DATE: 20010531

DOCKET: C35644 and C34289

COURT OF APPEAL FOR ONTARIO

LABROSSE, FELDMAN and SHARPE JJ.A.

C35644

B E T W E E N :

ONTARIO NEW HOME WARRANTY PROGRAM

Plaintiff

(Appellant)

Walter T. Langley and

Sean W. Kelly,

for the Appellant Ontario New

Home Warranty Program

• and -

P. Donald Rasmussen and

Heather Acton,

for Bertrand & Frère Construction

BERTRAND & FRÈRE CONSTRUCTION COMPANY LIMITED, LAFARGE CANADA INC., RON MORRIS CONSTRUCTION LTD., RAYMOND BOUCHER & FILS CONSTRUCTION INC., BERNARD PILON LIMITED, YVON LALANDE CONSTRUCTION LTÉE, CHARLEBOIS & DUBUC ASSOCIÉS LTÉE, LUCIEN DELORME, RONALD BENDER, RAVCO DEVELOPMENT CORPORATION, B.G.P. INVESTISSEMENTS LTÉE

Defendants

(Respondents)

Company Limited and

Raymond Bertrand

D. J. T. Mungovan and

P. T. Cavanaugh,

for Lafarge Canada Inc.

William J. Simpson, Q.C.,

for Duval and Wilson homeowners

Robert S. Smith and Yves Boucher,

for the Alie Plaintiffs and the

12 Marcil homeowners

• and -

Garth Macdonald,

for Chubb Insurance Company

of Canada

BOREAL INSURANCE INC., KANSA GENERAL INTERNATIONAL INSURANCE COMPANY LTD., SCOTTISH & YORK INSURANCE CO. LIMITED, CHUBB INSURANCE COMPANY OF CANADA, AMERICAN HOME INSURANCE COMPANY, GUARDIAN INSURANCE COMPANY OF CANADA, CIGNA INSURANCE COMPANY OF CANADA, NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, P.A., FIRST STATE INSURANCE COMPANY, WESTCHESTER FIRE INSURANCE COMPANY, RELIANCE INSURANCE COMPANY, HARTFORD CASUALTY INSURANCE COMPANY, HARBOR INSURANCE COMPANY, PACIFIC EMPLOYERS INSURANCE COMPANY, FEDERAL INSURANCE COMPANY, ROYAL INDEMNITY COMPANY, CALIFORNIA UNION INSURANCE COMPANY, AIU INSURANCE COMPANY and INSURANCE COMPANY OF NORTH AMERICA

Wayne B. Spooner,

for Canadian General Ins. Co.

Brian C. Elkin,

for General Accident Assurance

Company

Ian Godfrey and

Bonnie Roberts,

for the Marcil respondents

Vern Rogers,

for Guardian Insurance Company

of Canada (B & F Insurer)

Donald Macdonald, Q.C. and

Keith N. Batten,

for Royal Insurance

Third parties

(Respondents)

C34289

BERNARD ALIE and OTHERS

Heard: May 22, 23 and 24, 2001

Plaintiffs

(Respondents)

• and -

BERTRAND & FRERE CONSTRUCTION COMPANY LIMITED, LAFARGE CANADA LIMITED and OTHERS

Defendants

(Lafarge Canada Inc. – Appellant)

(All others –Respondents)

AND BETWEEN:

THE PARTIES TO the following actions and

third and subsequent party actions therein:

SUPERIOR COURT FILE NUMBERS

1937-1992, 2076-1992, 2083-1992, 2287-1993, 2477-1993, 2574-1993, 74532/93, 89428/95, 5289-1996, 97-CV-1804, 96639/95, 852-1997, 97-CV-3322

On appeal from the judgment of Justice Albert Roy dated April 17, 2000

BY THE COURT:

1These proceedings involved numerous actions heard together before Mr. Justice Roy. In these actions, approximately one hundred and thirty-nine homeowners claimed substantial damages against Bertrand & Frère Construction Company Limited (“Bertrand”), Lafarge Canada Limited (“Lafarge”) and other defendants and other parties in third-party and subsequent party actions. The damages were claimed as a result of defective concrete in foundations of residential homes constructed between 1986 and 1987. The foundations require total replacement.

2The trial lasted over 150 days. Substantial evidence was heard, including the evidence of fifteen experts, some of them leading world experts in concrete. Extensive written arguments were submitted by the parties (Lafarge’s submissions totaled close to four hundred pages). In the end, the trial judge held Bertrand, a ready-mix concrete supplier, and Lafarge, a manufacturer of cement, twenty and eighty per cent liable respectively under various heads of damages. Lafarge appeals, and Bertrand and others cross-appeal the decision.

3The main issue on this appeal and cross-appeals is the issue of liability as between Lafarge and Bertrand. In addition, issues are raised with respect to aspects of the damages, pre-judgment interest and costs. An important issue at trial relating to insurance coverage has been scheduled to be heard at a later date.

LIABILITY

4On this issue, the trial judge was essentially faced with two conflicting theories as to the cause of the premature deterioration of the concrete. One theory advanced by the experts for homeowners, Bertrand and other parties was that the introduction of Type C Fly Ash (supplied by Lafarge) into the concrete was the cause of the failure of the concrete. The other theory advanced by Lafarge was that the failure of the concrete was unrelated to the introduction of fly ash.

5More specifically, the position of the homeowners, Bertrand and others, was that the introduction of fly ash into the concrete mix was the effective cause of the lack of durability or premature deterioration of the concrete which occurred as a result of either sulphate attack or as a result of the freeze-thaw cycle. The position of Lafarge was that the fly ash had nothing to do with the deterioration of the concrete but rather, that the sand used by Bertrand in the preparation of the concrete required the addition of excess water which caused the cement to deteriorate in the freeze-thaw cycle.

6The trial judge accepted that the first theory, namely, that the fly ash was the cause of the faulty concrete, was more logical and probative than the second theory advanced by Lafarge. He also found that the primary mechanism of the deterioration was sulphate attack. He concluded that both Lafarge and Bertrand were negligent in failing to conduct adequate testing to determine that the product would perform as expected using available material from Eastern Ontario.

7In our view, the detailed and considered reasons of the trial judge reflect a proper consideration of the evidence of the conflicting theories. It was open to the trial judge to reject Lafarge’s allegations of a material change in Bertrand’s sand or mix design and to refuse to give to the computer records the effect desired by Lafarge. The theory for concrete failure put forward by the Lafarge expert was disputed by other experts. It was based on contentious grounds and the trial judge was fully justified in rejecting it. There was no misapprehension of the evidence by the trial judge and all his findings and his conclusions are supported by the evidence.

8The homeowners sued in contract and in tort. Certain homeowners proved their case in contract against Bertrand. However, the liability of Lafarge and Bertrand in tort was overwhelming, particularly the evidence of their failure to perform adequate field testing to verify the impact of fly ash in the concrete mix.

CONCLUSION ON LIABILITY

9A substantial part of Lafarge’s factum is essentially in the nature of an argument rather than a recitation of fact. It contains unbalanced selections of evidence. Similarly, in oral argument, Lafarge attempted to re-argue factual findings made by the trial judge which are supported by the evidence. We see no basis to interfere with the findings and conclusions of the trial judge.

ALLEGED ERRORS OF THE TRIAL JUDGE

10We see no merit in the submission that the trial judge was biased against Lafarge’s position and prejudged the issue of liability. The two impugned comments contained in the lengthy reasons for decision of the trial judge, examined in their proper context, do not lead to a conclusion that the trial judge was biased against Lafarge. When he referred to “fantasy land” the trial judge was simply trying to test the probative value of a convoluted hypothetical question which was being asked by Lafarge. His comment with respect to a “general rule” only reflects his attempt to wade through, understand and rationalize all the conflicting evidence as to the effect of fly ash on the foundation problems. Both comments were of trivial importance in the context of this lengthy trial.

11There is no merit in the submission that the trial judge’s lack of specific reference to portions of Lafarge’s written submissions indicates a predisposition with respect to the liability of Lafarge. This is not a realistic proposition, particularly in a trial of this magnitude. The submissions of the parties exceeded one thousand pages. It was unreasonable to expect a judge to deal specifically in his reasons with each and every point raised by the parties. In the present case, the trial judge referred to all the evidence that formed the basis of his findings. There is no error.

12Lafarge also complains that the trial judge erred in allowing counsel for five of Bertrand’s insurers to participate in the trial, in permitting an insurer to call an expert witness in reply and in refusing Lafarge an opportunity to present oral argument.

13With respect to the first complaint, the insurers had filed defences in the action and they were represented by different counsel representing different interests. Their participation was limited to questions dealing specifically with insurance-related issues and properly monitored by the trial judge. Considering that these parties would be bound by the findings of fact in the main action, it was entirely proper on the part of the trial judge to allow them to participate.

14The trial judge permitted one of Bertrand’s insurers to call expert evidence in reply. Lafarge was not taken by surprise by this evidence. The trial judge was prepared to grant an adjournment to permit Lafarge to prepare for cross-examination and he dealt with this matter in his disposition of the costs. The trial judge acted judiciously in dealing with this issue.

15All parties submitted extensive written arguments. A timetable was set up which was fair for all parties (if anything, favourable to Lafarge). Lafarge can point to nothing to suggest that it was prejudiced by the refusal to permit it to make further oral argument. The trial judge’s ruling was not unreasonable.

16With respect to these last three complaints, the trial judge heard submissions from the parties and his rulings clearly fall within the exercise of the discretion of a trial judge. We see no error and no unfairness on the part of the trial judge.

BERTRAND’S CROSS-APPEAL

17We see no proper basis to conclude that Bertrand should be entitled to full indemnity from Lafarge on the ground that it was entitled to rely on the representations and expertise of Lafarge. The trial judge found that Bertrand should not have relied solely on Lafarge but should have conducted some testing of its own or obtained engineering advice with respect to its own operation in order to ensure that this new product was fit. In addition to its failure to do any testing prior to using fly ash, Bertrand continued to use fly ash after it received complaints about the concrete. The trial judge found that Bertrand had its own independent duty to test the product. In view of the manner in which the case was pleaded and presented, we see no basis for finding a contract by Lafarge, expressed or implied, to indemnify Bertrand: see Negligence Act, R.S.O. 1990, c. N.1, s. 1.

CROSS-APPEAL OF THE ALIE HOMEOWNERS

18Certain respondent homeowners who are part of a group identified as the “Alie Homeowners” have cross-appealed from the refusal of the trial judge to award them punitive damages against Lafarge. They also claim the cost for the replacement of concrete footings and foundation walls for certain detached garages.

19Dealing firstly with the issue of punitive damages, these homeowners are unable to point to any error in the trial judge’s decision showing misapprehension of the law in this area. We agree with the trial judge that Lafarge’s conduct does not justify an award of punitive damages. Although found to have been negligent, Lafarge’s conduct cannot be described as deserving of punishment because it was harsh, vindictive, reprehensible or malicious or even recklessly indifferent in the pursuit of profit, as argued.

20With respect to the detached garages, the issue was settled during the hearing of the appeal. The parties have consented that the appeal be allowed with respect to one homeowner (Simard) who is to recover judgment for the agreed amount of $30,000.

CROSS-APPEAL OF ONTARIO NEW HOME WARRANTY PROGRAM

21At trial, Ontario New Home Warranty Program (“the Program”) was awarded judgment for approximately $3,000,000 for moneys expended between August 1992 and September 1995, in resolving the foundation problems of certain homeowners.

22The trial judge awarded prejudgment interest from August 15, 1994, being the approximate mid-point date of the expenditure incurred by the Program, and fixed the rate of interest at an average annual rate for the period 1993 to 1996. The Program appeals the disposition of the prejudgment interest.

23This issue was settled by the parties during the hearing of the appeal. The parties have agreed to a rate of interest of 6% from August 15, 1994.

LAFARGE’S APPEAL OF THE DISPOSITION OF THE COSTS OF THE TRAIL

24The trial judge ordered Lafarge to pay a larger share of the costs than its share of the liability. He ordered Lafarge to pay 90% of the costs.

25Bertrand admitted at the beginning of the trial that the defective foundations had to be replaced. Lafarge maintained well into the trial that the foundations did not have to be replaced and that only repair was required. Lafarge never called evidence on this issue. The trial judge considered that time was expended uselessly to prove this part of the claim and the proceedings were unduly prolonged.

26The trial judge also considered that, in their written submissions, Lafarge’s counsel engaged in repeated, serious and groundless allegations against the integrity of Bertrand’s counsel. All the respondents criticized Lafarge’s counsel for these personal attacks. In particular, one respondent’s factum sets out thirty-five instances where Lafarge’s counsel accuses Bertrand’s counsel of literally committing fraud on the court. These accusations are shocking and unsupported. In oral argument counsel for Lafarge apologized to counsel and to the court for these intemperate remarks.

27The trial judge considered that the plaintiffs in the actions were all innocent victims who were exposed to the huge costs of this long trial in which the only real issue was who should bear the responsibility for their misfortune. The costs between Lafarge and Bertrand were granted on a party-and-party basis.

28In these circumstances, the trial judge concluded that he had to resort to this unusual order to show his disapproval of the manner in which the trial had been conducted on behalf of Lafarge. We are of the view that the trial judge properly exercised his discretion and the circumstances amply justify both the scale and apportionment of the costs.

CONCLUSION

29In the result, the judgment is varied in accordance with the settlements referred to in these reasons. In all other respects, the appeal and cross-appeals are respectively dismissed with costs.

(signed) “J. M. Labrosse J.A.”

(signed) “K. Feldman J.A.”

(Signed) “Robert J. Sharpe J.A.”

RELEASED: May 31, 2001

“JML”