2005 BCSC 36 Catalyst Management v. Walter Construction et al

Before: The Honourable Madam Justice Gray

Reasons for Judgment

Counsel for the Plaintiff:	T.G. Keast
Counsel for Walter & SCI Construction (Canada) Ltd.:	M.A. Skene, T.G. Evergreen
Counsel for Greater Vancouver Sewerage and Drainage District:	D.I. McBride
Counsel for the Fourth Parties:	L.N. Matheson
Date and Place of Hearing:	September 22, 2004
	Vancouver, B.C.

INTRODUCTION

[1] The plaintiff Catalyst has applied to make substantial amendments to its statement of claim, and with respect to some of those amendments, to add three engineering companies as defendants. The proposed new defendants are the engineering companies which are already third and fourth parties in this lawsuit. This lawsuit has been set for hearing for 90 days commencing on April 4, 2005, to be heard together with seven other lawsuits. All eight lawsuits relate to the construction of the Lulu Island waste water treatment plant. One of the lawsuits was dismissed by consent of the parties filed January 5, 2005, after the hearing of this application. I am the case management judge and the designated trial judge.

[2] The main issue in this application is whether it is perfectly clear that the proposed allegations do not disclose a reasonable cause of action in light of the law relating to recovery of pure economic loss.

FACTS

[3] At the relevant times, the project owner was the Greater Vancouver Sewerage and Drainage District which I refer to as the "District". The head contractor was Walter Construction (Canada) Ltd. which I refer to as "Walter". The concrete form work subcontractor was Catalyst Management Ltd., which I call "Catalyst". The engineers were Associated Engineering (B.C.) Ltd., Brown and Caldwell Consultants Canada Ltd. and Reid Crowther & Partners Ltd. I refer to them as "ABR".

[4] Catalyst proposes to add about ten pages to its existing statement of claim, so that it will be 23 pages long. The contentious proposed allegations are set out in Appendix 1 to these reasons for judgment.

[5] At present, Catalyst’s claim is set out in its further amended statement of claim filed April 23, 2002. In it, Catalyst claims judgment against Walter for the amount of three lien claims, and claims recovery from the property owned by the District or alternatively any applicable lien bond. Catalyst also claims against the holdback money retained by Walter and the District. In addition, Catalyst claims general and special damages for breach of contract.

[6] In the existing further amended statement of claim, Catalyst alleges that Walter wrongfully terminated its subcontract with Catalyst, failed to ensure that ABR and the District delivered accurate project drawings and specifications in a timely manner, and failed to adequately coordinate the work and the scheduling.

[7] Catalyst’s proposed new allegations imitate allegations made by Walter against the District and ABR in what the parties term the “Lulu Island Action”. That lawsuit is one of the seven other lawsuits which was set for hearing together with this lawsuit. It is the lawsuit which, subsequent to the hearing of this application, was dismissed by consent of the parties.

[8] The allegations which Catalyst seeks to imitate were made in Walter's statement of claim as amended pursuant to my order pronounced June 2, 2004. Neither the District nor ABR opposed those amendments. Walter’s new allegations are in paragraphs 26 through 43, and are essentially the same as Catalyst's proposed paragraphs 66 through 83 set out in Appendix 1.

[9] Catalyst’s proposed new allegations can be summarized as follows. In proposed paragraphs unnumbered (following number 66) through 69, Catalyst seeks to allege that Walter, the District, and ABR made negligent misrepresentations. Proposed paragraph 70 makes a further negligent misrepresentation allegation, and also alleges that Walter, ABR and the District negligently failed to ensure that the tender documents accurately reflected the nature of the project. Proposed paragraphs 71 and 72 claim breach of contract against Walter. Proposed paragraphs 73 through 77 allege negligence against Walter, ABR and the District. Proposed paragraphs 78 through 83 allege that Walter, ABR and the District breached alleged duties of fairness and good faith in connection with the construction contract.

POSITION OF THE PARTIES

[10] Catalyst's position is that the proposed amendments simply permit Catalyst to allege that it is entitled to the benefit of the same duties which Walter alleged were owed to it. Catalyst's argument was overly simplistic, because it overlooked the fact that Walter had a contractual relationship with the District. The argument also overlooked the fact that the court did not rule on whether Walter’s allegations against the District were valid in law because the amendments were not opposed.

[11] All defendants take the position that if the amendments are allowed, they should be at liberty to raise any defences they may have under the Limitation Act, R.S.B.C. 1996, c. 266. Catalyst is agreeable to that term. Walter takes no other position on the proposed amendments except to argue that an adjournment of the trial should not be necessary.

[12] Both the defendant District and the proposed defendants ABR oppose the proposed allegations against them on the basis that as a matter of law they do not give rise to a cause of action.

ANALYSIS

[13] In considering whether to refuse an amendment on the ground that it discloses no reasonable cause of action, the case must be “perfectly clear”. The court’s power should be exercised only where the case is “absolutely beyond doubt”. See Minnes v. Minnes and Rees-Davies (1962), 39 W.W.R. 112 (B.C.C.A.), MacNaughton v. Baker (1988), 25 B.C.L.R. (2d) 17 (C.A.), and Carley Estate v. Allied Signal Inc. (1997), 35 B.C.L.R. (3d) 54 (C.A.). As stated in Carley Estate at para. 8, "[i]f the point being raised is one where there is not perfect clarity about the view which would ultimately be taken by the Supreme Court of Canada then the amendment might properly be allowed even if the point was settled as far as the Supreme Court of British Columbia is concerned".

[14] Catalyst does not allege damage to person or property or threat of same, and so its proposed claims are for pure economic loss. The contentious allegations are in tort not contract. The law relating to recovery in tort for pure economic loss has been developing, and despite several recent Supreme Court of Canada decisions about it, there are still some unanswered questions.

[15] A useful summary of the law appears in the decision of Sigurdson J. in F. W. Hearns/Actes – A Joint Venture v. University of British Columbia, 2000 BCSC 1827, [2000] B.C.J. No. 2569 (QL). Paragraphs 18 through 33 are as follows:

[18] By way of introduction, the Supreme Court of Canada, in Martel Building Ltd. v. Canada, 2000 SCC 60, [2000] S.C.J. No. 60 (Q.L.), expressed the historical position this way:

...the common law traditionally did not allow recovery of economic loss where a plaintiff had suffered neither physical harm nor property damage. See Cattle v. Stockton Waterworks Co. (1875), L.R. 10 Q.B. 453. [at paragraph 36].

[19] However recovery for economic loss was allowed in limited circumstances where there was no physical harm or property damage. In Kamloops City v. Nielsen, [1984] 2 S.C.R. 2, the Supreme Court of Canada expressly approved the test from Anns [v. Merton London Borough Council, [1978] A.C. 728]. In that case at pp. 10-11, Wilson J. restated Lord Wilberforce's test in the following terms:

(1) is there a sufficiently close relationship between the parties (the [defendant] and the person who has suffered the damage) so that, in the reasonable contemplation of the [defendant], carelessness on its part might cause damage to that person? If so,

(2) are there any considerations which ought to negative or limit (a) the scope of the duty and (b) the class of persons to whom it is owed or (c) the damages to which a breach of it may give rise?

[20] In 1990 the House of Lords in Murphy v. Brentwood District Council, [1991] 1 A.C. 38, repudiated Anns. However, the Supreme Court of Canada has followed a different course and subsequently shaped the development of the law of economic loss in cases such as Canadian National Railway Co. v. Norsk Pacific Steamship Co., [1992] 1 S.C.R. 1021; Winnipeg Condominium, supra [[1995] 1 S.C.R. 85]; Hercules Management Ltd. v. Ernst & Young, [1997] 2 S.C.R 165; Bow Valley Husky (Bermuda) Ltd. v. Saint John Shipbuilding Ltd., [1997] 3 S.C.R. 1210; and, Martel, supra.

[21] In Norsk the Court split 3-1-3 with Stevenson J. accepting McLachlin J.'s conclusion, although he did not adopt her reasoning. In that case the plaintiff, the Canadian National Railway Company, suffered damage as a result of the closure of a railway bridge because of an accident caused by the defendants' negligence. The contract between the owner of the bridge and the railway provided for no indemnification in the event of bridge service disruption. Unable to claim under the contract, the railway instead brought an action in tort against the parties responsible for the accident.

[22] McLachlin J. (as she then was) accepted an incremental approach to a determination of the limits of recovery for pure economic loss. She stated at p. 1153:

But the categories are not closed. As more cases are decided, we can expect further definition on what factors give rise to liability for pure economic loss in particular categories of cases. In determining whether liability should be extended to a new situation, courts will have regard to the factors traditionally relevant to proximity such as the relationship between the parties, physical propinquity, assumed or imposed obligations and close causal connection. And they will insist on sufficient special factors to avoid the imposition of indeterminate and unreasonable liability. The result will be a principled, yet flexible, approach to tort liability for pure economic loss.

As far as the particular facts of the case were concerned, McLachlin J. found that the version of the Anns test from Kamloops was satisfied and that recovery was justified. She concluded that there was sufficient proximity to found a duty, and that valid purposes were served by allowing recovery.

[23] La Forest J.'s dissenting judgment adopted the category by category approach of Professor Feldthusen from his article, "Economic Loss in the Supreme Court of Canada: Yesterday and Tomorrow" (1990-1991) 17 Can. Bus. L.J. 356. These categories, each of which involve different policy considerations, are:

1. the independent liability of statutory public authorities;

2. negligent misrepresentation;

3. negligent performance of a service;

4. negligent supply of shoddy goods or structures;

5. relational economic loss.

In doing so, La Forest J. considered the claim in Norsk to be within the category of "contractual relational economic loss". Contractual relational economic loss arises where even though the plaintiff has suffered no physical damage to its property, its operations were so closely allied to those of the parties suffering physical damage that it can be considered a joint venture. Such a person is in the same position for practical purposes as if he or she owned the property that was physically damaged.

[24] The cases that follow indicate that the Supreme Court of Canada has adopted the category by category approach in this area of law.

[25] In Winnipeg Condominium the issue was whether a general contractor responsible for the negligent construction of a building could be held liable to a subsequent purchaser of that building for the cost of repairing defects when there was no contractual privity between the contractor and the subsequent owner.

[26] The judgment was delivered by La Forest J. He began his analysis with reference to the different categories in Professor Feldthusen's article and said:

I stressed in Norsk that the question of recoverability for economic loss must be approached with reference to the unique and distinct policy issues raised in each of these categories. That is because ultimately the issues concerning recovery for economic loss are concerned with determining the proper ambit of the law of tort, an exercise that must take account of the various situations where that question may arise. This case raises issues different from that in Norsk, which fell within the fifth category. The present case, which involves the alleged negligent construction of a building, falls partially within the fourth category, although subject to an important caveat. The negligently supplied structure in this case was not merely shoddy; it was dangerous. [at page 97]

On behalf of a unanimous Court, La Forest J. proceeded to allow recovery for economic loss in this case according to the test developed in Anns and Kamloops.

[27] Subsequent cases followed this trend. In D'Amato v. Badger, [1996] 2 S.C.R. 1071 at 1085, Major J. said:

However, at least one of the differences which existed between the approaches in Norsk has been resolved. It is apparent that this Court now recognizes distinct categories of pure economic loss.

[28] In Hercules, the question was whether auditors responsible for the preparation of a corporation's financial statements owed a duty of care to shareholders of the corporation who suffered losses in reliance on the audited statements.

[29] La Forest J. again delivered the judgment for the Court and affirmed the two-stage approach for actions involving claims for different types of economic loss, including negligent misrepresentation. Despite the fact that the Court found that the auditors owed a prima facie duty of care, that duty was negated by policy considerations relating to indeterminate liability.

[30] In Bow Valley, the issue was whether a company leasing an oil rig could recover from the manufacturer economic losses resulting from the shutdown of the rig for fire repair.

[31] The approach of the Court can best be summarized from the judgment of Iacobucci J. In that case he considered the proper approach to be taken to novel cases of contractual relational economic loss and referred to the judgment of McLachlin J. (as she then was):

I understand my colleague's discussion of this matter to mean that she has adopted the general exclusionary rule and categorical exceptions approach set forth by La Forest J. in Norsk. My colleague has found that the circumstances of the present case do not fall within any of the three exceptions identified in that case. She points out that both her reasons and those of La Forest J. in Norsk recognize that the categories of recoverable contractual relational economic loss are not closed and that whether or not a new category ought to be created is determined on a case-by-case basis. In that connection, I approve of her analysis of the facts of this case and applaud the approach she has taken to meld her reasoning in Norsk with that of La Forest J. in this very difficult area of law. [at page 1272]

[32] Finally, the Supreme Court of Canada has recently pronounced the correct approach to be taken in deciding novel cases of pure economic loss that fall outside the recognized categories. In Martel, supra, the issue was whether the economic loss of an opportunity to negotiate a lease renewal arising out of the conduct of pre-contractual negotiations should be recoverable. Iacobucci and Major JJ., for the Court, stated at para. 47:

The Anns approach is equally applicable when, as in this appeal, the claim alleges a duty of care in an area not previously categorized.

Despite applying the Anns analysis to find proximity between the parties sufficient to found a prima facie duty of care, the Court concluded that there were sufficient policy considerations to negative the duty in this case.

[33] To summarize, the significance of the test in Anns is in considering whether to establish new categories or to expand or refine the existing categories in which there may be recovery. This is the appropriate approach to be taken in all novel cases of economic loss, whether they fall within an existing category or not. If a particular case does not fall within a recognized category, recovery in tort may still be awarded if the two-step test can be fulfilled.

(a) Proposed Allegations of Negligent Misrepresentation and Negligent Performance of a Service

[16] Some of the proposed amendments make allegations which fall within the recognized categories where there can be recovery for pure economic loss. Proposed paragraphs unnumbered (following 66) through 69 allege negligent misrepresentation.

[17] All of the proposed claims against ABR, including paragraph 75, are for negligent performance of a service. It cannot be said that those allegations are clearly invalid at law, so Catalyst should be at liberty to make them. The ABR companies are already third and fourth parties and the issues are connected. It is just and convenient that ABR be added as defendants pursuant to Rule 15(5)(a).

(b) Proposed Alleged Breach of Duty in Tendering Process

[18] Proposed paragraph 70 alleges that the District breached an alleged duty to Catalyst in respect of the tendering process.

[19] In Martel Building Ltd. v. Canada, [2000] 2 S.C.R. 860, the Supreme Court of Canada dismissed claims for pure economic loss brought by a landlord which lost a tender bid for providing leasehold premises. The court expressly left open a number of questions relating to claims for pure economic loss.

[20] At paragraph 105, Iacobucci and Major JJ. stated, for the court, that “recognizing a duty of care in the tendering process would represent an extension of the categories under which recovery for pure economic loss has been granted.” Later in the decision, they wrote as follows:

108. Finally, we note that Desjardins J.A. relied on two cases to support the view that a duty to treat all bidders fairly and equally has been recognized in the context of tort claims. However, we note that both cases have subsequently been reversed by appellate courts: Twin City Mechanical v. Bradsil (1967) Ltd. (1996), 31 C.L.R. (2d) 210 (Ont. Ct. (Gen. Div.)), rev'd (1999), 32 C.L.R. (2d) 274 (Ont. C.A.); Ken Toby Ltd. v. British Columbia Buildings Corp. (1997), 34 B.C.L.R. (3d) 263 (S.C.), rev'd (1999), 62 B.C.L.R. (3d) (308) (C.A.). In addition, reliance in tort was necessary because [page 905] both cases involved situations where a subcontractor sought redress against the tender calling authority who had received bids from the general contractor. Since there was no privity of contract between the subcontractor and the owner, liability could only be founded in tort. In both cases, the appellate courts refrained from deciding whether or not a duty of care was owed in such situations, and preferred to limit their decisions to the fact that a breach could not be established. We believe that the issue of whether a duty of care can arise between a subcontractor and an owner must be left to a case in which it arises.

...

113. In any event, we conclude that the Department did not owe Martel a duty of care in drafting the tender specifications. Martel's claim that the tender specifications were prepared negligently alleges a duty in an area not previously recognized. To determine whether the sphere of recovery for pure economic loss should be extended to cover the circumstances surrounding the preparation of the tender specifications in this case, the Anns two-step analysis must be applied.

114. Assuming without deciding that sufficient proximity existed between the parties, any prima facie duty of care would be negated by policy considerations. Indeed, considerations unique to the tendering process nullify any duty of care sought by Martel. First and foremost, we agree with the Department that it would call into question the integrity of the tender process if, by reason of a past relationship with, or special knowledge of, a potential bidder, there could be an enforceable obligation to take the interest of that particular bidder into account. While Martel argues that a duty of care would not entail taking into account the interests of a particular bidder, we note that all of its arguments relate to factors that a specific to its previous relationship with the Department.

[21] The Supreme Court of Canada has expressly left open the question of whether a duty of care can arise between a subcontractor and an owner in the tendering process, as set out in para. 108. As a result, it cannot be said that there is perfect clarity about the view which would ultimately be taken by the Supreme Court of Canada, and Catalyst must be permitted to make the allegations in its proposed paragraph 70 against the District as well.

(c) Proposed Alleged Breach of Contract

[22] No issue was taken regarding proposed paragraphs 71 and 72. Catalyst has liberty to make those allegations.

(d) Proposed Alleged Failure to Warn and to Ensure Competence

[23] Proposed paragraphs 73 and 74 allege breach of an alleged duty to warn, and proposed paragraph 76 alleges that the District owed a duty to Catalyst to ensure that the engineers were competent.

[24] In F. W. Hearns/Actes – A Joint Venture, supra, Sigurdson J. wrote that the question of whether there is a cause of action for damages for delay based on a duty of care between non-contracting parties, i.e. an owner and a subcontractor, on a construction project was a novel claim for pure economic loss. He considered the Anns test and concluded that it was not the type of situation in which a new category of recoverable pure economic loss should be created, or one of the categories expanded.

[25] Catalyst’s proposed allegations differ from those considered by Sigurdson J. in two respects. First, they are allegations by a subcontractor against an owner, rather than the opposite. Second, they do not simply allege delay, but rather allege specific acts of negligence which allegedly expanded the required work as well as causing delay.

[26] The first question in the Anns test is whether there is a sufficiently close relationship between Catalyst and the District so that, in the reasonable contemplation of the District, carelessness on its part might cause damage to Catalyst. In F. W. Hearns/Actes – A Joint Venture, Sigurdson J. held that it was not plain and obvious that it was not in the reasonable contemplation of a subcontractor that carelessness might cause damage to an owner.

[27] In the case at bar, it similarly is not absolutely beyond doubt that the relationship is not sufficiently close that carelessness by the District might cause damage to Catalyst.

[28] Sigurdson J. held that it was plain and obvious that policy concerns under the second branch of the Anns test would dictate that a subcontractor which has not entered into a contract with the owner would not owe a duty to the owner. He referred at para. 52 to the spectre, “in the words of Cardozo C.J. in Ultramares Corp. v. Touche, 174 N.E. 441 at 444 (1931) (N.Y.C.A.), of ‘liability in an indeterminate amount for an indeterminate time to an indeterminate class’." He wrote that if subcontractors owe a duty to the Owner to avoid delay, there is nothing in principle preventing such a duty to any affected user of the project. Potential occupiers, other contractors and anyone else affected by the delay could presumably seek to recover resulting pure economic losses from the subcontractors.

[29] Catalyst’s proposed amendments raise similar concerns, but to a lesser extent. If the District is liable to a subcontractor for pure economic loss in connection with the construction project, it could be liable to every subcontractor, sub-subcontractor, trade and material supplier. The class is potentially large, but not as large as it would be if it included occupiers and users of the project.

[30] Sigurdson J. referred to other policy concerns. He referred at para. 53 to the fact that on a construction project:

an owner is in the best position to organize its affairs prior to commencement of construction in order to protect itself from delay. It could, for example, require that the subcontractor contract directly with the owner. It could also require that bonding for this type of loss from delay be put in place. That I think is a further policy consideration that dictates against the imposition of a duty of care.

[31] This policy consideration dictating against the imposition of a duty of care is weaker with respect to a claim by a subcontractor against an owner than in the case of an owner against a subcontractor. Theoretically, a subcontractor might seek a contract directly with an owner, or some sort of bond. However, the bargaining position of a subcontractor would be far weaker. That weaker position is improved by the statutory right to claim liens and to claim against a holdback.

[32] It is not absolutely beyond doubt that the Supreme Court of Canada would ultimately take the view that a subcontractor cannot claim against an owner for pure economic loss as alleged in proposed paragraphs 73, 74 and 76. Catalyst is therefore entitled to make the allegations.

(e) Proposed Alleged Breach of Duty of Good Faith and Co-Operation

[33] Proposed paragraphs 77 - 83 allege breach of an alleged duty of good faith. All the particulars provided allege that the District failed to properly administer its construction contract with Walter.

[34] At paragraph 72 of Martel, Iacobucci and Major JJ. stated, for the court, that “as a general proposition, no duty of care arises in conducting negotiations. While there may well be a set of circumstances in which a duty of care may be found, it has not yet arisen.” At paragraph 73, they wrote that:

A duty to bargain in good faith has not been recognized to date in Canadian law. These reasons are restricted to whether or not the tort of negligence should be extended to include negotiation. Whether or not negotiations are to be governed by a duty of good faith is a question for another time.

[35] It is not absolutely beyond doubt that the Supreme Court of Canada would ultimately take the view that an owner does not have a duty to act in good faith in the administration of a contract. Catalyst is entitled to make these allegations.

SUMMARY

[36] Catalyst is granted leave to amend its statement of claim as proposed. The defendants have liberty to allege any defences under the Limitation Act.

[37] Catalyst has liberty to add ABR as defendants for the purposes of the approved amended pleadings.

[38] Catalyst is entitled to its costs of this application against the District and ABR at Scale 3, in the cause. There is no order as to costs regarding Walter.

“V. Gray, J.”
The Honourable Madam Justice V. Gray

APPENDIX 1

CONTENTIOUS PROPOSED ALLEGATIONS

Misrepresentation regarding Contract Documents

[Unnumbered paragraph following paragraph 66]:

At various times and dates, WSCI and ABR, the latter independently and as agent for GVS, and GVS represented to Catalyst that:

(a) the Contract Documents were complete, coordinated and correct;

(b) the Project could be constructed on the basis of the original Contract Documents, without corrections or clarifications that would impede the implementation of Catalyst's plan or causing it to suffer costs and losses;

(c) sufficient engineering had been done or would be done in order that the Project would be built without impeding the implementation of Catalyst's plan or causing it to suffer costs and losses;

(d) the improvement described in the Contract Documents Contract were constructable; and

(e) in the event that the designs or engineering were incomplete, uncoordinated or incorrect, appropriate Change Orders would be issued to compensate Catalyst fully in time and money.

[67] These representations were made negligently and were false. Catalyst relied on these representations to its detriment. Catalyst claims damages jointly and severally against WSCI, ABR and GVS for these misrepresentations.

Misrepresentation by Omission

[68] In addition, WSCI, GVS and ABR committed misrepresentations by omission by failing to advise Catalyst of the inadequacy of the Contract Documents when each of them knew, or ought to have known, that:

(a) the Contract Documents were incomplete, uncoordinated and error-filled;

(b) the Project could not be constructed on the basis of the original Contract Documents, without corrections or clarifications that would impede the implementation of Catalyst's plan or cause it to suffer costs and losses;

(c) sufficient engineering had not been done and would not be done in order that the Project could be built without impeding the implementation of Catalyst's plan or causing it to suffer costs and losses;

(d) the Contract Documents were not constructable;

(e) the Project was proceeding on the basis of a "Deferred Design."

[69] These representations were made negligently and were false. Catalyst relied on these representations by omission to its detriment. Catalyst claims damages jointly and severally against WSCI, ABR and GVS for these misrepresentations.

Duty regarding Tender Documents

[70] Further and alternatively, WSCI, ABR and GVS had an implied duty to ensure that the Tender Documents accurately reflected the nature and extent of the Work. WSCI, ABR and GVS, and each of them, were negligent in failing to ensure that the nature and extent of the Work were accurately described in the Tender Documents and it was a negligent misrepresentation that the nature and extent of the Work were accurately described in the Tender documents. The Tender Documents did not accurately reflect the nature and extent of the Work. Catalyst relied on the information regarding the nature and extent of the Work to its detriment when determining its bid for its portion of the Project. The actual Work required to be performed by Catalyst was substantially different than what was or could reasonably have been expected at the time of tender, and Catalyst has suffered losses, costs and expenses as a result.

Breach of Contract: Control of the Work

[71] Further and alternatively, express or implied terms of the Subcontract were that:

(a) Catalyst would complete the Work in accordance with a schedule provided by Catalyst to WSCI; and

(b) Catalyst shall determine the means, methods, techniques, sequences and procedures of construction for the completion of the Work.

[72] Catalyst was induced into entering the Subcontract based on the representations that it would be entitled to control the Work and its own schedule and would be allowed to perform the Work at such times, and in such manner, as was most conducive to economy of construction. In breach of the Subcontract, and despite the representations, WSCI repeatedly interfered with Catalyst's right to control the Work. As a result of the actions of WSCI, the Catalyst bid price for the Work did not reflect the cost of not being able to work in a manner that was conducive to the economy of construction and consequently damages resulted from this breach and misrepresentation.

Breach of Duty to Warn

[73] At all material times, WSCI, ABR and GVS, and each of them, knew or ought to have know that:

(a) the Contract Documents were incomplete, uncoordinated and incorrect;

(b) the Work could not be performed on the basis of the original Contract Documents, without corrections or clarifications that would impede the implementation of Catalyst's plan or cause it to suffer costs and losses;

(c) the information contained in the Tender Documents did not reflect with reasonable accuracy the Work that needed to be undertaken;

(d) sufficient engineering had not been done and would not be done in order that the Work could be performed without impeding the implementation of Catalyst's plan or causing it to suffer costs and losses;

(e) the improvement described in the Contract Documents were not constructable; and

(f) the Project was proceeding on the basis of a "Deferred Design".

(the "Incomplete State of Design").

[74] WSCI, ABR and GVS, and each of then, owed Catalyst a duty to warn of the Incomplete State of Design. In breach of these duties, WSCI, ABR and GVS, and each of them, failed to warn Catalyst of the Incomplete State of Design, in a timely way, or at all. These breaches of duty caused Catalyst to suffer losses, costs and expenses.

Negligence

[75] In preparing the design of the Project, and in providing the project management, construction management, contract administration, operations commissioning and consulting engineering services for the Project, ABR owed to Catalyst a duty of care to perform such services at the standard required of professional engineers of the day for projects of a like nature. ABR breached this duty to Catalyst by performing the services in a manner that did not meet the required standard, particulars of which are set out in paragraph 73 above. ABR also breached its duty to Catalyst by failing to produce Contract Documents sufficiently complete, coordinated and free from errors to perform the Work. Catalyst claims damages against ABR for these breaches of duty.

[76] In engaging WSCI to construct the Project in full knowledge that WSCI would employ sub-trades such as Catalyst for the performance of the Work, and in retaining ABR, GVS owed to Catalyst a duty of care to ensure that the Project engineers were competent and that the Project, including the Work, could be built in accordance with the Contract Documents. GVS breached these duties to Catalyst by engaging and maintaining the services of ABR, and by providing the incomplete, uncoordinated, error-filled Contract Documents, particulars of which are set out above. Catalyst claims against GVS for damages resulting from these breaches of duty.

Breaches of Duties of Fairness and Good Faith

[77] At all material times, WSCI owed Catalyst a duty to administer the Subcontract competently, fairly and in good faith, and in particular owed a duty to Catalyst to issue and pay for appropriate Change Orders to compensate Catalyst fully in time and money in the event that the designs or engineering were incomplete, uncoordinated or incorrect. In breach of these duties, WSCI failed to administer the Subcontract competently, fairly and in good faith, and failed to issue and pay for appropriate change Orders in a timely way, or not at all. These breaches of duty caused Catalyst to suffer losses, costs and expenses.

[78] At all material times, ABR owed to Catalyst duties of fairness and good faith in performing its project management, construction management, contract administration, operations commissioning and consulting engineering services for the Project. ABR performed its services in a manner that breached these duties, causing Catalyst to suffer losses, costs and expenses.

[79] At all material times, GVS owed to Catalyst duties of fairness and good faith in addition to the other tort duties particularized elsewhere in this Second Further Amended Statement of Claim. GVS breached these duties, causing Catalyst to suffer losses, costs and expenses.

[80] Particulars of GVS and ABR's failures to administer the Prime Contract completely, fairly or in good faith and of their breaches of duties of fairness and good faith include:

Bias

(a) prior to the time that the Prime Contract was awarded to WSCI, the primary representative of GVS had unjustly formed a view that WSCI was litigious, was likely to advance unmeritorious claims, lacked veracity and that in any disputes that may arise, ABR's position was to be preferred to that of WSCI;

(b) the primary representative of GVS viewed his principal duty to be to save money, rather than to deal fairly with WSCI;

(c) the primary representative of GVS worried about being terminated by his employer for an unsuccessful project result, rather than deal with WSCI;

Design Orders

(d) GVS demanded, and ABR acceded to, reductions of ABR design and construction-management budgets at times when they knew or ought to have known that these reductions would cause additional losses, costs and expenses to Catalyst;

Change Orders

(e) GVS exhorted ABR to maintain approved Change Orders on the project below the arbitrary level of 3% of construction costs, regardless of the merits of any claims;

(f) ABR had an undisclosed economic interest in maintaining approve Change Orders on the project below the arbitrary level of 3% of construction costs;

(g) ABR had an undisclosed economic interest in recommending against Change Orders caused by ABR errors or omissions, since GVS had advised that it would seek compensation from ABR for such changes, particularly if they came to total a significant amount;

(h) ABR had an undisclosed economic interest in recommending against Change Orders for all major claims, since its fees for Basic Services excluded administration of such claims;

(i) for the Project, GVS instituted a "Proposed Change Notification" process whereby ABR was required to advise of the causation of all changes and to identify its own errors and omissions as causative, if that was the case. GVS admits that it knew that this process created a conflict of interest for ABR in considering changes to the work;

Review of WSCI's Claim

(j) ABR's review of the WSCI claim was explicitly conducted under the overall direction of Don Littleford of GVS;

(k) the primary ABR claim review, Shaun Beaton, was predisposed to recommend forestalling WSCI's claim, refusing binding arbitration and sweating them out by requiring them to decide if it is worth actually paying lawyers in an effort to recover;

(l) prior to reviewing WSCI's claim, ABR and GVS met and agreed that it was important that GVS and ABR were absolutely together on defending WSCI's claim;

(m) the financial basis upon which ABR reviewed WSCI's claim was that ABR would not be paid if ABR found that WSCI's claims were valid;

(n) GVS knew that ABR had a conflict of interest in reviewing WSCI's claim, but retained ABR nevertheless;

No Independent Monitoring or Review

(o) GVS recognized that there was a potential conflict of interest in ABR acting as both the Project designer and Construction Manager but, unlike the Annacis Project, GVS failed to employ a third party to monitor ABR's processing or Requests for Information and Submittals;

(p) GVS rejected an early proposal to have an independent schedule analysis performed to determine the merit of WSCI's claims:

(q) GVS was sceptical of ABR's analysis of its own errors and omissions on the Annacis Project, but entirely relied on ABR's analysis of its own errors and omissions on the Project to deny entirely WSCI's claim;

Causation

(r) notwithstanding admissions by GVS that ABR missed any number of elevations, conflicts and other information in the design, and that ABR errors and omissions caused a significant number of RFI's and Change Orders, GVS has refused to compensate WSCI any amount on the sole basis that WSCI has not demonstrated, to GVS's satisfaction, the quantum costs that these errors and omissions caused;

(s) GVS and ABR required that WSCI demonstrate its entitlement using a schedule analysis, but have admitted that productivity losses cannot be demonstrated using a schedule analysis;

Arbitrary Acceleration

(t) notwithstanding GVS's view that the milestone dates were unimportant to it, a request by WSCI for a three month extension in the milestone dates was refused for the sole reason that ABR felt that a line should be drawn in the sand, in the knowledge that this would likely cause loss, cost and damage to Catalyst;

Spoliation

(u) GVS intentionally did not file or preserve project documents in which GVS recorded comments highly critical of ABR's performance.

[81] At all material times, WSCI, ABR and GVS, and each of them, owed to Catalyst:

(a) where Catalyst's performance of the Subcontract required co-operation from WSCI, ABR or GVS or any of them, duties to provide such cooperation in a timely way;

(b) duties not to interfere with Catalyst's performance of the Subcontract; and

(c) duties to conduct themselves on the Project in the spirit of partnering, including working towards equitable and fair profits, resolving conflicts fairly and with mutual respect, performing expeditious submittal review, prioritizing critical submittals, conducting an early review of the drawings to avoid extra work, planning for and anticipating problems, accepting responsibility and maintaining timely, honest, open, complete, and accurate communication.

[82] In breach of these duties WSCI, ABR and GVS, and each of them:

(a) where Catalyst's performance of the Subcontract required co-operation from ABR or GVS or both of them, failed to provide such co-operation in a timely way or at all;

(b) interfered with Catalyst's performance of the Subcontract; and

(c) failed to conduct themselves on the Project in the spirit of partnering, including working towards equitable and fair profits, resolving conflicts fairly and with mutual respect, performing expeditious submittal review, prioritizing critical submittals, conducting an early review of the drawings to avoid extra work, planning for and anticipating problems, accepting responsibility and maintaining timely, honest, open, complete, and accurate communication.

[83] These breaches of duty caused Catalyst to suffer losses, costs and expenses.

Wherefore the plaintiff claims: ...

[D. Other...]

[(d) for general damages] against the following:

(i) WSCI for breach of contract and negligence;

(ii) WSCI, ABR and GVS for negligent misrepresentation, breach of duty regarding the Tender Documents, breach of duty to warn and breach of duty of fairness and good faith;

(iii) against ABR for negligence in the performance of their professional responsibilities; and

(iv) against GVS for negligence regarding project engineers.

[(e) for special damages] against WSCI. ...

Citation:	*Catalyst Management v. Walter Construction et al.,*
	2005 BCSC 36