John Barlot Architect Ltd. v, 2013 ABQB 388

Court of Queen ’ s Bench of Alberta Citation: John Barlot Architect Ltd. v 413481 Alberta Ltd., 2013 ABQB 388 Date: 20131003 Docket: 0601 01140 Registry: Calgary Between: John Barlot Architect Ltd. Plaintiff - and - 413481 Alberta Ltd. , Stephen Lamphier, Armin A. Preiksaitis and Armin A. Preiksaitis & Associates Ltd. , Ascot Investments Inc. Defendants _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice A.D. Macleod _______________________________________________________ [ 1 ] Jonas Luhur is a successful entrepreneur.

He describes his usual role as a “ passive investor. ” In the year 2000 his company owned a parcel of land of approximately 17 acres in the Athlone community of Edmonton. The parcel, while irregularly shaped, is bounded by 129 th and 132 nd Streets and 130 th and 132 nd Avenues in an older part of Edmonton. It became the subject of a re-zoning application to DC 2 which meant that the owner and the City of Edmonton had to negotiate a By-Law to regulate the development of this parcel.

It was ultimately passed by the City as By-Law 14453, which permitted row housing, and low rise apartment housing to a maximum of 750 dwelling units and an amenity centre on site. This was passed by Council in January, 2007. According to the evidence of Stephen Lamphier, the Chief Executive Officer of the project, this was one of the larger residential redevelopment projects undertaken in the City of Edmonton. [ 2 ] Such a project requires a multi-disciplinary team which normally encompasses many talents - legal, artistic, financial, planning, engineering, marketing and management.

Communication among the team is obviously important as well as an understanding by everyone as to the expectations and the management of those expectations.

[ 3 ] In 2005 there was increasing tension between the architectural office of John Barlot and the rest of the development team. The design concept, which Mr. Barlot had come up with in 2000, came under increasing attack by the proposed marketer of the development and the planning consultant to the development team. Moreover, in the mind of Mr. Luhur, Mr. Barlot was not responding to some very difficult questions which had significant financial consequences to the development. On October 16, 2005 Mr.

Luhur, on behalf of the numbered company Defendant, terminated its relationship with John Barlot’s architectural company alleging a fundamental breach. This litigation is the result. [ 4 ] There were two actions, the first by Mr. Barlot’s company against the numbered company owned by Mr. Luhur. There was also an action brought by Mr. Barlot against Mr. Lamphier, Mr. Preiksaitis and his company alleging that they induced the numbered company to breach its contract with Barlot’s company. Those two actions were consolidated by order of this Court dated June 15, 2012.

During the course of the trial I granted an order adding, with the consent of the Defendant, the present owner of the site, Ascot Investments Inc. History of the Relationship [ 5 ] John Barlot moved to Montreal from Israel in 1965. He obtained his architectural degree from the University of Montreal and his MBA from McGill. After practising in Montreal for nearly 10 years he moved to Calgary in 1978 and has practised here since then as an architect. He has done a number of commercial and residential projects in Calgary.

He is familiar with zoning concepts and dealing with municipal bodies with respect to zoning and development requirements. He runs a small office on Macleod Trail and during the first few years of 2000 he was the sole architect in his office who could seal architectural drawings. He had Mr. Sigurdson, an intern architect, to help him as well as a number of other assistants. [ 6 ] He had some dealings with Mr. Luhur, who is from Toronto, in connection with a building in Calgary. Mr. Luhur had been impressed by his work and, while he was not an experienced developer, he sought Mr.

Barlot’s advice with respect to some land he had assembled in the City of Edmonton. By the end of June Mr. Luhur and Mr. Barlot had reached an agreement. Initially, only a portion of the site was to be developed. [ 7 ] Mr. Barlot drew up some preliminary plans, made contact with the City of Edmonton and gathered some information about the communities of Athlone and Wellington which would be impacted by the development. He was aware of the importance of the transportation impact analysis and engaged a Calgary consultant to do a TIA.

He was aware of the importance of getting the surrounding communities onside and he began to take steps to introduce the communities to the development project. [ 8 ] A Mr. Paquette who was working with Mr. Luhur introduced the “team” to Jack and Janet Agrios, two Edmonton lawyers (father and daughter) who in turn introduced Mr. Mark Huberman of Earth Tech and highly recommended his expertise in traffic impact assessment. Mr. Huberman was engaged and continued to work with the team on and off up until the re-zoning application was resolved.

He did a considerable amount of work for the development and produced a number of reports and studies. [ 9 ] After a preliminary examination of the site and the situation, Mr. Barlot felt that they could justify development on the parcel of somewhere in the vicinity of 1000 to 1200 units and it was on this basis that he went to the communities of Athlone and Wellington. By early 2004 he had received letters from both the Wellington and Athlone Community Associations endorsing a project of up to 1200 units. [ 10 ] By that time however, Mr. Barlot had received a report from Mr.

Huberman that his traffic study and discussions with the City indicated to him that the number of units had to be restricted to 900 - 950 and even that number would have to contain a blend of retirees and nursing home inhabitants which would have less of a traffic impact. While Mr. Huberman acknowledged that Mr. Barlot and Mr. Luhur wanted higher density, the City was not in a position to support “this magnitude of development.” [ 11 ] Early on in the planning stages Mr. Barlot and Mr. Luhur had decided to proceed to develop the entire site and have it re- zoned as DC 2.

[ 12 ] In September 2003 Mr. Luhur hired Mr. Stephen Lamphier as “CEO of the Project.” During February, March and April 2004 Mr. Luhur negotiated another agreement with Mr. Barlot’s architectural company. It is clear from the exchange of correspondence that Mr. Luhur was concerned with limiting his exposure and that of his company and tying compensation to the success of the venture. Moreover, Mr. Barlot had emphasized in one of his memos that project management is very intensive work and that 4.5% of the construction costs could only be for the design and would not include any project management. Mr.

Luhur’s response was to counter at 3.5% and to leave project management out of their agreement. Ultimately the parties agreed to 4.5% but Mr. Luhur still insisted that “our company will have a project management team and welcome your participation as a separate issue.” [ 13 ] Thus, while Mr. Luhur claimed to be inexperienced in the matters of real estate development, he was obviously an experienced and shrewd business person. While he claims to act as a “passive investor”, he had no intention of allowing management of the project by someone else.

This is significant in my view. [ 14 ] It was at about the same time that the preliminary application for the development of Ascot Gardens was submitted to the City planners for review. Mr. Lamphier and Mr. Barlot had met with Mark Hall and Shauna Kuiper of the City Planning Department and Mr. Barlot had taken them through his concept for the re-development of Ascot Gardens with 1000 units consisting of townhouses, 3 to 5 story apartment buildings and underground parking. Ms.

Kuiper was the Edmonton coordinator of the project and testified that she wanted to review the application to see whether it was complete and complied with City requirements. No fee accompanied the application and in that sense everyone must have understood that it was not a complete application. Nevertheless, there was some confusion as to what department and who in the City of Edmonton were going to be reviewing it. It would appear that Mr. Barlot thought that the City would circulate the application. Mr.

Sigurdson’s evidence was that he did not expect that to occur at that time. [ 15 ] In any event, it became clear towards the end of May that the matter had not been circulated and it also became clear that the surrounding property owners had not been notified or solicited for comments as required by the zoning By-Law. This appeared to be an oversight on the part of Mr. Barlot. That was remedied and on August 18, 2004 the letter had gone out to the surrounding property owners and comments had been received which Mr.

Barlot’s office forwarded on to the City of Edmonton to Shauna Kuiper’s attention. [ 16 ] In September 2004 Mr. Lamphier had a full discussion with Shauna Kuiper and he reviewed the various things that had to be done and made a comprehensive report to Mr. Luhur. In the meantime there was correspondence back and forth between the City to Mr. Barlot’s office correcting errors or omissions in the application and in October 2004 the application and drawings were re-submitted along with the required cheques totalling approximately $4,200.00.

Sixteen drawings were submitted at that time. [ 17 ] The application included provision for two nine storey buildings in the middle of the complex and for a total of 1200 units. Shortly thereafter, an application was submitted for the closure of the public roadways within the development. It was not clear how much this would cost but the development team was assured that if it was more than they were prepared to pay they could withdraw the application.

If the application was successful then the roadways would become the responsibility of the developer, which could prove convenient, but if not they were to remain the responsibility of the City and accessible to the public. [ 18 ] The increased density of the project and the introduction of two 9 story buildings had an immediate impact. The surrounding communities objected to both as did the City. The City had a number of concerns, not the least of which was the traffic impact assessment which had never been finalized and would have to be re-done.

Nine story buildings were unacceptable and it soon became apparent that this aspect of the design had to be, and was, withdrawn. [ 19 ] Things were not proceeding as quickly as anticipated with the City of Edmonton. Apparently Shauna Kuiper was no longer with that particular division and in fact Ms. Sara Lundy took her place. She met with Mr. Luhur and Mr. Lamphier on February 25, 2005. Also, Mr. Lamphier met with Mr. Huberman who had been in discussion with the Edmonton Transportation Department. Mr.

Huberman expressed some disappointment that he had not been kept informed as to the application and the re-submission of the application made during 2004. Mr. Lamphier assured him that that would change henceforth. By March 15, 2005 Mr. Barlot officially announced to the City of Edmonton that henceforth Mr. Lamphier was the one who would coordinate re-zoning matters for the project. Mr. Huberman also brought Mr. Lamphier up to speed as to where he had left matters with Edmonton Transportation.

His analysis indicated that a 1200 unit density could not be supported unless they came up with a different TIA which he had just undertaken. In the meantime the team was being expanded to include a law firm, an engineering firm and a construction firm. [ 20 ] By this point in time the evidence is clear that the man on the ground in Edmonton on behalf of Mr. Luhur was Steve Lamphier. He had met with a number of people concerning the project, including representatives of City, Mr. Huberman and lawyers

from Field. In two emails sent by him on March 8 th and 9 th , 2005, he describes that the team assembled for the project and in neither case was Mr. Barlot or his firm mentioned. I do not find that Mr. Lamphier intentionally omitted Mr. Barlot and indeed in one of those emails he copied Mr. Barlot’s office. But the fact that Mr. Barlot’s name was omitted clearly confirms my view that at this time Mr. Barlot was not seen as a leader of the project. [ 21 ] On March 21, 2005, Mr. Jim MacKie a City Planner sent a memorandum to Ms. Lundy who was in charge for the City and others raising a number of issues.

According to the Defendants this memo was almost immediately sent on to Mr. Barlot’s Office. Neither Mr. Barlot nor Mr. Sigurdson could remember seeing it and in fact they maintained at a meeting held during the summer that they had never received a copy. Regardless of whether they did or they did not, it appears that the memo was either not received or misplaced and neither Mr. Barlot nor Mr. Sigurdson acted on the memo until it was brought the their attention in the first part of August 2005. [ 22 ] No doubt because of the delay encountered in the approval process, Mr. Luhur retained Armin A.

Preiksaitis and Preiksaitis & Associates Ltd. On April 19, 2005 in his proposal to Mr. Luhur, Mr. Preiksaitis wrote “we see our role as establishing with the City, Planning and Development Department a target date for the Public Hearing and working with other consulting team members to resolve any technical and design issues to get a favourable report from the Planning and Development Department and ultimately Council approval.” [ 23 ] On April 21 st Mr. Preiksaitis sent a comprehensive letter to Mr. Luhur with “his findings to date”. Included is a critique of the proposal. It is clear that he shared Mr.

Huberman’s view that the initial proposal of 1200 Residential Units was a non-starter, but did not dwell on that because “there is no point in going down this road unless the market support is there and such a project is feasible and practical for this site.” He also disagreed with the re-zoning application recommended by Mr. Barlot and suggested that they revert to a conventional zoning district like RA8. As time progressed, it became clear that Mr. Preiksaitis disagreed with much of what Mr. Barlot had done or was recommending. He further disagreed with the fundamental design concept purposed by Mr. Barlot.

I do not ascribe anything but good faith on the part of Mr. Preiksaitis. I think he genuinely disagreed with the Barlot approach and he felt that he had much more experience and was much more qualified to not only deal with the City of Edmonton but to opine on the marketability of this project. As time passed, clearly the management of the project came to agree with Mr. Preiksaitis. [ 24 ] The planning team began to prepare itself for a public meeting.

There were a number of issues to resolve with the City Planners, including the availability of affordable housing in the project, green space, landscaping and pedestrian access. City and, of course, community acceptability was always in the fore front and, of prime importance, was the traffic impact assessment which Mr. Huberman was preparing and which was fundamental to the question of density. [ 25 ] Mr. Barlot felt that it was important to prepare some working drawings for two reasons. Mr. Luhur wanted costs estimates on construction and in Mr.

Barlot’s view, the best way to facilitate that was to prepare working drawings for his estimator. Moreover, Mr. Barlot thought that detailed drawings should be available for the City of Edmonton and for the public meeting. Mr. Preiksaitis did not see the point of more detailed drawings until they were at the development permit stage. Moreover, Mr. Preiksaitis thought they should have artists renderings rather than detailed drawings. [ 26 ] An important meeting of the planning team was held on August 11 th , at Mr. Preiksaitis’s Offices in Edmonton.

One of the items discussed was pricing, according to hand written notes kept by Mr. Sigurdson. Also Mr. Lamphier raised the need for detailed phase one drawings which would need to be done by the end of December. There was also an indication that the public hearing date may be in January 2006. [ 27 ] Significantly, there is also a comment by Mr. Preiksaitis that “most marketable buildings are double loaded not single.” It was clear to everyone that Mr. Preiksaitis did not share Mr. Barlot’s enthusiasm for his design concept. [ 28 ] Mr.

Barlot was concerned that he was not being paid adequately, considering that more drawings were now going to be needed. Mr. Sigurdson wrote to Mr. Luhur in August asking for an early advance of their fee since they were now being required to prepare development permit drawings. Mr. Luhur made a proposal on August 16 th which was not acceptable. Mr. Barlot’s response was “the amount of work required is huge” and it needed to be done quickly. The matter remained unresolved.

[ 29 ] An important meeting took place involving the Planning Team and Representatives of the City of Edmonton on August 31 st , 2005. This meeting was also at Mr. Preiksaitis’s office in Edmonton. A number of items were discussed. Landscaping was discussed as well as the amount of green space. The Transportation Department was concerned that though 352 units are described as Senior’s Condos in the TIA, there were no assurances that these units would remain so. The City was also told that the lane ways within the complex were to remain the property of the City.

The City indicated that due to a number of changes they would have to do a mini re- circulation of the DC-2 Plan. Further, Mr. Mackie for the first time suggested that as much as one and a half to two acres should be set aside within the complex for active open space. This caused concern because it would have a significant effect on density which was obviously critical to the economic success of the project. [ 30 ] Another meeting was arranged at the Office of Mr. Barlot in Calgary for September 16, 2005.

By this time a Vancouver firm by the name Maverick Real Estate Corporation had been retained by the group to market the project and Mr. Dan Stewart, VP of Business Development, attended the meeting as Maverick’s representative. The evidence is not clear as to when that firm was retained but it is obvious from an email sent to Mr. Barlot from Mr. Lamphier on September 12 th , that Mr. Stewart was already questioning the Barlot design. [ 31 ] On September 18 th , 2005 Maverick wrote a lengthy letter to Mr. Lamphier, which was very critical of Mr.

Barlot’s design and expressed the view that it would be unacceptable in the market place. [ 32 ] The letter strongly recommended “going back to the drawing board and starting over fresh with a new design that will maximize the potential of this wonderful 16 acre in-fill site sitting next to existing open parks and school grounds”. Significantly, Maverick refused to have anything to do with the project as it was presently contemplated. [ 33 ] Soon after this Mr. Luhur met with Counsel and by letter dated October 11, 2005 he terminated Barlot’s services claiming fundamental breach of contract.

Issues [ 34 ] The issues to be determined are: 1. Did Barlot fundamentally breach the contract such that Mr. Luhur could treat the contract as at an end? 2. If there was no fundamental breach, what is the appropriate calculation of damages based on the termination clauses in the contract? 3. Did Mr. Preiksaitis and Mr. Lamphier induce Mr. Luhur to breach the contract or otherwise tortiously interfere with contractual relations? [ 35 ] For the reasons outlined below, I find that Mr. Barlot did not fundamentally breach the contract or deprive Mr. Luhur of its substantial benefit. Mr.

Luhur was entitled to terminate the contract but it had to be done in accordance with the terms of the contract. Thus, Mr. Barlot is entitled to damages as dictated by the contract. I furthermore find that Mr. Preiksaitis and Mr. Lamphier are not liable. Issue 1. Fundamental Breach Law [ 36 ] The parties have provided numerous authorities to assist the court in determining whether Mr. Barlot breached the contract

with Mr. Luhur in such a way as to entitle Mr. Luhur to treat the contract as at an end.

Where a breach deprives the innocent party of thesubstantial benefit of the contract, or goes to the root of the contract, then this breach will amount to a fundamental breach. [37] In Hunter Engineering Co v Syncrude Canada Ltd, (SCC), [1989] 1 SCR 426 at 199, Wilson J explainedthat: A fundamental breach occurs “Where the event resulting from the failure by one party to perform a primary obligation has the effect ofdepriving the other party of substantially the whole benefit which it was the intention of the parties that he should obtain from thecontract” (emphasis added). [38] She goes on to explain why this type of breach occurs in a limited scope of situations: This is a restrictive definition and rightly so, I believe.

As Lord Diplock points out, the usual remedy for breach of a “primary”contractual obligation (the thing bargained for) is a concomitant “secondary” obligation to pay damages. The other primary obligationsof both parties yet unperformed remain in place. Fundamental breach represents an exception to this rule for it gives to the innocent partyan additional remedy, an election to “put an end to all primary obligations of both parties remaining unperformed” (p. 849).

It seems tome that this exceptional remedy should be available only in circumstances where the foundation of the contract has been undermined,where the very thing bargained for has not been provided: Hunter at 199 [39] Thus, in order to distinguish between a breach that results in the usual remedy of damages, and a breach that allows aninnocent party to treat the contract as at an end, the court must determine whether the breach at issue was “fundamental.” Whether such abreach is fundamental will depend on the construction of the contract and on the facts and circumstances of the case: Suisse AtlantiqueSociete v N.V.

Rotterdamsche Kolen Centrale, [1966] 2 All ER 61 (HL) [Suisse Atlantique]. [40] Since Hunter, courts have provided further guidance on how to identify a breach as “fundamental.” In Canadian WesternBank v 702348 Alberta Ltd, 2010 ABCA 227 [CWB], the Court of Appeal affirmed the use of five factors to assess whether a breach isfundamental.

Those factors are: (1) the ratio of the party's obligations not performed to that party's obligations as a whole; (2) the seriousness of the breach to theinnocent party; (3) the likelihood of repetition of such breach; (4) the seriousness of the consequences of the breach; and (5) therelationship of the part of the obligation performed to the whole obligation: CWB at para 17. [41] A fundamental breach can arise as a result of a series of breaches: BA Capital Inc v Stream Oil & Gas Ltd, 2011 ABQB 91 atpara 23, citing Keefe v Fort (1979), (NS CA), 27 N.S.R. (2d) 353 (CA), which cites Suisse Atlantique.

However, thisseries of breaches must together still meet the test for a fundamental breach. For example, where a contract provides for late payments, aseries of late payments cannot amount to a fundamental breach: see e.g. Action Helicopters Ltd. v Siller Brothers Inc, 1996 CarswellBC503 (BCSC) [Action Helicopters]. [42] If a party fundamentally breaches a contract, then any termination requirements in the contract will not apply.

The “right toterminate the contract for fundamental breach [was] a right which stood quite independent of the rights of termination” granted by thecontract: Norwood Construction Ltd v Post 83 Co-operative Housing Association (1988), 30 CLR 231 (BCCA) at 239 [Norwood];Action Helicopters at para 26. [43] In Real Life Homes & Investments Ltd. v Wert, 2011 ABQB 447, the court found that the Plaintiff had fundamentallybreached a contract by failing to apply to a program, acceptance into which was essential to the contract, commencing construction thatwas not yet approved, and demanding payment for a subcontractor in which she had a financial interest at a time of crisis for theendeavour between the parties.

The breaches singly and cumulatively went to the heart of the development contract and ultimatelydeprived the Defendant of substantially the whole benefit of the contract. Similarly, where a company was contracted to construct theshell of a building but was incapable of completing the construction due to financial difficulties, the contract could be treated as at an endby the innocent party: Norwood.

[ 44 ] Thus, the case law shows that a breach of contract will ordinarily result in a remedy of damages, unless that breach is of a nature that it goes to the very root of the contract, depriving the innocent party of the benefit which they sought under the contract. Application [ 45 ] Mr. Luhur alleges that Mr. Barlot’s actions deprived him of substantially the whole benefit of the contract. Mr. Luhur emphasizes three particular issues in support of his claim: that the DC2 re-zoning application submitted by Mr. Barlot was bound to fail; that Mr.

Barlot had very little communication with the City, and withdrew from contributing to the development team in 2005; and that Mr. Barlot attempted to “extract additional funds” for the work he agreed to perform under the 2004 contract. [ 46 ] While Mr. Luhur and the development team were unsatisfied with Mr. Barlot’s work on this project, I find that on the facts of this case Mr. Barlot did not fundamentally breach the contract. [ 47 ] The evidence shows that Mr. Barlot was involved in preparing the DC2 application and receiving feedback from the City and the development team from the beginning.

Aspects of the application resulted in further discussion and delay, including the larger volume of units included in the application. However, the evidence does not show that the application was bound to fail, thus depriving Mr. Luhur of the benefit of the contract. While I recognize the frustrations that arose because of certain elements of this application, it has not been argued that Mr. Barlot failed to, for example, submit the application as in Real Life Homes , nor did the Defendants call any witnesses who could say that there was no chance that the City would approve the application as a result of Mr.

Barlot’s approach. In fact, even when the re-zoning application was resubmitted after Mr. Barlot’s termination, it was submitted for 839 units, even though Mr. Huberman had concluded that the scale of the City’s traffic requirements would only allow for 700 to 750 units. Submitting an application with a higher density than is likely to be approved is not a fundamental flaw in an application. The development was ultimately approved at 750 units after negotiation between the City and Mr. Luhur’s team. [ 48 ] I further do not find that Mr.

Barlot’s communications with the City and the development team constitute a fundamental breach. There were mis-communications between the different members of the development team but these cannot all be attributed to Mr. Barlot. Mr. Lamphier became the main point of contact with the City in 2005. It further appears that Mr. Barlot and team members were not getting along. However, this issue cannot be solely attributed to Mr. Barlot, nor can it be said to have gone to the root of the architectural design contract. Mr. Barlot is an artist, not a manager.

The contract does include aspects of negotiating and communicating with the City and the team, but the heart of the contract is not team management; it is design. [ 49 ] Nor do I find that Mr. Barlot’s seeking further funds constituted a fundamental breach. Based on the facts presented at trial, Mr. Barlot was seeking an advance on the funds already attributed to his work under the 2004 contract. There is no evidence that he sought to increase his overall fee of 4.5% of the total project cost. [ 50 ] There was no evidence presented at trial to suggest that Mr.

Barlot’s designs were fundamentally or substantially flawed. Though his designs ultimately were not what the development team wanted, a change of direction on the designs did not amount to a fundamental breach, even in conjunction with the delays arising throughout the re-zoning project. Mr. Barlot prepared and revised the application, he began work on the development permits, he met with the community and he communicated with the City, though perhaps not to the extent that Luhur would have liked. Based on the work that he was required to do under the contract, Mr.

Barlot did not breach the contract so fundamentally as to allow Luhur to treat his contractual obligations as at an end. [ 51 ] I have reviewed the evidence and Mr. Luhur’s letter dated October 11, 2005. I am satisfied that the eleven points listed, taken individually or together, do not provide a basis for Mr. Luhur to claim fundamental breach. Mr. Barlot’s DC 2 submission and his design were understood by the Plaintiff’s development team. When deficiencies were recognized steps were taken to correct them.

The real truth of the matter is that the Luhur team became disillusioned with the Barlot design and became convinced that it would not sell as well as a more conventional design. They were entitled to their views but it does not entitle Mr. Luhur to claim fundamental breach. With respect to the servicing upgrades, Mr. Barlot had told them that the City Services were of sufficient capacity to support the density and this was correct. With respect to lane closures, the development team took the informed decision not to acquire the lanes from the City. This concern does not assist Mr. Luhur.

With respect to reserves, the method of development which had been recommended by Mr. Barlot did not trigger any legal obligation to provide any municipal reserve by the Plaintiff. The TIA was professional and thorough. It was what it was and everybody understood it. There were some mis-communications but they were also well understood and resulted in a re- configuration of the team as explained above. The evidence does not support the complaint regarding the provision of information. The affordable housing issue was not an architectural issue; it was a political one and it was handled by the development team.

The evidence

does not in my view support the complaint about parking and the complaint about pedestrian circulation is simply not capable of raisingany issue of fundamental breach. [52] Mr. Luhur was entitled to end his agreement with Mr. Barlot, but had to do so pursuant to the termination clauses in thecontract. 2. Damages Law [53] Where a contract contains a termination provision that provides for damages, then a party is entitled to damages in accordancewith that agreed upon term: see e.g. Pacific Destination Properties Inc v Granville West Capital Corp, (1999) 1999 BCCA 115, 65 BCLR (3d) 27 at paras 20 and 21.

Damages arising from the early cancellation of a contract would typically include allunearned fees, but the termination provision in the contract acts as a mutually agreed upon limit to the amount of damages that can flowfrom early termination: Spectra Architectural Group Ltd v St Michael’s Extended Care Centre Society, 2002 ABQB 432, 310 AR 351at para 125. Mr. Barlot’s damages must be determined with regard to the terms of the contract. [54] The contract in this case requires the court to first determine the total value of the project. Mr. Barlot’s fees are derived aspercentages of that total amount.

It is the party seeking damages for breach of contract who “must place reasonable evidence to supporttheir existence and quantification before the judge”: Taylor v Eisner (1993), (SK CA), 105 Sask R 283 at para 33.Uncertainty of the quantum of damages is not an automatic bar to the award of damages.

It is a longstanding rule that “the fact that a lossis difficult or mathematically impossible to ascertain is not a bar to an assessment of loss if a court is satisfied that loss has occurred”:Campobello Fisheries Ltd v Jackson Brothers Ltd, (NB KB), 132 NBR (2d) 91; Wood v Grand Valley Railway, (SCC), [1915] 51 S.C.R. 283. [55] However, in Martin v Goldfarb (1998), (ON CA), 41 OR (3d) 161 (ONCA), leave to appeal refused,[1998] SCCA No 516 (SCC), the Ontario Court of Appeal limited the scope of the Wood principle to situations where the nature of thedamages renders them difficult to quantify: see also Farm Boy Inc v Mobius Corp, 2011 ONSC 2877.

Specifically, the court agreed thatwhere there are complex contingencies that are incapable of being accurately proven, a court must then do its best to assess the quantumof damages: at para 75. The court contrasts this with situations where damages are only difficult to assess because the Plaintiff failed tocall the necessary evidence. The court concludes at paragraph 75: [...] it is a well established principle that where damages in a particular case are by their inherent nature difficult to assess, the court mustdo the best it can in the circumstances.

That is not to say, however, that a litigant is relieved of his or her duty to prove the facts uponwhich the damages are estimated. The distinction drawn in the various authorities, as I see it, is that where the assessment is difficultbecause of the nature of the damage proved, the difficulty of assessment is no ground for refusing substantial damages even to the pointof resorting to guess work. However, where the absence of evidence makes it impossible to assess damages, the litigant is entitled tonominal damages at best.

In Martin the court was concerned with the quantification of damages for a breach of fiduciary duty. The Plaintiff called no expertevidence that would assist in proving his losses, and his own evidence contained inaccuracies demonstrated on cross-examination. Thecourt said at paragraph 74: “the case in appeal involves circumstances where, by the appellant’s own conduct, the court is not furnishedwith evidence necessary to properly dispose of the damages portion of the case.” Therefore the court reluctantly sent the matter back totrial on the narrow issue of the quantification of damages.

Farm Boy Inc v Mobius Corp, 2011 ONSC 2877 applies Martin in a breach ofcontract context. [56] The Defendants here argue that the invoice is based, in part at least, upon opinion as to the stage of termination and as to thepercentage of work that was done. The Defendants argue that I need expert evidence to determine what and what is not a developmentpermit drawing. Accordingly, the Court is asked not to award the Plaintiff anything but nominal damages. [57] I do not think that would be a fair result.

I am satisfied that there is enough evidence before me to assign a value to the project.I am satisfied that the Plaintiff has, as a result of the Defendants’ breach of contract, suffered a loss. I agree that the evidence is not asfulsome as it could be but I believe I can assess the damages on what is before me. It may not be what the Plaintiff wants and it may not

be as much as he could have obtained with more evidence. [ 58 ] On the other hand, I do not believe it would be an effective use of this Court’s time to send the matter back for an assessment of damages. I believe on the evidence before me I can come up with an assessment of damages which, while perhaps conservative, achieves a just result without the need to prolong this already lengthy litigation process further. Application [ 59 ] Under the contract, Mr. Barlot’s fee was to be calculated as 4.5% of the total project costs. The contract also provides the following allocation of the 4.5% fee: A14 For the Architect’s services as outlined in the Schedule(

s) identified in A10, the fee shall be computed as follows: 4.5% of the cost of the project to be allocated as follows: 30% for the development phase 65% for the construction phase 5% for inspections [ 60 ]

Schedule A of the contract provides a description of each phase. Phase A is titled “Re-Zoning & Development Phases.” Phase B is titled “Construction Document Phase & Inspections.” There are no additional phases described in the Schedule. Based on the wording and organization of the phases, I take Phase A to be the “development phase” referred to in clause A14 of the contract. [ 61 ]

Schedule A to the contract also includes the Fee Schedule, which provides for Mr. Luhur to pay make a first payment to Mr. Barlot as follows: ... The above fees will be allocated as follows: 30% allocated toward the development phase to be paid after the approval of the DP. ...

Though “DP” is not defined, it is clear throughout the contract and the parties’ submissions that this refers to “development permit.” [ 62 ] The relevant termination clauses of the contract provide that: [GC10].4 In the event of termination, the Architect shall be paid within 30 days of the date that an invoice is submitted for all services performed to the effective termination date, together with reimbursable expenses and applicable taxes then due, and for all termination expenses as defined in GC10.5 .5 Termination expenses are expenses directly attributable to abandonment of the Project or termination of this Contract for which the Architect is not otherwise compensated, and in addition, an amount for anticipated loss of earnings computed as a percentage of the total fee for the Architect’s services and Additional Services earned to the time of termination as follows: 1.

Twenty percent if termination occurs during the schematic design phase; or

2. Ten percent if termination occurs during the design development phase; or 3. Five percent if termination occurs during a phase subsequent to the design development phase. [ 63 ] It is not clear from the terms of the contract whether Mr. Luhur was entitled to terminate the contract when he did but this is not an issue before the court as Mr. Barlot accepted the termination. [ 64 ] Mr. Barlot refers the court to an invoice that he sent to Mr. Luhur on November 11, 2005 for his calculation of the amount owing under the contract.

He seeks $973,404.34 plus interest for the early termination of the contract. (Exhibit 150) [ 65 ] The Defendants submit that Mr. Barlot has not presented any evidence to prove any of the costs that he alleges and has not established that he performed the extent of work under Phase A of the contract that he claims. They deny that he is entitled to any payment. [ 66 ] Based on the evidence presented at trial, I find that Mr. Barlot has established that he performed work under the contract and is therefore entitled to damages.

However, I am not satisfied that the evidence supports his numbers.. [ 67 ] In order to determine the proper measure of damages for Mr. Barlot’s termination in accordance with the termination clause of the contract, it is first necessary to determine what the total project cost would have been. The fees for Mr. Barlot’s services are determined as percentages of this total cost. [ 68 ] The evidence at trial with respect to the total project cost was limited.

The final cost of a project that has yet to be completed is in many ways a contingency, rendering an exact calculation of damages under the contract difficult. It was apparent in the facts of this case that developments like Ascot Gardens involve much in the way of negotiation and interaction with City officials, and that City approval process can result in changes to the project size, as they eventually did here.

Thus, I find that in a case such as this, where an exact calculation of damages is not possible because of the contingent nature of the contract damages clauses, the court must do the best it can to determine the appropriate damages based on the evidence before it. [ 69 ] Mr. Barlot relies on a building capacity of 1200 units and a construction cost of $110 per square foot to ground his submission on damages. Mr. Barlot gave evidence at trial that $110 was a conservative estimate of the cost for construction. This evidence was not contradicted by the Defendants. Furthermore, Mr.

Barlot estimated the average unit size to be 843.71 square feet based on his development permit drawings. This evidence was not contradicted at trial. Mr. Lamphier testified that he expected the total project costs to well exceed $100,000,000.00. This statement is consistent with the number provided by Mr. Barlot, which would result in a total project cost of $111,276,000. [ 70 ] It was clear that the City was not going to approve the construction of 1200 units. In fact, throughout Mr. Barlot’s work on the project the highest density that the City indicated that it would accept was 950 units.

The City eventually approved the construction of 750 units, after Mr. Barlot’s termination. This final approval is the only evidence of the actual size of the project and thus the cost of the development. Presumably, had Mr. Barlot remained the architect on this project until the date of that approval, the City’s position on traffic flow and density would nevertheless be the same, and thus would not have changed the final size of the development.

Therefore, the unit number of 750 provides the most realistic basis for the calculation of the total project costs in this case. [ 71 ] Based on these numbers, the project can be estimated to cost approximately $69,606,075.00. The math for arriving at this figure is: 843.71sf per unit x 750units x $110]. With GST this amounts to $74,478,500.00. Mr. Barlot’s total fee would therefore have been $3,351,532.50 (the GST is $4,872,425.00). [ 72 ] The next step is to identify the services that Mr. Barlot performed, and accordingly what percentage of his total fee he earned through performing those services. [ 73 ] Mr.

Barlot submits that Phase A includes two parts: the re-zoning application and the development permit application. He submits that he fully completed the first half of Phase A by submitting the re-zoning application, entitling him to 15% of the 30%

allocated to Phase A. Mr. Barlot further submits that he completed 85% of the development permit drawings, entitling him to 85% of the remaining 15% fee for this Phase. [ 74 ] The description of Phase A in the contract does appear to treat this Phase in two parts - the re-zoning application and the development permit application. The title of Phase A further supports this

interpretation, identifying Phase A as the “Re-Zoning & Development Phases.” Thus, the wording of the contract does provide for the division of Phase A, worth 30% of Mr. Barlot’s total fee, into two parts worth 15% of the fee each for the re-zoning application and the development permit application. [ 75 ] Mr. Barlot has performed work under Phase A of the contract. The evidence before the court shows that the re-zoning application was not approved while Mr. Barlot worked on this project. Thus, Mr. Barlot had not yet completed the first part of Phase A. However, it was clear that he had done most of the work.

He submitted the re-zoning application and communicated with the community. He also began work on the development permit drawings, though from a review of these drawings presented to the court as exhibits, that work was certainly not complete. [ 76 ] Mr. Barlot did not present any independent evidence regarding the requirements of a development permit and I am not satisfied that he completed 85% of the preparation, as he suggests. However, it is clear that he did complete some work preparing for the development permit. Based on the evidence before the court, Mr.

Barlot has demonstrated that he did much but not all of the work under the first part of Phase A and began the work under the second part of Phase A. I would have preferred more evidence on this point, as arriving at a conclusion regarding the percentage of work completed is challenging. Nevertheless, I feel confident that I can arrive at a conservative determination of the amount of work performed under Phase A on the evidence before me. Based on the level of work completed by Mr. Barlot, I find that he is entitled to payment for 75% of the first part of Phase A, and to 25% of the second part of Phase A.

This totals 15% of the total fee or $507,730.00 (with a very slight rounding) [ 77 ] The fee

schedule contained in

Schedule A does not require payment of this 30% fee until after the approval of the development permit. However, this does not prevent Mr. Barlot from seeking payment for the services that he performed before the approval under the termination clause of the contract. The fee

schedule only stipulates the timing of the payment, it does not suggest that 30% of the fee is not earned until the approval of the development permit. Furthermore, the termination clause provides for payment of services performed but it does not limit payment according to the fee schedule. Therefore, reading the contract as a whole, Mr. Barlot is entitled to payment for the work that he performed under Phase A of the contract until the effective date of his termination. [ 78 ] Mr.

Barlot claimed two termination fees in his invoice: he claims a 20% fee for the work he did under the first part of Phase A, and an additional 10% fee for the work that he did preparing for the development permit application. [ 79 ] It could be argued that on its face claiming two termination fees is inconsistent with the wording of the contract because under clause 10.5 the three phases are separated by the word “or”. Moreover, the alternate percentages are expressed as percentages of the “total” fee.

However, when two phases of the work are proceeding concurrently it does make sense to apply the applicable percentage to the total work done for each phase. Indeed, this was the method chosen by Mr. Barlot himself and it works to the advantage of the Defendant. If I could choose only one termination percentage applicable to the entire amount earned I would have chosen the 20% number under the schematic design phase. However, it does seem more equitable to apply 20% to the work done in preparation for the re-zoning and 10% to the work done related to the development permit.

Accordingly, as I calculate them, the numbers would be $75,410.00 and $12,568.00 for a total of $88,000.00 with a slight rounding. These numbers should be added to the total in paragraph 76 for a grand total of $590,000.00 again with a slight rounding. [ 80 ] With respect to the disbursement claimed in the amount of $11,662.58, the Defendant argues that there has been no evidence adduced with respect to that amount. My notes are of no assistance on this point. If indeed that is the case so be it. However, if this was overlooked counsel may speak to the matter. [ 81 ] The contract also entitles Mr.

Barlot to “applicable taxes,” including GST on the above amounts. With respect to the credits the invoice credits the Defendants with $211,900.00 having been paid. But during the presentation of the case and argument the entire invoice was questioned and, indeed, I have found it to be flawed. The Plaintiff argued that $150,000.00 of the amount credited had been agreed to be accounted for separately and not against the fees payable under the agreement. (See Tab 50). Accepting that, it would be unfair to hold Mr. Barlot to his error. It was also suggested that a further $21,900.00 was a mistake.

Perhaps it was but I have not been referred to the evidence. Accordingly, I reduce the credit by $150,000.00 to $61,900.00.

[ 82 ] The contract provides for interest at a rate of 6% +prime per annum, commencing 30 days after the date of the invoice. Exhibit 215 sets out the prime lending rates of the Bank of Canada during the relevant period. Under our country’s banking system, that would be the lowest prime rate among Canadian banks and I think that is a reasonable basis upon which to calculate interest payable. I assume the parties can make the appropriate calculation. If not, they may make further application to me. 3. Inducing Breach of Contract [ 83 ] Mr. Barlot brings two tort actions against Mr. Preiksaitis and Mr.

Lamphier for their alleged role in his ultimate termination: the tort of intentional interference with economic relations, and the tort of interference with contractual relations.

i) Intentional Interference with Economic Relations [ 84 ] I have found as a fact that the parties did not act with any bad faith when giving their honest critiques of Mr. Barlot’s designs. Therefore, I find that Mr. Barlot has failed to establish that the Defendants acted unfairly or unlawfully in any way. They were simply providing honest input based on their years of experience. They did not commit the tort of intentional interference with economic relations. ii) Contractual Relations [ 85 ] On the facts of this case, it is clear to me that Mr.

Luhur’s decision to terminate the contract was his own, it was not induced by Defendants. They provided honest critiques in good faith to Mr. Luhur with regard to the marketability of the project. They were justified in giving their honest and good faith opinion as part of their role in the development team. Their expertise was precisely why Mr. Luhur recruited them into his team. Mr. Preiksaitis and Mr. Lamphier did not tortiously induce Mr. Barlot’s termination. I therefore dismiss Mr. Barlot’s claims against Mr. Preiksaitis, his company and Mr. Lamphier.

Conclusion [ 86 ] In the result, the Plaintiff is entitled to judgment against Ascot Investments Inc. and 413481 Alberta Ltd. in accordance with these reasons. Parties may speak to costs. Heard on the 14 th , 15 th , 16 th , 17 th , 21 st , 22 nd , 23 rd , 24 th and 28 th days of January, 2013. Dated at the City of Calgary, Alberta this 3 rd day of October, 2013. A.D. Macleod J.C.Q.B.A. Appearances:

J. Patrick Peacock, Q.C. Janet L. McCready Peacock Linder & Halt LLP for the Plaintiff Dennis L. Picco, Q.C. Alison D. Walsh Fraser Milner Casgrain LLP for the Defendants