prepare a report on Welcon's claim, opined that only a small portion of the project was affected and that would not be "extraordinary" considering the makeup of the soil not only for the municipality, but for the whole of the Avalon Peninsula - Relying on Kavanagh's report, the trial judge dismissed the claim except in respect of a minor item - Although Welcon did not object at trial to Kavanagh being qualified as an expert nor to the entry of his report, its post-trial brief contended that the report should be accorded no weight - Its appeal factum challenged the qualification of Kavanagh as an expert and the admissibility of his report - The Newfoundland and Labrador Court of Appeal observed that case law did not state that any lapse in an expert report from the stated requirements compelled its exclusion, but that it must be read as a whole and in context - Kavanagh's report did not so offend the noted evidentiary principles as to warrant overturning the decision to qualify Kavanagh as an expert and to admit his report into evidence, particularly where no objection was taken at trial - See paragraphs 21 to 23.

Evidence - Topic 465

Functions of counsel, judge and jury - Acceptance of opinion evidence - A contractor (Welcon) claimed costs of alleged "extra work" occasioned by unexpected adverse soil conditions encountered in the performance of a municipal water and sewer project - Expert witnesses opined respecting soil conditions - A major contention of Welcon at the appeal was that the trial judge did not properly consider the testimony of Cranford - Cranford's company (Cougar) had installed the previous phase of the project - Cranford testified respecting the soil conditions Cougar had encountered and the extra payments for imported backfill that were approved - Cranford had viewed the Welcon project on several occasions - The trial judge's findings respecting soil conditions did not specifically reference Cranford's testimony - The Newfoundland and Labrador Court of Appeal held that the trial judge was alert to Cranford's testimony - He commented on Cranford's testimony respecting the extra payments and that Welcon failed to show that the imported backfill was used as fill - And other witnesses testified that the price paid to Cranford was inconsistent with the imported fill being trench backfill - There was accordingly a solid evidentiary basis for the trial judge's treatment of Cranford's testimony on that point and it was logical to infer that the trial judge bore that in mind in weighing Cranford's testimony overall on the subject of soil conditions - See paragraph 25.

Evidence - Topic 7002

Opinion evidence - Expert evidence - General - Acceptance, rejection and weight to be given to expert opinion - [See both Evidence - Topic 465 ].

Municipal Law - Topic 2386

Contracts by a municipality - Construction contracts - Liability for cost overruns - [See first Building Contracts - 2624 ].

Practice - Topic 8808

Appeals - Duty of appellate court respecting conclusions or interpretation of trial judge - [See first Building Contracts - Topic 2624 and first Building Contracts - Topic 5449 ].

Professional Occupations - Topic 3301.1

Engineers - Negligence - Duty of care - [See second Building Contracts - Topic 5449 and second Building Contracts - Topic 5450 ].

Cases Noticed:

Housen v. Nikolaisen et al., [2002] 2 S.C.R. 235; 286 N.R. 1; 219 Sask.R. 1; 272 W.A.C. 1, refd to. [para. 20].

Earle Estate v. Finn (2008), 274 Nfld. & P.E.I.R. 33; 837 A.P.R. 33; 2008 NLCA 14, refd to. [para. 20].

Finn v. Earle (Estate) - see Earle Estate v. Finn.

Coady Construction and Excavating Ltd. v. St. John's (City) (2004), 239 Nfld. & P.E.I.R. 235; 709 A.P.R. 235; 2004 NLSCTD 148, refd to. [paras. 21, 145].

Corner Brook Pulp and Paper Ltd. v. Geocon et al., unreported decision, November 16, 2000, Docket 1996 C.B. No. 789 (Nfld. T.D.), refd to. [paras. 22, 84, 211].

Corpex (1977) Inc. v. Canada, [1982] 2 S.C.R. 643; 50 N.R. 197, refd to. [paras. 43, 61].

Hedley Byrne & Co. v. Heller & Partners Ltd., [1964] A.C. 465 (H.L.), refd to. [para. 43].

Dinn v. Snow et al. (2008), 282 Nfld. & P.E.I.R. 1; 868 A.P.R. 1; 2008 NLCA 59, refd to. [para. 45].

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. 60].

British Columbia Hydro and Power Authority v. BG Checo International Ltd. - see BG Checo International Ltd.

Walsh-Canadian Construction Co. v. Churchill Falls (Labrador) Corp. (1979), 25 Nfld. & P.E.I.R. 361; 68 A.P.R. 361 (Nfld. C.A.), leave to appeal denied (1980), 31 N.R. 539; 24 Nfld. & P.E.I.R. 269; 65 A.P.R. 269 (S.C.C.), refd to. [para. 63].

Donoghue v. Stevenson, [1932] A.C. 362 (H.L.), refd to. [para. 71].

Queen (D.J.) v. Cognos Inc., [1993] 1 S.C.R. 87; 147 N.R. 169; 60 O.A.C. 1, refd to. [para. 72].

Edgeworth Construction Ltd. v. Lea (N.D.) & Associates Ltd. et al., [1993] 3 S.C.R. 206; 157 N.R. 241; 32 B.C.A.C. 221; 53 W.A.C. 221, refd to. [para. 73].

Hickman & Co. v. Roberts et al., [1913] A.C. 229, refd to. [para. 76].

Kamlee Construction Ltd. v. Oakville (Town) (1960), 26 D.L.R.(2d) 166 (S.C.C.), refd to. [para. 77].

Butler (Bruce) (1974) Ltd. v. Bonavista Peninsula Interfaith Senior Citizen's Foundation and B.F.L. Consultants Ltd. (1989), 83 Nfld. & P.E.I.R. 318; 260 A.P.R. 318; 37 C.L.R. 205 (Nfld. T.D.), refd to. [para. 144].

Hill (R.J.) Explosives Consultants Ltd. v. Newfoundland (Minister of Municipal Affairs) (1988), 76 Nfld. & P.E.I.R. 301; 235 A.P.R. 301; 30 C.L.R. 88 (Nfld. T.D.), refd to. [para. 146].

Brown & Huston Ltd. v. York (Borough) (1983), 5 C.L.R. 240 (Ont. H.C.), refd to. [para. 161].

Authors and Works Noticed:

Goldsmith, Immanuel, and Heintzman, Thomas G., Canadian Building Contracts (4th Ed. 1988) (2009 Looseleaf Update), pp. 1-37 to 1-39 [para. 52]; 1-40, 1-41 [para. 66]; 8-3, 8-4 [para. 75].

McLachlin, Beverley M., Wallace, Wilfred J., and Grant, Arthur M., The Canadian Law of Architecture and Engineering (2nd Ed. 1994), p. 223 [para. 77].

Wise, Harold M., Manual of Construction Law (1994 Looseleaf), generally [para. 71].

Counsel:

Donald Powell, for the appellant;

Ronald Cole, for the first respondent;

David Buffett, Q.C., for the second respondent.

This appeal was heard on May 22, 2009, by Wells, Welsh and Mercer, JJ.A., of the Newfoundland and Labrador Court of Appeal. The judgment of the court was rendered on October 21, 2009. The following reasons were filed:

Mercer, J.A. (Welsh, J.A., concurring) - see paragraphs 1 to 31;

Wells, J.A., dissenting - see paragraphs 32 to 234.