Creeburn Lake Lodge Limited Partnership v Fluor Canada Ltd., 2013 ABQB 721

Court of Queen ’ s Bench of Alberta Citation: Creeburn Lake Lodge Limited Partnership v Fluor Canada Ltd., 2013 ABQB 721 Date: 20131205 Docket: 1201 08763 Registry: Calgary Between: Creeburn Lake Lodge Limited Partnership Plaintiff - and - Fluor Canada Ltd. Defendant _ ________________________________________ ______________ Reasons for Judgment of J.T. Prowse , Master in Chambers _________________________________________ ______________ [ 1 ] The Plaintiff Creeburn Lake Lodge Limited Partnership applies for

summary judgment against the Defendant Fluor Canada Ltd. [ 2 ] Creeburn and Fluor entered into a contract setting out the terms under which Creeburn would make rooms available to personnel of Fluor at Creeburn Lake Lodge near Fort McMurray, Alberta. Once rooms were booked, Fluor was to pay whether the rooms were used or not. Fluor would pay a lower rate if rooms were not used, and a higher rate if they were used. [ 3 ] Creeburn says that Fluor booked rooms for, inter alia, May 23 to June 8, 2011. As it turned out, during this time period forest fires occurred near the Lodge.

Creeburn says that Fluor is liable to pay the lower rate per room applicable when rooms were not used. [ 4 ] Fluor says it is not liable to pay anything for the rooms, which it did not use due to its concerns regarding air quality and other safety factors arising the forest fires.

Onus of proof where

summary judgment depends on the

interpretation of a contract [ 5 ] The nature of the onus to be met in a

summary judgment application dealing with the

interpretation of a contract is described by the Alberta Court of Appeal in Tottrup v Clearwater , [2006] A.J. No. 1532, 2006 ABCA 380 , 68 Alta. L.R. (4th) 237, 401 A.R. 88, 2006 CarswellAlta 1627. The Court first mentioned the usual onus of "plain and obvious" or "beyond real doubt" before continuing: There are however, other types of

summary judgment applications. In some cases the facts are clear and undisputed. The ultimate outcome of the case may depend on the

interpretation of some statute or document, or on some other issue of law that arises from undisputed facts. In such cases the test for

summary judgment is not whether the issue of law is ‘beyond doubt’, but whether the issue of law can fairly be decided on the record before the court. If the legal issue is unsettled or complex or intertwined with the facts, it is sometimes necessary to have a full trial to provide a proper foundation for the decision.

In other cases it is possible to decide the question of law summarily... [ 6 ] To use the language from Tottrup , Fluor’s position is that the legal issues involved in this litigation are complex and intertwined with the facts, so that it is necessary to have a full trial to provide a proper foundation for the decision. [ 7 ] Whether there are sufficient uncontested facts to adjudicate Creeburn’s claim summarily depends on the nature of Fluor’s defences, which are as follows: • The rooms were neither safe and nor reasonably fit for use, in breach of implied terms of the contract, • Creeburn failed in its safety obligations as provided for in clause 2.9 of the Contract, • Creeburn failed to discharge its contractual obligations with respect to the maintenance of room reservations, • Creeburn unilaterally purported to impose conditions on the performance of its obligations under the contract, including unilaterally requiring that Fluor be prepared to conduct an emergency evacuation of its personnel, • Fluor was entitled to rely on the force majeure clause in the contract, which suspended any obligation Fluor may have otherwise had to accept rooms at the Lodge.

Implied term that the rooms were safe and reasonably fit for the purpose for which they were being provided [ 8 ] In Bhasin v Hrynew , 2013 ABCA 98 , 2013 CarswellAlta 822 at para 27 , the Alberta Court of Appeal summarizes the law concerning implied terms as follows: (

a) Courts can imply terms in contracts which are not explicit only when the new term is (

i) so obvious that it was not even thought necessary to mention, or (ii) truly necessary to make the contract work at all, not merely reasonable or fair. (

b) Mere foresight of a possible happening is not enough; both parties must have intended the term. (

c) The law's presumption is against implying terms. [ 9 ] In my view, subject to issues which arise due to an ‘entire agreement’ clause discussed below, Fluor has an arguable position that there is an implied term in the contract that the rooms being provided would be safe and reasonably fit for the purpose for which they were being provided i.e. short term residential accommodation. [ 10 ] The question I put to counsel for Creeburn during argument was as follows: if a Fluor employee opened up the door to one of these rooms, and saw the walls covered with toxic mold, would Creeburn nevertheless be entitled to payment for the accommodation?

I think anyone considering this example would say “surely not”. In other words, the fact that the rooms needed to be safe is a matter so obvious that it would not even be thought necessary to mention in the contract. [ 11 ] The question of whether in fact there was a breach of the implied term that the accommodation be fit for habitation and safe is another matter altogether. The Creeburn Lodge stayed open and was used by other customers during this time period.

Would a trial judge find that these other customers were being foolhardy and taking an unnecessary risk, or would a trial judge conclude that the camp was fit for habitation and safe? This is a very fact intensive enquiry that only a trial judge could make after hearing all the evidence. The effect of an entire agreement clause on an implied term [ 12 ] There is an entire agreement clause in the contract between Creeburn and Flour. Does this clause rule out the implied term of safety and fitness just discussed? [ 13 ] The entire agreement clause is found in

Article 1.0 of the contract as follows: Said Contract sets forth the entire Contract and agreement between the Parties pertaining to said Work and supersedes all inquiries, proposals, agreements, negotiations and commitments, whether written or oral, prior to the date of execution of this Contract pertaining to said Work or this Contract. The provisions of this Contract may be changed only by a writing executed by the Parties to this Contract.

[ 14 ] This clause does not mention “implied term” or “implied terms”. It does not expressly state that there are no implied terms. [ 15 ] Creeburn’s position is that when

article 1.0 says that the document “sets forth the entire Contract and agreement between the Parties” this wording rules out the existence of implied terms.

In other words, if a term is not written in the contract, it cannot exist, because the written terms which follow are stated to be “the entire Contract”. [ 16 ] I will now review chronologically case law dealing with whether an entire agreement clause, such as the one found in the contract between Creeburn and Fluor, prevents Fluor from arguing that the contract contains an implied term that the rooms were safe and reasonably fit for the purpose intended. [ 17 ] In the 2000 decision of Gainers Inc. v Pocklington Holdings Inc. , 2000 ABCA 151 , 81 Alta.L.R. (3d) 17, 255 A.R. 373, 2000 CarswellAlta 151, the primary issue was whether parol evidence could be admitted to vary a formal written management services agreement.

The agreement contained the following provisions which were quoted by The Court of Appeal: 6.01 This Agreement constitutes the entire agreement between the Parties hereto with respect to the subject matter hereof and supersedes all prior negotiations, proposals and agreements, whether oral or written, with respect to the subject matter hereof. 6.06 No term or provision hereof may be amended except by an instrument in writing signed by the Parties to this Agreement. [ 18 ] The Court of Appeal then when on to observe: It seems to us that much of what the trial judge did was to amend the Management Services Agreement by implication, conduct, oral discussions, or oral agreements.

The quoted clauses alone would suffice to prevent that. [ 19 ] In the 2003 decision of 921250 Alberta Ltd. v 762910 Alberta Inc. , 2003 ABQB 81 , 7 R.P.R. (4 th ) 209, 334 A.R. 363, 2003 CarswellAlta 197, a vendor of land presented three offers to sell, each offer dealing with a separate piece of property. The purchaser purported to accept the offers conditionally but then removed the conditions on only one property. In other words, the purchaser intended to proceed with the purchase of only one parcel.

The vendor took the position that there was an implied term in each of the offers that the purchaser would either accept all of the offers or none of the offers.

The court, relying on the Gainers decision, declined to find an implied term, ruling that implied terms were ruled out by the entire agreement clause which stated: This offer to purchase constitutes the entire agreement between the Vendor and Purchaser and there are no representations, warranties, collateral agreements or conditions affecting the Property or the Agreement of Purchase and Sale arising out of acceptance of this Offer, other than as set forth herein. [ 20 ] The 921250 case supports Creeburn’s position.

The entire agreement clause did not use the words “implied terms” but, by stating that the agreement constituted the entire agreement, the court ruled out the prospect of an implied term being established. [ 21 ] In 2006, the Ontario Court of Appeal took a contrary approach in CivicLife.com v Canada (Attorney General) ,

(2006) O.A.C. 43, which considered whether an implied term could exist in the face of an entire agreement clause which stated: This Agreement constitutes and expresses the entire Agreement of the parties hereto and any amendment or addition thereto shall be in writing and signed by the respective parties [ 22 ] The Ontario Court of Appeal held that this entire agreement clause did not rule out the possibility of implied terms.

Paragraph 52 of the CivicLife decision states as follows: … an entire agreement clause will not preclude the implication of a term of the contract, such as a duty of good faith performance or the duty not to abuse a discretion, because such a term is already part of the existing agreement. The trial judge was not adding a term to the agreement that was not part of the parties' bargain; he was enforcing the reasonable expectations of the parties under the agreement. Second, neither of the entire agreement clauses here says that their agreement contains no implied terms.

Indeed, it would be difficult to set out every aspect of the expectations of the parties to a contract. The wording of the entire agreement clauses does not preclude the implication of a term. [ 23 ] In 2011 this issue was discussed in Manufacturers Life Insurance Co. v Executive Centre at Manulife Place Inc. , 2011 ABQB 189 , 48 Alta. L.R. (5 th ) 178, 2011 CarswellAlta 479. The landlord brought

summary judgment for unpaid rent and the tenant countered that the landlord had breached an implied term of good faith in the lease. The court commented as follows: It is true, of course, that there are situations in which terms, including an obligation of good faith, could be implied in a contract.

However, in the situation here, there is an entire clause [sic] term in the written contract for a commercial lease between sophisticated parties; therefore, no term can be implied beyond the written terms of the agreement. [ 24 ] Later in 2011, the trial judge in Bhasin v Hrynew , 2011 ABQB 637 , 96 B.L.R. (4 th ) 73, [2012] 9 W.W.R. 728, 2011 CarswellAlta 1905, considered whether to imply a term of good faith into a contract between the parties. The contract had an entire agreement clause. The Court cited all of the decisions set out above regarding whether the entire agreement clause prevented implied terms.

She found there was an implied term in the case before her and that it was not excluded by the entire agreement clause. She distinguished the above decisions on the basis that they dealt with cases involving sophisticated parties, whereas the plaintiff before her was not a sophisticated party.

[ 25 ] The trial judgment was appealed and the decision of the Court of Appeal can be found as Bhasin v Hrynew , supra. In this decision, the Alberta Court of Appeal did comment on the Ontario Court of Appeal’s decision in CivicLife (supra). The Alberta Court of Appeal noted that in CivicLife the entire agreement clause did not expressly exclude implied terms whereas, in the contract before the court in Bhasin , the entire agreement clause expressly ruled out implied terms. [ 26 ] It would be going too far to say that the Alberta Court of Appeal otherwise approved CivicLife .

The Alberta Court of Appeal only said that it would not allow an implied term in the face of an entire agreement clause which expressly ruled out with implied terms. The Court of Appeal did not say whether it would allow an implied term in the face of a more abbreviated entire agreement clause which did not specifically rule out implied terms – in other words, a clause of the nature we are dealing with in the Creeburn – Fluor dispute. [ 27 ] As a result, I conclude that the Alberta Court of Appeal in Bhasin has had no effect on the Queen’s Bench decision in 921250 . It remains the law in Alberta.

Whether the rationale expressed in CivicLife will persuade the Courts in Alberta to change the law to allow implied terms where the entire agreement clause does not expressly exclude them remains to be seen. As a Master in Chambers I am bound by the 921250 decision. I can see no basis for distinguishing it. [ 28 ] To sum up, it is my view that, except for the entire agreement clause, there would be an implied term that the rooms at the Creeburn Lodge would be fit for accommodation and safe – and that the matter of whether such implied term had been breached was a triable issue.

However, the argument for such an implied term fails in light of the entire agreement clause.

Creeburn failed in its safety obligations as provided for in clause 2.9 of the contract [ 29 ] Clause 2.9 of the contract states: [Creeburn] shall be responsible and accountable for compliance with all environmental, health, fire and other relevant safety and environmental regulations, work practices and procedures prescribed by law or by [Fluor] as may be applicable from time to time. [ 30 ] Fluor has not been able to point to any environmental, health, fire and other regulations, work practices or procedures which Creeburn has breached. As a result, Fluor cannot defend Creeburn’s claim based on clause 2.9.

Creeburn failed to discharge its contractual obligations with respect to the maintenance of room reservations [ 31 ] Flour has not provided any evidence that Creeburn failed in its contractual obligations with respect to the maintenance of room reservations.

Creeburn unilaterally purported to impose conditions on the performance of its obligations under the contract, including unilaterally requiring that Fluor be prepared to conduct an emergency evacuation of its personnel [ 32 ] To advance this defence, Fluor would have to say that it wanted to use the rooms, but Creeburn declined to make the rooms available because Fluor refused to confirm that Fluor had an emergency evacuation plan. There is no evidence that this happened.

Fluor is entitled to rely on the force majeure clause in the contract, which suspended any obligation Fluor may otherwise have had to pay Creeburn for the rooms [ 33 ] Clause 2.16.1 of the contract states: No delay or failure in performance by either Party hereto shall constitute default hereunder or give rise to any claim for damages if and to the extent such delay or failure is caused by force majeure. [ 34 ] Creeburn’s obligation under the contract was to provide rooms.

If the forest fire prevented Creeburn from providing rooms, then Creeburn might be relieved from its obligation under the force majeure clause. [ 35 ] Fluor’s obligation under the contract was to pay money. The forest fire does not prevent Fluor from doing so. Consequently Fluor cannot rely on the force majeure clause. Conclusion [ 36 ] Creeburn has met the onus on it to establish that there is no triable issue. I hearby grant Creeburn

summary judgment against Fluor for the amount claimed. If there is any disagreement as to the specific amount the parties may approach me for a ruling in that regard. [ 37 ] If counsel cannot agree as to costs, they may approach me for a ruling in that regard.

Heard on the 06 th day of November, 2013. Dated at the City of Calgary, Alberta this 05 th day of December, 2013. J.T. Prowse M.C.C.Q.B.A. Appearances: Brian P. Reid and Ciara J. Toole Bennett Jones LLP for the Plaintiff Lowell A. Westersund and Joshua D. Fraese Rose LLP for the Defendant