Skyline Concrete Services Ltd v Flint Energy Services Ltd, 2016 ABQB 396

Court of Queen ’ s Bench of Alberta Citation: Skyline Concrete Services Ltd v Flint Energy Services Ltd, 2016 ABQB 396 Date: 20160713 Docket: 1101 14959 Registry: Calgary Between: Skyline Concrete Services Ltd. Plaintiff - and - Flint Energy Services Ltd., Federated Co-Operatives Ltd., and Flint Field Services Ltd. Defendants -and - Flint Field Services Ltd., R.B. Slen Project Management Ltd. and Richard Slen Third Party Defendants _______________________________________________________ Reasons for Judgment of J.T. Prowse , Master in Chambers _______________________________________________________

[ 1 ] Federated Co-operatives Ltd. contracted with Flint Field Services Ltd.(“Flint”) as general contractor for the construction of a fuel storage and distribution terminal. Flint in turn subcontracted with Skyline Concrete Services Ltd.(“Skyline”) for the provision of concrete, excavation services and materials. [ 2 ] Flint terminated the subcontract prior to its completion and directed Skyline to leave the site. [ 3 ] Skyline brings this

summary judgment application against Flint for compensation for work done to the date of termination and for compensation for lost profit it would have earned on the balance of the contract if it had not been terminated. [ 4 ] For the reasons which follow I have concluded that the amount of and entitlement to the compensation claimed are triable issues not suitable for

summary determination. Accordingly I dismiss Skyline’s application for

summary judgment. Compensation for work done to the date of termination [ 5 ] Flint concedes that the subcontract between itself and Skyline entitles Skyline to compensation for work done to the date of termination. Flint says it has paid (or overpaid) this amount. [ 6 ] Flint notes that there is no guidance in the subcontract as to how the value of the work done to the date of termination is to be determined.

It cites case law to support the proposition that Skyline is entitled to reasonable compensation. [ 7 ] Flint has filed an affidavit setting out its calculation of the required reasonable compensation, and Flint asserts that it has paid in full the amount so calculated. [ 8 ] Skyline has filed an opposing affidavit of a quantity surveyor taking a different approach as to valuation.

Skyline asserts that there is more owing. [ 9 ] It is unclear to me how Skyline expects this Court to choose between these two conflicting opinions on the value of the work done to the date of contract termination without hearing viva voce testimony at trial. A

summary judgment application is not an appropriate method to resolve conflicting evidence. [ 10 ] As stated in Sherwood Steel Ltd. v. Odyssey Construction Inc. , 2014 ABCA 320 at para 7 : The chambers judge noted the conflicting affidavit evidence, and the jurisprudence on deciding

summary judgment applications where there are factual disputes. This jurisprudence states that where resolving such disputes entails weighing evidence,

summary judgment normally ought not to be granted. [ 11 ] There are some exceptions to this general rule, for example: (

i) where the chambers judge/master assumes that the evidence of the non-moving party is correct, (as was done in Sherwood Steel , supra). (ii) where the evidence of the non-moving party is either destroyed by cross-examination on affidavit or the introduction of other evidence rendering that party's evidence completely non-credible: Janvier v. 834474 Alberta Ltd. , 2010 ABQB 800 . (iii) Where the conflicting evidence is on matters which are irrelevant to the ground upon which

summary judgment is being sought (for example, where there is conflicting evidence as to which driver caused a collision between two automobiles but the

summary dismissal application is being brought on a limitations defence). [ 12 ] No exceptions apply here. [ 13 ] Skyline has made submissions criticizing the evidence of Mr. Lucas, Flint’s witness as to damages, but it can hardly be said that these criticisms have ‘destroyed’ or ‘rendered non-credible’ the evidence of Mr. Lucas. [ 14 ] Likewise, Flint has made criticisms of the evidence of Mr. Hullah Sr., Skyline’s quantity surveyor. For example, it appears that the bulk of the work reflected in Mr. Hullah Sr.’s report was done by Mr. Hullah’s son, rather than by Mr. Hullah Sr. himself.

When this was raised as an issue, Mr. Hullah Sr. defended doing this by saying that his son was ‘more in tune with the market than I now am’ and that Mr. Hullah Sr. had ‘been away from it too long’. This is hardly the type of testimony upon which I have sufficient confidence to grant

summary judgment. [ 15 ] Flint also notes that Mr. Hullah Sr.’s opinion sets out a number of express assumptions, and some of those factual assumptions have not been proven. [ 16 ] It is the function of a trial judge to listen to the conflicting viva voce evidence of Mr. Lucas and Mr. Hullah Sr., see them subjected to cross-examination, and then to make the necessary findings of fact. This is not something which can be done on a

summary judgment application. [ 17 ] A further issue arrives as Mr. Hullah Sr. has included in his calculation of the amount owing for work done to the date of termination, amounts for work done on ‘extras’, that is, work which was not included within the scope of Skyline’s subcontract. [ 18 ] Flint replies that Skyline cannot claim for work done on extras as the contract makes prior approval in writing a condition precedent to payment. Flint points out that this is not an artificial barrier, because without that written approval Flint cannot pass on to the owner, Federated Co-op, the claim for that extra work.

[19] Skyline in turn replies by pointing to case law which says that, notwithstanding a requirement for written approval, courtshave sometimes allowed claims for extras where “the plaintiff did work or supplied materials not called for by the contract on theinstructions, express or implied, of the defendant”: Chittick v. Taylor, (AB KB), [1954] A.J. No.23. [20] The determination of whether instructions to do extra work can be implied in the absence of written directions calls fordetailed evidence as to who said what to whom and under what circumstances.

The resolution of this type of factual issue should be doneby viva voce evidence before a trial judge. [21] Yet another outstanding issue exists with respect to Flint’s assertion that any award to Skyline should be reduced byapproximately $62,000, which was the cost of repairs to alleged deficiencies found in Skyline’s work on slab 9. Mr. Hullah Sr.’s reporton behalf of Skyline does not address this issue. [22] Skyline responds that it cannot be held liable for deficiencies as it was not given the opportunity to correct them, as it wasexcluded from the site. Flint responds by referring to a

section of the contract between itself and Skyline which allows it to terminate thecontract or remove portions of the contract at will. [23] As indicated above, there are numerous triable issues which need to be addressed before the Court can reach a conclusion asto whether Skyline has been paid in full for work done to the date of termination, or, if not, what amount remains owing.

Compensation for lost profit that would have been earned onthe balance of the subcontract [24] This topic raises both a legal issue and a factual issue. [25] The legal issue is whether, due to the existence of a ‘termination for convenience’ clause, Skyline is prevented from claimingcompensation for loss of profit on the remainder of the cancelled subcontract. [26] The factual issue is whether Mr. Hullah Sr.’s report, submitted by Skyline, adequately addresses the quantum of lost profit.

The legal issue: Skyline’s entitlement to a loss of profit claim in light of a ‘termination for convenience’clause [27] Flint advances a series of alternative arguments, based on the written subcontract between itself and Skyline, as to whySkyline is not entitled to claim for loss of profit for the balance of the cancelled subcontract.

In order to discuss this I will first set out therelevant contractual provisions. [28] Skyline and Flint entered into a Job Specific Subcontractor Agreement which attached a number of documents, including a“CCDC 2 Stipulated Price Contract and Supplementary Conditions”, and “Prequalification Terms and Conditions”. The parties agreedthat in the event of conflict between the documents then the CCDC 2 would have priority over the Prequalification Terms andConditions. [29] Here are the relevant terms of the CCDC 2 regarding termination for default (the CCDC 2 did not provide for termination forconvenience).

GC7.1 OWNER’S RIGHT TO PERFORM THE WORK, TERMINATE THE CONTRACTOR’S RIGHT TO CONTINUE WITH THEWORK OR TERMINATE THE CONTRACT 7.1.2 If the Contractor neglects to prosecute the Work properly or otherwise fails to comply with the requirements of the Contract to asubstantial degree and if the Consultant has given a written statement to the Owner and Contractor that sufficient cause exists to justifysuch action, the Owner may, without prejudice to any other right or remedy the Owner may have, give the Contractor Notice in Writingthat the Contractor is in default of the Contractor’s contractual obligations and instruct the Contractor to correct the default in the 5Working Days immediately following the receipt of such Notice in Writing. 7.1.3 If the default cannot be corrected in the 5 Working Days specified or in such other time period as may be subsequently agreed inwriting by the parties, the Contractor shall be in compliance with the Owner’s instructions if the Contractor: .1 commences the correction of the default within the specified time, .2 provides the owner with an acceptable

schedule for such correction, and .3 corrects the default in accordance with the Contract terms and with such schedule. 7.1.4 If the Contractor fails to correct the default in the time specified or in such other time period as may be subsequently agreed inwriting by the parties, without prejudice to any other right or remedy the Owner may have, the Owner may: .1 correct such default and deduct the cost thereof from any payment then or thereafter due the Contractor provided the Consultant hascertified such cost to the Owner and the Contractor, or .2 terminate the Contractor’s right to continue with the Work in whole or in part or terminate the Contract. 7.1.5 If the Owner terminates the Contractor’s right to continue with the Work as provided in paragraphs 7.1.1 and 7.1.4, the Owner

shall be entitled to: .1 take possession of the Work and the Products at the Place of the Work... .2 withhold further payment to the Contractor until a final certificate for payment is issued, and .3 charge the Contractor the amount by which the full cost of finishing the Work as certified by the Consultant, including the compensation to the Consultant for the Consultant’s additional services and a reasonable allowance as determined by the Consultant to cover the cost of corrections to work performed by the Contractor that may be required under GC 12.3- WARRANTY, exceeds the unpaid balance of the Contract Price; however, if such cost of finishing the Work is less than the unpaid balance of the Contract Price, the Owner shall pay the Contractor the difference, and .4 on expiry of the warranty period, charge the Contractor the amount by which the cost of corrections to the Contractor’s work under GC 12.3- WARRANTY exceeds the allowance provided for such corrections, or if the cost of such corrections is less than the allowance, pay the Contractor the difference. 7.1.6 The Contractor’s obligation under the Contract as to quality, correction and warranty of the work performed by the Contractor up to the time of termination shall continue until after such termination of the Contract. [ 30 ] Here are the relevant terms of the Prequalification Terms and Conditions, which provides for both termination for default and termination for convenience.

I have underlined the provisions dealing with termination for convenience: 9.1 The Contractor may terminate this Agreement upon written notice to the Subcontractor, if the Subcontractor: 9.1.1 Fails to perform any of its obligations set forth in this Agreement, and if such failure shall continue for a period of five (5) days after written notice from the Contractor. 9.2 The Contractor’s termination of this Agreement under

Section 9.1 shall be without prejudice to any other right or remedy it may have at law, in equity or otherwise, including without limitation any right to set off any Claims from any payment or payments otherwise due to the Subcontractor. 9.3 The Contractor may, for its own convenience and in the absence or without reliance by Contractor on any default by the Subcontractor, terminate this Agreement or any portion of the Work to be performed at any time upon written notice to the Subcontractor. 9.4 Upon termination of the Work or the Agreement the Contractor shall pay all amounts due and owing to the Subcontractor for Work performed to the date of termination. [ 31 ] By written notice dated August 12, 2011, and issued again on August 15, 2011, Flint purported to cancel the Skyline subcontract, as follows: Take notice that Flint, hereinafter called the contractor, hereby serves Skyline Concrete Services Ltd., herein after known as the subcontractor, with notice that the contract between the contractor and the subcontractor signed on 01/30/2011 is being cancelled due to the subcontractors inability to provide adequate supervision to their crews onsite.

Furthermore that the subcontractor has repeatedly been approached by the contractor as well as the owners’ representative to rectify the situation and has repeatedly failed to meet the obligations and schedules, which were mutually agreed to. Furthermore work completed on Wednesday August 10, 2011 was not completed in the manner as discussed and agreed to in writing on the drawings and now requires rework to achieve the intended drainage.

As a result of this non performance to fulfill their contractual obligations on the part of the subcontractor, the contractors own work and relationship with the owner has been placed in jeopardy. The parties arguments regarding the lost profit claim [ 32 ] Flint denies that Skyline is entitled to lost profits. It notes that Paragraph 9.4 expressly provides what Skyline is entitled to on termination, namely, payment for work performed to the date of termination.

It does not provide for payment for lost profit for the balance of the cancelled subcontract. [ 33 ] Skyline responds that the termination for convenience clause was only intended to apply to terminations occurring before the work began. [ 34 ] Flint on the other hand says that the termination for convenience clause was intended for situations exactly such as occurred here, where the owner of the project removed the concrete work from Flint’s general contract.

Absent a termination for convenience clause Flint would bear all the risk of such an occurrence, and Flint says the ability to spread this risk was exactly what the clause is for. [ 35 ] Skyline further responds, in the alternative, that Paragraph 9 (the ‘termination for convenience clause’) is inconsistent with Paragraph 7 in CCDC 2, and thus, under the priority provision set out in the contract, it is to be ignored.

This is a difficult argument to make in that Paragraph 9 itself contains both a termination for default clause and a termination for convenience clause, showing that both types of clauses can co-exist. [ 36 ] Flint says that Skyline’s lost profit claim fails because Flint is entitled to rely on Paragraph 9.3 (the termination for convenience clause) notwithstanding that Flint’s termination notice does set out allegations of default by Skyline. [ 37 ] Flint says that while the termination notice admittedly does not comply with the ‘termination for default’ provisions of either

Paragraph 7 or Paragraph 9, the wording dealing with default should be considered mere surplusage, and the notice should be taken as a valid “written notice to the Subcontractor” under Paragraph 9.3 (termination for convenience). [ 38 ] Flint cites an Australian decision, GEC Marconi Systems Pty Ltd. v. BHP InformationTechnology Pty.

Ltd. , [2003] FCA 50 in support of its position that reference to default under a termination letter does not prevent reliance on that termination letter under a termination for convenience provision found in the same contract. [ 39 ] Skyline argues that, having pointed to a default in its termination notice, Flint cannot now respond by relying on the ‘termination for convenience’ clause. [ 40 ] Flint alternatively argues that Skyline is not entitled to lost profits even if the notice of termination clause was not effectively invoked (due to the termination notice containing allegations of default). [ 41 ] Flint says that any claim for damages of a contract terminable on convenience should be evaluated as if the contract had been terminated for convenience.

Flint cites in support of this assertion the following extract from HG Beale, Chitty on Contracts , 32 nd ed (London, UK Sweet & Maxwell, 2015) vol 1 at 26-075: If the defendant falls to perform, when he had an option to perform the contract in one of several ways, damages are assessed on the basis that he would have performed in the way which would have benefited him most, e.g. at the least cost to himself . ..

A similar situation arises where the contract-breaker had an option to terminate the contract; if the claimant accepts the anticipatory breach of the defendant as a ground for terminating the contract but the defendant could have exercised his option to terminate the contract so as to extinguish or reduce the toss caused by the anticipatory breach, the court will assess the damages for breach on the assumption that the defendant would have exercised the option. (emphasis added) [ 42 ] The issues raised by these arguments may well be sufficiently complex to only be resolvable in the context of a trial, but in any event, there is no utility in engaging those legal issues in light of the factual dispute described below.

The factual issue: the quantum of the loss of profit claim [ 43 ] Flint submits, and I agree, that Mr. Hullah Sr.’s report (in addition to the difficulties already discussed) is deficient in its calculation of lost profit because it does not discuss what adjustment, if any, should be made due to the fact that Skyline ‘backfilled’ to full utilization of its capacity i.e. found some other profitable work to replace the work contained in the balance of the cancelled subcontract. Conclusion [ 44 ] For the reasons set out above, I am dismissing Skyline’s application for partial

summary judgment. Costs [ 45 ] If the parties cannot agree on costs, they make seek a ruling from me in that regard. Heard on May 26 and June 22 , 2016. Dated at the City of Calgary, Alberta this 13 th day of July, 2016. J.T. Prowse M.C.C.Q.B.A. Appearances: Philip R. Biggar

The Law Firm of W. Donald Goodfellow, Q.C. for the Plaintiff Skyline William J. Kenny, Q.C. Fergus Schappert Miller Thompson LLP for the Defendant Flint Jordan C. Milne Rose LLP for the Defendant Federated Co-op