ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: 12-55475
DATE: 20140307

B E T W E E N:

DAVID S. LAFLAMME CONSTRUCTION INC.

Ronald W. Price and Chris Merrick, for the Plaintiff (Responding Party)

• and -

ATTORNEY GENERAL OF CANADA

Andrew Gibbs and Leah Garvin for the Defendant Attorney General of Canada (Moving Party)

ARGUED: February 6, 2014 (Ottawa)

HACKLAND R.S.J.

REASONS FOR DECISION

Overview

[1] The Crown moves to strike the defendant David S. Laflamme Construction Inc.’s (DSL) action on the basis that the Ontario Superior Court lacks subject-matter jurisdiction over the claim, and on the basis that it is plain and obvious that the allegations pleaded are incapable of supporting the cause of action. In this action DSL sues the Crown, representing the Minister of Public Works and Government Services Canada (PWGSC), for breach of contract and for negligent misrepresentation. The contract pertained to the replacement of the Laniel Dam located in Northern Quebec. This dam was originally built in 1910 along the Kipawa River and after nearly 100 years in operation required replacement.

Does this court have subject-matter jurisdiction over the claims?

[2] The Crown Liability and Proceedings Act , R.S.C., 1985, c. C-50, s. 21(1) (CLPA) requires actions against the Federal Crown to be determined in the jurisdiction “in which the claim arises”. DSL commenced this action in Ontario and the Crown moves under Rule 21.01 (3) (a) of the Rules of Civil Procedure to strike the action on the basis that the Ontario Superior Court has no jurisdiction because the claim arose in Quebec. This rule provides:

To Defendant

(3) A defendant may move before a judge to have an action stayed or dismissed on the ground that,

Jurisdiction

(a) The court has no jurisdiction over the subject matter of the action.

[3] The contract in this case contains neither a choice of jurisdiction nor choice of law clause.

[4] As noted, DSL asserts a claim in both contract and in tort. I think it is quite clear that the contractual claim arises in Quebec. This is the only conclusion that can be reasonably drawn from a fact-specific analysis of the substance of the claim, see Rowe v. Canada (Attorney-General), (2004) 2004 18898 (ON CA), 186 O.A.C. 106 (C.A.). This was a major construction project to build a dam in Northern Quebec. DSL’s project manager was on site directing the work over the course of the project. Although DSL’s offices were situated in Stittsville, a suburb of Ottawa, the contract was administered out of the offices of PWGSC in Gatineau, Quebec.

[5] Paragraphs 9 and 10 of DSL’s Statement of Claim summarize the bases of its claims against PWGSC [emphasis added]:

9. During the course of the project, the defendant issued change orders that increased the scope of work to be performed. Although the contract price was increased to $18,430,838.00, the defendant failed or refused to fully and adequately compensate the plaintiff for all reasonable additional costs incurred and for the delays caused thereby.

10. The plaintiff states that the extended completion date for the project and the increase in the amount of work required to complete the project was caused by the defendant’s breach of contract, or, in the alternative, the defendant’s negligence. The plaintiff alleges, inter alia, that:

a) the soil and rock conditions on the site were substantially different from the conditions represented to the plaintiff in the defendant’s tender documents, which changed the nature and scope of the work to be performed;

b) the defendant ordered additional work to be performed but failed or refused to pay for all additional delay and other related costs; and

c) the defendant delayed making timely decisions and providing timely directions in dealing with questions raised by the plaintiff or conditions that arose during the course of construction.

[6] As can be seen in its Statement of Claim, DSL alleges that PWGSC issued change orders that increased the scope of work to be performed, but failed or refused to adequately compensate DSL for all reasonable additional costs incurred and for the delays caused thereby. DSL also alleges that the extended completion date for the project and the increase in the amount of work required to complete the project were caused by PWGSC’s breach of contract.

[7] I accept that the evidence filed on this motion establishes the correctness of the Crown’s submissions at paragraphs 48 to 52 of their factum.

ii) PWGSC’s “decisions and directions” were made in Quebec

48. The management of the Contract by PWGSC and the decisions related to the Contract, including decisions to order additional work, and decisions regarding payment, were made from the offices of PWGSC in Gatineau, Quebec or on site at the Laniel Dam in Laniel, Quebec.

49. In fact, the Contract specifically provides that the office of the “Engineer”, the official decision-maker for PWGSC under the terms of the Contract, was in Gatineau, Quebec “for the purposes of the Contract and for all purposes of or incidental to the Contract.” Therefore, any decision on the part of PWGSC was made in Gatineau, Quebec.

50. DSL states that it sent all requests for progress payments to either Mr. Laporte or Mr. Charlebois in Gatineau, and that it also sent requests for payment for additional costs to PWGSC in Gatineau on four occasions. These requests were considered and responded to by PWGSC from its offices in Gatineau.

51. DSL alleges breach of contract for PWGSC’s alleged failure or refusal to pay for all additional delays and other related costs, as well as delays in making timely decisions and providing timely directions in dealing with questions raised by DSL or conditions that arose during the course of construction.

52. PWGSC’s decisions regarding payment and work required pursuant to the Contract were made in Quebec. Thus, any alleged breach of the Contract by PWGSC can only be said to have occurred in Quebec.

[8] DSL relies on Conor Pacific Group Inc. v. Canada (Attorney General), 2011 BCCA 403, a case in which the court found that a claim arose in British Columbia. In Conor, the plaintiff brought a claim against the federal Crown, claiming that employees of the federal government made misrepresentations that induced it to purchase shares in a company. In finding that the claim arose in British Columbia, the court relied on the fact that the plaintiff’s management was located in Vancouver, the plaintiff’s business operated primarily in Vancouver, correspondence and relevant reports were delivered to the plaintiff’s office in Vancouver, and, while the evidence was somewhat vague as to what precise misrepresentations were received and when, at least some of the negotiations between the parties occurred in Vancouver.

[9] With respect to the claim for breach of contract, the decision in Conor is distinguishable. The claim in Conor was a claim for misrepresentation. Claims for misrepresentation arise when a misrepresentation is made to the plaintiff that the plaintiff relies on to his/her detriment. The plaintiff’s location when receiving and relying on the misrepresentation is central to the question of where the tort arises. In the present case, the claim for breach of contract arises out of the defendant’s decisions regarding payment and work required pursuant to the contract. These decisions were made in Quebec, and, as such, the claim arose in Quebec.

[10] On the other hand, DSL’s negligent misrepresentation claim is strongly connected with Ontario. DSL claims that its extra costs and damages were incurred primarily as a result of inaccurate representations about the conditions on site which were made in the tender documents put out in Ontario and relied on by DSL in preparing its bid in Ontario.

[11] The affidavit material filed by DSL relates that in order to bid on the project, the plaintiff required the tender form and the plans and specifications (“the plans”) for the dam. The plans were part of the tender and contract documents. The plans consisted of 73 different drawings and 601 pages of specifications which contained the entire design for the dam and the method by which the various parts of the dam were to be constructed. This was essential and critical information for contractors bidding on the project. Hard copies of the plans and of other contract documents were available for pickup at three locations; MERX’s office at 1165 Kenaston Road, in Ottawa, Ontario; the Ottawa Valley Bid Depository at 196 Bronson Ave. in Ottawa, Ontario; and the Association de la Construction du Quebec, in Gatineau, Quebec.

[12] DSL further relies on the fact that on August 23, 2010, the plaintiff picked up a copy of the plans and other contract documents from MERX in Ottawa, Ontario. Mr. Laflamme and his staff reviewed the plans from the plaintiff’s office in Carp, Ontario. The plans showed the depth and condition of the bedrock at the dam site as well as the type of soil overlying the bedrock. That information assisted the plaintiff in setting its bid price for the project because it helped the plaintiff determine how much excavation would be required on the project, the quantity and quality of shoring required and the amount of concrete and steel required. The plans also contained the specifications which showed how various elements of the project, including the cofferdams, were to be built.

[13] Counsel for DSL further points out that the tender form contained a unit price table which set out the defendant’s estimate of the quantities of certain types of labour and material required for the project. The quantities in the unit price table also helped the plaintiff determine its bid price for the project. The plaintiff consulted with its engineers, Patterson Group Inc. and Harmer Podolak Engineering, regarding the design and engineering requirements for the dam. Patterson Group and Harmer Podolak are both located in Ottawa, Ontario. From its office in Ontario, the plaintiff also obtained bids for various parts of the project from its subcontractors. Using the information contained in the Tender documents, and the recommendations from its Engineers and subcontractors, the plaintiff decided on the sequence for the work and the different materials, equipment and labour that would be required to construct the Dam and calculated its bid price for the Dam. This entire process occurred in Ontario. The plaintiff then submitted its bid.

[14] Based primarily on these facts, DSL argues that its negligent misrepresentation claim arose in Ontario. I agree with this submission.

[15] In summary, the evidence on this motion establishes that the claim for breach of contract arises in Quebec, but the claim for negligent misrepresentation arises in Ontario. Given the requirements of the CLPA, the latter finding would suffice to give subject-matter jurisdiction to the Ontario Superior Court.

Is it plain and obvious that DSL’s claim for negligent misrepresentation cannot succeed?

[16] However, the Crown raises what I consider to be the determinative issue on this motion which is whether it is plain and obvious that the parties have contracted out of the right which DSL would otherwise have to put forward a claim based on alleged negligent misrepresentation in the tender process. The Crown’s position is that the parties have indeed contracted out of DSL having any right to claim in tort. DSL denies this.

[17] The answer to this important question turns on a construction of the terms of the contract. The Crown’s argument as to the proper construction of the contract is brought under Rule 21.01 (1) (a). Accordingly, the court must be satisfied that it is plain and obvious that DSL contracted out of its right to assert a claim in negligence. Further, it is to be assumed that the facts alleged in the statement of claim are accepted as proven for the purposes of a motion under this sub-rule.

[18] As a preliminary issue, DSL argues that this application is premature. DSL relies on Montreal Trust Co. of Canada v. Toronto Dominion Bank, (1992) 40 C.P.C. (3d) 389 (Ont. C.J. (Gen. Div.)), as standing for the proposition that it is not appropriate to determine a question of law on a Rule 21.01 (1) (a) motion until a statement of defence has been filed. The policy basis for this general rule is that, generally, a question of law cannot be properly determined until a statement of defence has been filed to which the plaintiff has had the opportunity to reply. However, this general rule does not apply in situations where it is plain and obvious from a review of the statement of claim and the contract referred to therein, that no additional facts could be asserted that would alter the conclusion that the plaintiff has contracted out of the right to sue in tort, see Beardsley v. Ontario Provincial Police, (2001) 2001 8621 (ON CA), 57 O.R. (3d) 1 (C.A.) at para. 21.

[19] In arguing that DSL has contracted out of the right to sue in tort, the Crown relies on General Conditions 6 and 35, which are as follows:

6.1 No implied terms or obligations of any kind by or on behalf of Her Majesty shall arise from anything in the contract and the express covenants and agreements therein contained and made by Her Majesty are the only covenants and agreements upon which any rights against Her Majesty are to be founded.

6.2 The contract supersedes all communications, negotiations and agreements, either written or oral, relating to the work, that were made prior to the date of the contract.

GC 35 (01/10/94) Changes in Soil Conditions and Neglect or Delay by Her Majesty

35.1 Subject to GC 35.2 no payment, other than a payment that is expressly stipulated in the contract, shall be made by Her Majesty to the contractor for any extra expense or any loss or damage incurred or sustained by the contractor.

35.2 If the contractor incurs or sustains any extra expense or any loss or damage that is directly attributable to

35.2.1 a substantial difference between the information relating to soil conditions at the work site that is contained in the Plans and Specifications or other documents supplied to the contractor for use in preparing the contractor's tender or a reasonable assumption of fact based thereon made by the contractor, and the actual soil conditions encountered by the contractor at the work site during the performance of the contract, or

35.2.2 any neglect or delay that occurs after the date of the contract on the part of Her Majesty in providing any information or in doing any act that the contract either expressly requires Her Majesty to do or that would ordinarily be done by an owner in accordance with the usage of the trade,

the contractor shall, within ten (10) days of the date the actual soil conditions described in GC 35.2.1 were encountered or the neglect or delay described in GC 35.2.2 occurred, give the Engineer written notice of intention to claim for that extra expense or that loss or damage. […]

[20] The Crown argues that Clause 35 is a “complete code” for how DSL is to be compensated in such circumstances. This clause extinguishes DSL’s right to receive any payment, other than a payment expressly stipulated in the Contract, for any extra expense or any loss or damage incurred or sustained by the contractor – whether arising out of alleged unforeseen soil conditions, or due to any neglect or delay on the part of the Crown. As a result, the Crown argues, no concurrent right remains to seek compensation in tort for any of the claimed extra expenses, loss or damage incurred by the contractor. I am of the opinion that this submission is correct.

[21] This conclusion is strengthened by clause 6 of the General Conditions which confirms that the Contract contains no implied obligations on the part of the Crown. The express covenants and agreements contained in the Contract are the only covenants and agreements upon which any rights against the Crown are to be founded. In other words, the Contract represents the complete agreement between the parties: any rights of DSL against the Crown are limited to the express terms or obligations contained in the Contract. There is no concurrent liability in tort. DSL’s alternative claim in negligence must, therefore, be struck, pursuant to rule 21.01 (1) (a).

[22] In Central Trust Co. v. Rafuse, 1986 29 (SCC), [1986] 2 S.C.R. 147, the Supreme Court recognized the possibility of concurrent liability in contract and tort, subject to the following limitations (at para 51):

A concurrent or alternative liability in tort will not be admitted if its effect would be to permit the plaintiff to circumvent or escape a contractual exclusion or limitation of liability for the act or omission that would constitute the tort.

[23] In B.G. Checo International Ltd. V. British Columbia Hydro and Power Authority, 1993 145 (SCC), [1993] 1 S.C.R. 12, the leading case on the issue of concurrent liability, the Supreme Court reaffirmed the rule in Central Trust Co. v. Rafuse. The B.G. Checo case involved a call for tenders by the British Columbia Hydro and Power Authority to erect transmission towers and string transmission lines. One issue before the Court was whether a pre-contractual representation which becomes a contractual term can found liability in negligent misrepresentation. McLachlin, J., as she then was, writing for the majority, described the rule on concurrent liability as follows:

In our view, the general rule emerging from this Court’s decision in Central Trust Co. v. Rafuse is that where a given wrong prima facie supports an action in contract and in tort, a party may sue in either or both, except where the contract indicates that the parties intended to limit or negative the right to sue in tort. This limitation on the general rule of concurrency arises because it is always open to parties to limit or waive the duties which the common law would impose on them for negligence. This principle is of great importance in preserving a sphere of individual liberty and commercial flexibility.

(underlining added)

[24] The question is, then, whether the above quoted provisions of the contract make it plain and obvious that the parties have agreed to exclude DSL’s right to claim in tort. As noted previously, I am of the opinion that the parties have indeed impliedly agreed to exclude a claim based in tort. A plain reading of clause 35 shows that the parties contemplated DSL putting forward claims for delay and claims for differences in soil conditions from those contained in documentation supplied to the contractor for use in preparation of the contractor’s tender. These claims are not precluded; they are, in fact, anticipated and a contractual procedure is established for their adjudication.

[25] The essence of DSL’s claim in this action is that it has been under-compensated for its delay claims and in respect of its extra costs resulting from inaccurate information supplied by the Crown in the tender process. These claims are encompassed by GC 35 and are contractual. I find that GC 35 is in the nature of a limitation clause and is a complete code for how the contractor is to be compensated for extra expenses or loss or damage claims which fall within the clause. On a proper construction of the contract, concurrent claims in tort for delay and misrepresentation claims must be regarded as having been excluded.

[26] In the circumstances, in view of the court’s finding that DSL’s remaining claim is based on the contract between DSL and the Crown and the contractual claim arises in the Province of Quebec, the Ontario Superior Court is without jurisdiction to hear this action under s. 21 (1) of the CLPA. Accordingly the plaintiff DSL’s claim is struck.

[27] In view of this disposition it is unnecessary to deal with the Crown’s alternative argument that the action should be stayed on the basis that Ontario is a forum non conveniens. I would in any event exercise my discretion not to give effect to this argument. The Crown is not in a position to show that Quebec is a clearly more appropriate forum. The administration of this contract as well as the technical and engineering design work was carried out in the National Capital area, which encompasses Ottawa and Gatineau and there is little logistical difference if the trial were held in the Ontario Superior Court at the Ottawa courthouse or in the Quebec Superior Court in the Gatineau courthouse, which is a few kilometers away.

[28] While the Crown has been successful on this motion, in the exercise of my discretion, I would not award costs of the motion or the action. The terms of the contract were set by the Crown. The Crown could easily have included a choice of jurisdiction clause for the adjudication of disputes, which would have obviated the need for this expensive litigation.

Mr. Justice Charles T. Hackland

Released: March 7, 2014