COURT FILE NO.: 54393/13
DATE: 2012-01-24 2022-01-24
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Kim Stevens operating as Mostly Comics and 406765 Ontario Ltd. operating as Niagara Central Hobbies
Plaintiffs
– and –
Nexterra Substructures Incorporated and Nexterra Substructures Limited
Defendants
COUNSEL:
Neil Colville-Reeves for the plaintiffs
Kathleen A. Polczer for the defendants
HEARD: February 26, 28, March 6, 2020; January 17 – 21, 2022 at St Catharines
BEFORE: Mr Justice J.A. Ramsay
REASONS FOR JUDGMENT
[1] On June 6, 2011 at 7:30 pm an old water main running under St Paul Street in St Catharines ruptured, causing damage to two local businesses, Mostly Comics (owned by the plaintiff, Kim Stevens) and Niagara Central Hobbies (owned by the co-plaintiff, 406765 Ontario Ltd.). The businesses and their principals are suing for damages as a result of loss, for the most part to their stock in trade. The defendants are the two corporations operated by the contractors who were laying a new water main parallel to the old one at the time of the rupture. I shall refer to the defendants as Nexterra.
Mostly Comics damages
[2] The flooding damaged about 50,000 comic books stored in the basement of Mostly Comics in cardboard boxes. Each comic book was in a cellophane sleeve that also contained a cardboard backing sheet.
[3] The plaintiff, Kim Stevens, bought the business in AD 2000. The price he paid included the comic books that were already there. Some of those comic books were still there in 2011 at the time of the flood. Mr Stevens is very knowledgeable in the area of retailing comic books. He displayed the new arrivals at the front of the store. As they got older, unsold comics were moved to the back of the store. Eventually they would be stored in the basement. In addition, his business partner, to whom he was married at the time, regularly went to the basement to retrieve back issues for customers. Comic book collectors often buy a new comic and then decide that they would like previous issues. Mrs Stevens spent most of her days in the basement organizing and retrieving comic books. There was no inventory record system. The system seems to have been the comics themselves. I do not know how often someone bought something from the basement.
[4] Sorting and listing the damaged comics was a huge undertaking. It took a year to finish and cost just over $30,000, of which $24,000 was paid to casual employees hired for the purpose at minimum wage. Some of the comics were nothing more than a bag of mush. Some were wet and some had become mouldy because of the humidity in the basement, even if they had not been submerged. All were ruined.
[5] The plaintiff’s workers looked at every ruined comic book and recorded the title and the cover price. The total of the cover prices was about $188,000.
[6] The defendants say that the plaintiffs should not be compensated for these wages because it was unreasonable for the plaintiffs to have undertaken the exercise. Instead, they should have used Mrs Stevens’ expertise to sort through the boxes and pick out the few valuable comics. I do not accept this argument because the defendant’s own expert used the lists of titles and prices to make his own assessment of the value of the lost stock.
[7] The plaintiff also lost some toys, which, after they mitigated their loss to the extent possible, give rise to a claim of $9,216.
[8] Finally, a recovery service did $10,665.87 worth of work to restore the property to useable condition.
The value of the comic books
[9] The plaintiff called expert evidence from Brock Dickinson. Mr Dickinson works in economic development. He has a very distinguished background in that field. He is a university-trained economist, with an MA in political science and a diploma in economic development. He is also a comic book collector. His personal collection contains 30,000 volumes dating from 1910 to the present, amassed over 35 years. He is an adviser to the Overstreet Comic Book Price Guide, which is the recognized industry standard. He has a thorough understanding of the economics of comic books, including the factors that affect both supply and demand and the reasons a comic book may take on more value than another.
[10] According to Mr Dickinson, comic book pricing is not a science. Ultimately, like any other commodity, a comic book is worth what someone will pay for it.
[11] There are recognized approaches to pricing. The price guide sets a floor. Purchasers of large lots of comic books from the 1990’s, when they were printed in large numbers, can expect a significant discount. Purchasers who are looking for a specific issue expect to pay more than cover price.
[12] Cover prices can be said to represent a minimum formal valuation for comic books, and prices in priced guides use cover price as a minimum valuation. He concludes that cover price is a reasonable starting point for assessing the value of a large number of comic books. Some may be worth substantially more than cover price. Comic books can be bought for less than cover price, but specific comic books are unlikely to be bought for less than cover price. Comic book price guides seek to approximate market activity, but they are not formal price lists.
[13] Value of comic books is affected by such things as which issue it was, whether it had the standard cover or a rarer, variant cover and what condition it was in. The plaintiff’s workers did not record such information.
[14] Mr Dickinson pointed to some examples from the list of comics that could have been worth from $US3.00 to $US160 depending on when they were published, but the publishing date is unknown. He did identify one gem. “Incredible Hulk 60₵. Rocket Raccoon” has to be issue #271, the only one in which Rocket Raccoon appears. It is worth $US200 on Overstreet, $US150 on Comicspriceguide.com, $US211 on Mycomicshop.com and $US810 on Mile High Comics. It last sold on eBay for $229 including shipping.
[15] Mr Dickinson concluded that 5 to 10% of the damaged comic books would likely have traded for multiples of the cover price. A bulk purchase would not adequately replace the specific stock lost in the flood. Mr Dickinson valued the lost stock at $177,506, an average of $3.52 per issue.
[16] The defendants called Walter Durajlija, who owns several comic book stores in Hamilton and Niagara Falls. He has a B.A. in economics. He has been buying and selling comic books for 35 years. He, too, is an adviser to Overstreet.
[17] Comic book stores buy new comics from Diamond Comic Distributors at an average discount of about 50%. Diamond does not take returns, so retailers have to be careful not to overstock.
[18] Looking at the plaintiff’s inventory lists, Mr Durajlija concludes that most of the comics are random overstock, although there are a few key issues, such as Captain America #360 and Incredible Hulk #271. He estimated that such items would be less than 5% of the damaged items “based on my scanning of the lists.” He agrees that the lists do not permit an exact amount because they do not provide issue numbers and what condition they were in before they were damaged.
[19] He assumes that the lost items are essentially overstock, so there is no need to replace them piece by piece. The plaintiff would be served just as well with a bulk purchase of random issues from the same era. He would value the lost items at about $75,000, or on average about $1.50 per comic, assuming a loss of 50,000 items.
[20] The experts agree that the lost comic books were random overstock apart from either 5% or 5-10%. I do not think that cover price can be of much use in determining the value of old comic books in view of everything I have heard. There are too many variables, none of which are known because the plaintiff never took inventory before the accident, and the post-accident inventory was inadequate. Mr Durajlija’s estimate strikes me as generous. The plaintiff has not proven on the balance of probabilities that the lost inventory was worth more than the $75,000 estimated by the defence.
[21] Adding to that amount the other losses, I conclude that Mostly Comics’ damages are $125,000.
Niagara Central Hobbies damages
[22] The parties agree that Niagara Central’s damages are $88,850.50.
Causation
[23] The defendant’s expert engineer concedes that the construction “triggered” the failure of the water main. That much is obvious. After decades of being held together by the earth that surrounded it, it failed after a day of parallel trenching, perpendicular trenching, backfill with gravel and compaction with tamping machines. It failed just as tamping was being completed. That cannot be a coincidence. I have no doubt that the line would not have failed but for the defendant’s work.
Contractual liability
[24] The plaintiffs argue that the defendants are liable to them based on the contract between the Region and the defendants. It was a big contract between sophisticated parties. It was worth seven million dollars.
[25] The contract required Nexterra to protect property from damage and provided that Nexterra would be responsible for all losses and damage that may arise as the result of its operations under the contract, subject to certain exceptions which do not apply.
[26] Although they are not parties to it the plaintiffs claim the benefit of the contract under the limited exception to the doctrine of privity of contract that was created in London Drugs Ltd. v. Kuehne & Nagel International Ltd., 1992 CanLII 41 (SCC), [1992] 3 S.C.R. 299. According to the Supreme Court of Canada in Fraser River Pile & Dredge Ltd. v. Can-Dive Services Ltd., 1999 CanLII 654 (SCC), [1999] 3 S.C.R. 108, paragraph 32, two criteria must be met:
(a) Did the parties to the contract intend to extend the benefit in question to the third party seeking to rely on the contractual provision; and
(b) are the activities performed by the third party seeking to rely on the contractual provision the very activities contemplated as coming within the scope of the contract in general, or the provision in particular, again as determined by reference to the intentions of the parties?
[27] I do not think that the plaintiff can claim under the contract for two reasons. First, the Court of Appeal in Arora v. Whirlpool Canada LP, 2013 ONCA 657, paragraph 39, held that Fraser River recognizes an exception to the doctrine of privity of contract to protect a party from liability, not to permit a party to sue. I do not accept Mr Colville-Reeves’s argument that Arora can be seen as consistent with Strathy J.’s observation in Coast-to-Coast Industrial Development Co. v. 1657483 Ontario Inc., 2010 ONSC 2011, paragraph 44, that the principled exception to privity of contract is not restricted to defensive provisions. I think that Arora overruled the observation in Coast-to-Coast Industrial Development Co. and that I am bound to apply the decision in Arora.
[28] Second, and this is related to the first reason, I find it impossible to answer the second question in Fraser River in the affirmative. The plaintiffs were not performing activities in the scope of the contract.
Negligence
[29] It was reasonably foreseeable that negligence on the part of the defendants in installing water mains would result in damage to the neighbouring properties. There was a close enough relationship between the plaintiffs and the defendants to give rise to a duty on the defendants to exercise reasonable care.
[30] The defendants are not liable simply on the basis of causation. They are only liable if they acted negligently, that is, in a way that falls below the standard expected of a prudent contractor in the circumstances.
[31] The project was undertaken on the basis of a contract between the Regional Municipality and the defendants. AECOM were the Region’s consultant engineers. They designed the project, did the drawings and set out the specifics of what had to be done. Their inspector, John Pickett, was on site daily. Their engineer, John Sek, testified for the plaintiffs. The defendants chose the method of doing the work, but the contract specified what was to be done and AECOM said when it was to be done. AECOM had to approve the start of each phase of work.
[32] Anthony Vitaterna, the principal of the owner, testified that the defendant undertook the work on St Paul in accordance with the contract and industry standards. His credibility suffers from the fact that by 2014 when he was examined for discovery, he still did not know that the old main had been uncovered. That is, he did not know about the perpendicular cut. It also suffers from the fact that he has been unable to produce the construction schedule for that day. He claims that it was lost in a move. On the most charitable view, he is not well informed or responsible.
[33] AECOM, however, represented by John Sek, had no problem with what Nexterra did on June 6. That is not decisive, but it is worthy of some weight.
[34] On June 6, 2011 Nexterra’s crew dug a trench along St Paul Street parallel to the old water main. They installed new pipe into the trench. At the intersection of Court Street, they made a hard left turn and dug perpendicular to the old pipe and underneath it. For a time, then, part of the old pipe was no longer covered by earth or lying on top of it. It was hanging. The crew laid 12 inches of limestone gravel at the bottom of the pit and installed the new pipe on top of it. They filled up the pit with gravel in 12-inch layers, tamping as they went with tamping machines, or, where quarters were too close, hand shovels. Once the backfill had been done to the extent that it was flush with the road, they finished tamping with a backhoe and a tamping machine. They did it slower and therefore more gently than elsewhere. As they were tamping, the top of the pipe blew off underground at a point a few feet east of the perpendicular trench.
[35] A neighbour, Jeremy Gilligan, testified that at about 445 pm he saw a workman using a rod to knock dirt off the pipe that was in the ditch parallel to the street. Water started spurting forth, as from a firehose. He went to Thorold to take his daughter back to her mother at about 5 o’clock. When he returned there was water in the gutter. I do not think that Mr Gilligan can be right about seeing water coming out of a pipe under pressure at that point. The pipe failed underground in an explosive manner. I do not find Mr Gilligan’s evidence helpful.
[36] Beverly Ann Morley was present on June 6. She worked at Mostly Comics sometimes. At one point in the day she looked into the excavation and saw a water line. She joked with the workman that the water for their crappy coffee came from that line. She called Katherine De Simone over to look. Ms Desimone owned the variety store next door to the comic shop. Ms De Simone also looked into the trench and saw an old water line that was not in good shape. If she was right and this was the old main, she must have been looking into the perpendicular cut. Again, I do not think that the evidence of Ms Morley and Ms De Simone adds anything for my purposes.
[37] The plaintiff’s expert engineers are Jeremy Bishop, P.Eng., B.A.Sc. and Terrence Smith, who has similar qualifications. They testified between them that the defendants fell below the standard of a prudent contractor in the following ways:
a. They failed to investigate the nature and condition of the existing water main.
b. They failed to develop an emergency plan with the City and Region to ensure that in case of failure the mains could be shut off quickly.
c. They failed to take measures to mitigate the risk of failure of the existing water main by means such as
i. Shoring the trench;
ii. Using backfill such as U-fill instead of granular limestone; or
iii. Delaying compaction until the old main had been abandoned.
The nature of the existing main
[38] I think that the defendants knew the nature of the pipe and its potential fragility. It was marked “CIWM” (cast iron water main) on the drawings. Luciano Vitaterna admitted as much. Anthony Vitaterna, the principal of Nexterra, did not seriously take exception to that proposition, either. Luciano testified that at the point where they undermined the old cast iron city water main, they tamped more gently than usual after backfilling because of the condition of the old pipe. So he adverted to the risk of failure. The gentle compaction was the only step Nexterra took to mitigate the risk. Everything else was done as usual.
Failure to develop an emergency plan
[39] The accident happened at about 7:26 pm. The defendant’s crew told the City at 7:30. The City representative told the defendant to tell the Region as well. The water flow was reduced to 20% at 8:30 pm when the Region closed its valves. The flow reduced to 5% at 9:30 when the City closed its valves. The water stopped at 11:00 pm when the valves were re-tightened. In the mean time, the Region’s contract administrator told the defendants to put gravel on the sidewalks to protect the stores on the street from water damage. The defendants put gravel on the road, which successfully dammed the flow, and protected the properties to the east of the plaintiffs’ but did no good for the plaintiffs.
[40] When the rupture occurred Nexterra notified the City and the Region without delay. The delay in shutting off the water was caused by the time it takes to shut off mains of this size and the fact that the municipalities did not keep crews on stand by. The responsibility for the delay is the municipalities’, not the defendants’.
Shoring, alternate backfill and delaying compaction
[41] Mr Smith said that Nexterra should have shored the trench. That is, as they dug, they should have put up boards (wales) and two-by-fours (studs) to keep the walls of the trench from falling in. They did use trench boxes to protect the workers. Trench boxes do not prevent erosion to the same extent as studs and wales. Moreover, the photographs show that there was a certain degree of erosion in the trench.
[42] Mr Smith also said that Nexterra should have used a higher grade backfill, such as U-fill, instead of limestone gravel. U-fill goes in wet. It dries hard, like cement. It does not require compaction. It is not used routinely because it is expensive, and it is difficult to remove. It is used when there are nearby structures that need to be protected.
[43] Finally, the defendants could have delayed compaction until after the old main was abandoned. They had done this elsewhere on the project, on Ontario Street.
[44] The defendants’ expert engineer is Farhood Nowzartash, Ph.D. He has a doctorate in engineering. He knows all about pipes. He has an equation named after him. He confused causation and negligence. He seemed to think that there was a difference between “triggering” and “causing.” He did not agree that the defendants’ activity had so much effect on the old pipe. But he did agree that they should have used U-fill in the perpendicular trench.
[45] Dr Nowzartash thought that if a loss of confinement pressure from the surrounding earth contributed to the failure of the pipe, the failure would have been expected to be on the side of the pipe. That strikes me as speculative. Whatever the contribution of lateral loss of soil integrity, I do not see why the pipe could not fail at its weakest point, which may well have been on top where it was cracked, and it had thinned.
[46] Mr Smith, then, testified that Nexterra could have done a number of things to reduce the risk of pipe failure. I find that a prudent contractor would have used an alternate backfill in the perpendicular cut or, in the alternative, would have delayed compacting until after the old line had been abandoned.
[47] I arrived at this conclusion with respect to the alternate backfill because:
a. They knew that the pipe was particularly vulnerable here, where they had undermined it. That is why Luciano was compacting more carefully than usual. I infer that he knew that routine procedures were inadequate.
b. Mr Smith and Dr Nowzartash agree that U-fill should have been used here.
[48] I arrived at my conclusion with respect to delaying compaction because Nexterra had done this elsewhere in the project. Anthony Vitaterna testified that on Ontario Street they delayed compacting the backfill until after the old water main had been abandoned. The old main was four feet higher than the new main. In the event of a failure, the crew might not be able to evacuate the trench in time to avoid drowning. Instead of backfilling and tamping in layers they dumped the backfill in from the top and deferred compaction until after the old main had been abandoned. They did not take this step on St Paul Street because the two mains were at equal depth, so there was no danger to the workmen. I conclude that the defendants were aware of the risk of rupture, but they chose to manage it only when necessary for worker safety. They did not worry about causing property damage to the neighbours. As a result, they acted imprudently.
Conclusion
[49] I give judgment to Kim Stevens for $125,000 and to 406765 Ontario Ltd. for $88,850.50, in both cases with pre-judgment interest from June 7, 2011.
[50] The parties may make written submissions to costs not exceeding three pages in length, to which they may append a bill of costs and any offers to settle, the plaintiffs within 7 days and the defendants within 7 further days.
J.A. Ramsay J.
Released: 2022-01-24