Agrium Inc v Colt Engineering Corporation, 2019 ABQB 978

Court of Queen’s Bench of Alberta Citation: Agrium Inc v Colt Engineering Corporation, 2019 ABQB 978 Date: 20191208 Docket: 1601 03869 Registry: Calgary Between: Agrium, Inc Plaintiff - and - Colt Engineering Corporation, Worley Canada Services Ltd., ACM Automation, Inc., Orbis Engineering Field Services Ltd. Elliott Turbomachinery Canada, Inc., Elliott Company, Invensys Systems Canada, Inc., Schneider Electric Systems Canada Inc., Rockwell Automation, Inc., and Allen-Bradley Defendants _______________________________________________________ Reasons for Decision of J.T.

Prowse , Master in Chambers _______________________________________________________ [ 1 ] The defendants Colt Engineering Corporation and Worley Canada Services Ltd. (collectively “Worley”) provided services and/or materials to the plaintiff Agrium, Inc. in relation to system upgrades at Agrium’s Carseland Nitrogen Plant, between 2008 and 2010. [ 2 ] Agrium’s plant was damaged in an incident which occurred about four years later, on March 22, 2014. Agrium brought a claim for damages against numerous defendants said to be responsible for the incident, including Worley. [ 3 ] Worley applies for

summary dismissal. [ 4 ] Worley provided its services pursuant to the terms of a Master Engineering Services Agreement (“the MESA”). Worley says the action against it is barred by the provisions of the MESA. [ 5 ] Specifically, Worley says the only claim which the MESA allowed Agrium to make was a claim alleging that Worley breached its express warranty contained in the MESA.

Since the warranty expired 18 months after Worley completed its work, it had already expired when the incident occurred on March 22, 2014. [ 6 ] Agrium counters that the warranty contained in the MESA is merely a ‘callback’ provision which applies only to problems arising within the first 18 months, and that the provision of such a warranty does not negate Agrium’s right to sue for negligence and/or

breach of contract arising more than 18 months following completion of the work. [7] For the reasons which follow I dismiss Worley’s application for

summary dismissal. Principles of contractual

interpretation [8] Here are some general principles of contractual

interpretation which I have kept in mind: • the words of one provision of a contract must not be read in isolation but should be considered in harmony with the rest of thecontract and in light of its purposes and commercial context. [Tercon v British Columbia, 2010 SCC 4, 2010 CarswellBC 296, atparagraph 64] • the mere fact a contract is difficult to interpret is not fatal to its validity. Nor, the authorities tell us, is a difficulty with theinterpretation to be regarded as synonymous with ambiguity.

The contract may be effective even though it is open to more than oneconstruction if the court can ascertain the intended meaning. [ TransCanada Pipelines Ltd v Northern & Central Gas Corp, (1983), (ON CA), 41 O.R. (2d) 447, 1983 CarswellOnt 1430, (C.A.), at para 13] • express, clear and direct wording is required for an exclusion clause to prevent a claim being made in negligence. [QueenCharlotte Lodge Ltd v Hiway Refrigeration Ltd, [1998] B.C.J.

No. 13, 1998 CarswellBC 17, paragraphs 33 and 34] • there is nothing in a warranty by itself that suggests that further liability should be excluded: University of Regina v Pettick,(1991), (SK CA), 45 C.L.R. 1, 1991 CarswellSask 164 (Sask. C.A.) at para. 139. Where work or product provided issubstandard and defects subsequently appear beyond a warranty period, then the provider of those services or product should not avoidliability unless the language of the contract is “very clear and specific”. [Vanir Construction Services Ltd (Receiver of) v Field AviationCo, [1988] A.J. No. 417, 1988 CarswellAlta 485 (Alta.

Q.B.) at paras. 86 and 87] Key provisions of the MESA [9] The key provision in the MESA is

article 15.7, which states: 15.7 Remedies. [Agrium] shall be restricted to the remedies expressly set forth in this Agreement. Such remedies are [Agrium’s] soleand exclusive remedies and [Agrium] hereby waives any and all other remedies, whether at law or in equity, and whether the claim arisesunder contract, tort (including the concurrent or sole and exclusive negligence), strict liability or otherwise, of [Worley]. [10] This is very broad language - it covers claims of any nature. [11] It restricts Agrium to “the remedies expressly set forth in this Agreement”. [12] The only remedy expressly set forth in the agreement is found in

article 8.1, which states as follows: 8.1 [Agrium’s] sole remedy for [Worley’s] breach of the warranties in

Article 7 or deficient or defective Services is as set out in thefollowing procedure ... (emphasis added) [13]

Article 8.1 deals with two separate types of claims: (1) claims for breach of the warranties in

Article 7, and (2) claims fordeficient or defective services. [14] The claims being asserted by Agrium in this action against Worley seem to fall under (2), namely claims for deficient ordefective services. [15] Accordingly Agrium’s claim survives the waiver in

article 15.7, quoted above, because it seeks a remedy for a type of claimspecifically listed in

article 8.1 (a claim for deficient or defective services). [16] The existence of two types of claims under

article 8.1 is supported by the limitation of liability clauses quoted in paragraph 31of these reasons. Those clauses appear to apply to claims for deficient or defective services. Agrium’s failure to follow the procedures specified for advancing a claim against Worley [17] Agrium’s remedy against Worley for “deficient or defective services” is a remedy “set out in the following procedures”described in

article 8. It is clear that Agrium has not followed those procedures. [18] The procedures set forth in

article 8 are as follows: (a) [Agrium] shall within one (1) business day notify [Worley] in writing of any potential breach or deficiency; (b) [Worley] shall within one (1) business day respond to [Agrium’s] notification of such breach or deficiency, with a plan toinvestigate such breach of deficiency and corrective action, if any; (

c) once [Agrium] acting reasonably, has approved a corrective plan, [Worley] shall promptly, at no cost to [Agrium] furnish allengineering and design services required in connection therewith as agreed by both Party Representatives. [Worley] and [Agrium] shallshare the cost to repair, replace, add or delete any equipment, materials and facilities required as a result of [Worley’s] breach of itswarranties in

Article 7, in accordance with the table attached as Exhibit C and in the following manner: (i) [Agrium] shall pay the first increment of cost, the amount of which is identified in column A of Exhibit C, to repair, replace,

add or delete equipment, materials and facilities resulting from each such breach by [Worley]; and (ii) [Worley] shall pay the next increment of cost, the amount of which is identified in column B of Exhibit C, to repair, replace,add or delete equipment, materials and facilities resulting from each such breach by [Worley], provided that [Worley’s] total liability forrepair, replacement, addition or deletion of equipment, materials and facilities under this Agreement is limited annually to the applicableamount identified in Column C of Exhibit C. (

d) Any engineering costs resulting from design rework to correct inaccurate or obvious design errors that occur before commencementof the Warranty Period will be to [Worley’s] account provided that this obligation shall not apply to such engineering costs: (

i) if aprofessional engineer performing similar work in accordance with the standards of care, competence, skill, diligence of a professionalengineer qualified and experience in performing similar services; would have made the same error; or (ii) resulting from normal designdevelopment work or (iii) if the errors or inaccuracies were caused by [Agrium’s] acts or omissions. If [Worley] provides engineering,procurement, procurement services, or construction management (or any combination thereof) for a Project, the Warranty Periodcommences upon mechanical completion of the Project and extends for 18 months.

For a study, the Warranty Period commences oncompletion of the deliverables. (emphasis added) [19] What is the effect of Agrium not following the procedures outlined in

article 8 of the MESA in advancing its claim againstWorley? [20] Worley submits case authority to the effect that, where a claimant (in this case Agrium) has not followed notice procedures, inparticular the provision of timely notice, then that party (again, Agrium) is barred from advancing a claim. See: Corpex

(1977) Inc vCanada, (SCC), [1982] 2 S.C.R. 643, 1982 CarswellNat 143; Technicore Underground Inc v Toronto (City), 2012ONCA 597, 2012 CarswellOnt 11173; Dilcon Constructors Ltd v ANC Developments Inc, 2000 ABCA 223, 2000 CarswellAlta 840:Centura Building Systems Ltd v Cressey Whistler Project Corp, 2002 BCSC 1220, 2002 CarswellBC 2044. [21] Agrium replies that the cases cited by Worley are inapplicable because they deal with “course of construction” notices whichwere missed. [22] Agrium says that missing a course of construction notice may well bar a subsequent claim, because if notice is not providedduring the course of construction then remediation or evaluation may be impossible once construction is completed. [23] In this case, where Agrium may have failed to abide by procedures calling for notice within one day, in the context of anincident arising from work which was completed four years earlier, the situation seems to be different.

It may be that failure to follow‘notice’ procedures in this context does not result in a loss of Agrium’s claim. [24] Agrium did not provide one business day notice in writing of its potential claim for deficient or defective services. In fact, itwas close to 3 years later that Worley found out about the claim against it, when it was served with Agrium’s statement of claim. [25]

Article 8.1 does not expressly state that failure to provide that 1 day notice results in Agrium forfeiting the right to make aclaim for deficient or defective services. [26] It is possible that Agrium’s breach of its promise to provide notice of the potential claim is such a serious breach that it hasirrevocably prejudiced Worley’s right to defend itself, but that will depend on evidence not before me. [27] Perhaps the result is that, while the claim of Agrium is not barred, then Worley is only responsible for the amount that itwould have reimbursed Agrium if the procedure outlined in

article 8.1 had been followed? What that amount is would again depend onevidence not before me. [28] Likewise, it is unclear to me whether the 18 month limitation mentioned in

article 7 and

article 8 of the MESA applies to aclaim by Agrium for deficient or defective services, as the wording of the 18 month limitation is arguably restricted to “warranties” or a“warranty period”. [29] The Alberta Court of Appeal commented on contractual

interpretation, in Tottrup v Clearwater, 2006 ABCA 380, 2006CarswellAlta 1627, at para 11, as follows: There are however, other types of

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

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

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

In other cases it is possible to decide the questionof law summarily ... (emphasis added) [30] The more recent Court of Appeal decision in Weir-Jones Technical Services Incorporated v Purolator Courier Ltd, 2019ABCA 49, 2019 CarswellAlta 204, at para 30 likewise emphasizes the importance of the Court being sufficiently satisfied andcomfortable with the record to conclude that there is no genuine issue requiring a trial. [31] Worley has at least 4 arguable positions that Agrium’s claims against it are barred in full or in part by the wording of theMESA, namely; • Agrium has not complied with the procedure (and perhaps the 18 month time limitation) set out in

article 8 regarding claims by

Agrium for deficient or defective services. • Agrium’s claim is limited to $1.0 million pursuant to article15.2, which states: Except to the extent caused by the gross negligence or willful misconduct of Engineer, as between Engineer and Owner, Owner assumes responsibility for and hereby releases Engineer from all loss of or damages to Owner's properly in excess of $1,000,000. This release shall apply even if the loss or damage arises from the fault, breach of contract, tort (including concurrent or sole and exclusive negligence), indemnity, strict liability or otherwise of the Engineer. • Agrium’s claim is limited to $5.0 million pursuant to

article 5.5, which states: Notwithstanding anything to the contrary in this Agreement, the Engineer's aggregate liability shall, with respect to any individual Statement of Work, be limited to $5,000,000.00, whether arising from the fault, breach of contract, tort (including concurrent or sole and exclusive negligence), indemnity, strict liability or otherwise of the Engineer... • Agrium’s claim is constrained by

article 15.6, which states: Notwithstanding anything to the contrary in this Agreement, neither party shall be liable to the other party for any loss of profit, loss of production, cost of capital, interest, cost of delay, business interruption, plant shutdown or other indirect, special or consequential damages whether arising from the fault, breach of contract, tort (including concurrent or sole and exclusive negligence), indemnity, strict liability or otherwise of the other party. [ 32 ] With respect to each of these potential defences, the

interpretation of the contract is complex and intertwined with the facts. I am not sufficiently satisfied and comfortable with the record to conclude that there is no genuine issue requiring a trial. [ 33 ] Accordingly I decline to grant Worley’s application for

summary dismissal. Costs [ 34 ] If the parties cannot agree on a costs outcome they may seek a ruling from me in that regard. Heard on the 12 th day of December, 2019. Dated at the City of Calgary, Alberta this 18 th day of December, 2019. J.T. Prowse M.C.C.Q.B.A. Appearances: Michael J. Bailey, Q.C. Cozen O'Connor LLP for Agrium William J. Kenny, Q.C. Miller Thomson LLP for Colt Engineering Corporation and Worley Canada Services Ltd.