Yorkton Group International Ltd. v. A. D. Williams Engineering Inc., 2012 ABQB 478

Court of Queen ’ s Bench of Alberta Citation: Yorkton Group International Ltd. v. A. D. Williams Engineering Inc., 2012 ABQB 478 Date: 20120724 Docket: 0703 03876 Registry: Edmonton Between: Yorkton Group International Ltd. and 1168867 Alberta Ltd. Plaintiff - and - A. D. Williams Engineering Inc. Defendant _______________________________________________________ Memorandum of Decision of W.S. Schlosser, Master in Chambers _______________________________________________________ [ 1 ] This is a Defendant ’ s

summary dismissal application in an interesting area of the law. [ 2 ] The Defendant engineers prepared a report that was relied upon to purchase an apartment tower. 1168867 Alberta Ltd. says that the report was defective and that it has suffered economic loss as a result. [ 3 ] The Defendant argues that 1168867 Alberta Ltd. was not a “ representee ” in the sense that that term is used in the law of

negligent misrepresentation. On this basis, it argues that the numbered company has no cause of action and that its lawsuit against the engineers should be summarily dismissed. [ 4 ] The facts are relatively straightforward. Mr. Lui (not a party) was considering the purchase of Park House Towers, a nine story apartment building on Stony Plain Road. Yorkton Group International Ltd. was to be the property manager if the deal went through. [ 5 ] Mr. Lui, on behalf of Yorkton, initiated a request for a building inspection by (then) A.D. Williams Engineering Inc. Correspondence passed between A.D.

Williams and Yorkton on the letterhead of those two companies. Mr. Lui signed for Yorkton. The letter of request identified him as the President. [ 6 ] The first letter apparently followed up a telephone conversation. Mr. Lui indicated that he needed the inspection to “ do due diligence for ... acquisition purposes ” . [ 7 ] Yorkton retained A.D. Williams to do the inspection. The terms of engagement included a limitation of liability purporting to limit A.D. William ’ s liability to the amount of compensation paid for the report; which in this case was $6,955.00.

The contract provided: The total amount of all claims the client may have against the consultant under this engagement, including but not limited to claims for negligence, negligent misrepresentation and breach of contract , shall be strictly limited to the amount of the compensation. (emphasis added) [ 8 ] There is a live issue about whether Mr. Lui read and returned the terms of engagement. He first said (at examinations) that he had done so - at least this is implicit from his evidence - but he raised doubts about this later, in his Affidavit for this application.

Thus there may be a credibility issue, given that Mr. Lui appears to have resiled from his examination evidence. This issue also has wider repercussions in the context of this application. [ 9 ] The report was prepared April 14, 2005. Mr. Lui relied on it and decided to go ahead with the purchase. He then obtained a shelf company and used it (the numbered company) to buy the apartment tower. The numbered company is the party that the Defendant wants out. The numbered company was not owned or controlled by Mr. Lui when he received the report.

It wasn ’ t his until some months later. [ 10 ] Thus the Defendant wants to remove the numbered company from the lawsuit or, alternately, to have the Court declare that its claim is limited to $6,955.00. [ 11 ] If the numbered Company is a remote representee that did not exist in the relevant sense when the alleged misrepresentations were made, the question becomes whether the numbered company is among the class of representees that should have a cause of action. A.D. Williams tried to limit its liability with a disclaimer. It gave no express permission for this Plaintiff to use or rely upon the report.

It says that even if there is a prima facie duty, policy considerations should eliminate it. [ 12 ] The two main characteristics of the law of negligent misrepresentation are judicial eloquence, and circumspection where liability is concerned.

It is necessary to be circumspect in determining liability because the combination of words and economic loss raises the spectre of ‘ open floodgates ’ so quotably described by Cardozo, C.J. some thirty years before Hedley Byrne in the Ultramares case ((1931) 255 NY 170 at 179). [ 13 ] Thus, the dominant themes of this tort have been appropriate limits and suitable control mechanisms. But now, some fifty years after Hedley Byrne , it is not easy to say where the limits will be drawn in a particular case, especially, if the case is on the borderline.

[14] In Caparo Plc v. Dickman [1992] AC 605 at 633, Lord Oliver said: ... although the cases in which the courts have imposed or withheld liability are capable of an approximate categorization, one looks invain for some common denominator by which the existence of the essential relationship can be tested. [15] Lord Oliver was speaking there of proximity.

Out of all of this, the one thing that is clear is that the courts are using theelements of the tort in a pragmatic way to make sure that liability flows in determinate amounts, for a determinate time, to a determinateclass. [16] Whether someone is a “representee” is a matter of fact. Whether someone is among a class of representees to whom aDefendant will be liable is a more complex issue of fact and law and is subject to the judicial control mechanisms that have developedover the past fifty years. [17] Judicial cautiousness may be the Defendant’s friend at trial but for the purposes of a

summary dismissal application, fuzzyboundaries and pragmatic fact-based applications of principle puts this type of case more into the Tottrup category (Tottrup v. Clearwater Municipal District (99), (2007) 2006 ABCA 380 , 68 Alta. L.R. (4th) 237 at 242, para. 11). In this type of case legalissues are closely intertwined with the facts, and a trial on a full factual record is required before the issue can be decided fairly. [18] The legal burden is on A. D. Williams to demonstrate that it is ‘plain and obvious’ or ‘beyond doubt’ that the numberedcompany’s case has no merit.

Once it has discharged its evidentiary burden, the onus shifts to the numbered company to show that it hasan “arguable case”. In this case there is no doubt that Mr. Lui is a representee but whether this gives his apparent alter ego, the numberedcompany, a cause of action, is mixed up with the law. In my view, given the centrality of Mr. Lui to both Yorkton and the numberedcompany and given that Mr. Lui actually received the report this/Plaintiff has satisfied the burden of demonstrating that it has anarguable case.

Whether there will be liability at the end of the day will depend on a fuller set of facts than now before the court. [19] I am mindful that our Court of Appeal recently dismissed a similar application, though on somewhat more complex facts, inCondominium Corp. No. 0321365 v. 970365 Alberta Ltd., 1023 ABCA 26. The unruly horse of policy should be left to a trial judge. [20] The credibility issue (at least) stands in the way of a

summary application of the contractual limitation of liability. [21] The Defendant’s application is dismissed. Heard on the 18th day of June, 2012. Dated at the City of Edmonton, Alberta this 24th day of July, 2012. W.S. Schlosser M.C.C.Q.B.A.

Appearances: Daniel Hagg, Q.C. Hagg Law for the Plaintiff Dennis Schmidt Fraser Milner Casgrain LLP for the Defendant/Applicant