Midnight Sun Management Ltd. v. Four-Way Holdings Ltd., 2011 NUCJ 10

nunavuumi iqkaqtuijikkut NUNAVUT COURT OF JUSTICE La Cour de justice du Nunavut Citation: Midnight Sun Management Ltd. v. Four-Way Holdings Ltd., 2011 NUCJ 10 Date: 20110617 Docket: 08-07-508-CVC Registry: Iqaluit Plaintiff: MIDNIGHT SUN MANAGEMENT LTD. -and- Defendants: FOUR-WAY HOLDINGS LTD. AND FROBUILD CONSTRUCTION LTD. ________________________________________________________________________ Before: The Honourable Mr. Justice E.

Johnson Counsel (Plaintiff): Neil Abbott Counsel (Defendants): Paul Webber Location Heard: Iqaluit, Nunavut Date Heard: January 17-21, 2011 Matters: Judicature Act S.N.W.T. 1998, c. 34 s. 54(2)(a), as duplicated for Nunavut by s. 29 of the Nunavut Act, S.C. 1993, c. 28 . REASONS FOR JUDGMENT (NOTE: This document may have been edited for publication) I. INTRODUCTION [ 1 ] Bill Dolan (Dolan) is the business manager of the Plaintiff. Renault Sage (Sage) is a shareholder and the President of Narwhal Plumbing & Heating Ltd (Narwhal), the largest plumbing contractor in Iqaluit.

Since 1991 Dolan, Sage, and two other persons have been in a partnership that owns the Plaintiff and Narwhal. For the past 20 years Dolan has resided in Alberta while Sage resided in Iqaluit.

[ 2 ] Jacques Belleau (Belleau), his wife and children are the shareholders of the Defendants. Belleau is the President of the both Defendants. Frobuild Construction Ltd. (Frobuild) carried on a construction business from 1979 to 2006 when it changed its business to building materials. Four-Way Holdings Ltd. (Four-Way) is a holding company that owns the five buildings that are the subject matter of this litigation.

The buildings were primarily used as storage warehouses that were leased to tenants. [ 3 ] Until 2002 the business premises of Frobuild and Narwhal were located on adjacent properties and Sage and Belleau were good friends. As Frobuild expanded and erected the five buildings it contracted with Narwhal to provide the heating and plumbing required in those buildings. [ 4 ] Belleau was aware that Narwhal was thinking of expanding its business premises to accommodate its growing business.

Sage was aware that Frobuild was erecting a fifth building on its property bordering the Narwhal building and watched it being constructed in the summer of 2002. [ 5 ] Belleau approached Sage to see if Narwhal was interested in leasing the new building. Sage spoke to Dolan and Dolan suggested they buy the building instead. During negotiations the discussions expanded to include all five buildings and resulted in an informal contract dated June 21, 2002 (informal agreement).

A formal contract (Agreement of Sale) prepared by the lawyers representing the parties was executed on December 13, 2002 and the sale closed in February 2003. [ 6 ] In September 2005, the solicitor for the Plaintiff notified the Defendants that the concrete floors of two buildings were sinking. The Plaintiff demanded that the Defendants repair the defects in floors and the Defendants refused. The Plaintiff repaired the two floors and part of a third one and now seeks to recover the costs expended as well as the anticipated future costs to repair the remaining floors where the sinking is not as severe.

The Defendant counterclaims for the amount unpaid under the mortgage it holds on the property. II. ISSUES A. Was Frobuild negligent in the construction of the concrete foundations for the warehouses? B. Was Four-Way in breach of a warranty or representation in the Agreement of Sale with respect to alleged defects in the floors of the warehouses? C. Did Four-Way make fraudulent misrepresentations about alleged defects in the floors of the warehouses? D. Did Four-Way make negligent misrepresentations about alleged defects in the floors of the warehouses? E. What damages or judgment should be awarded? III.

FACTUAL BACKGROUND [ 7 ] The five buildings were erected between 1989 and 2003 on a vacant lot, legally described as Lot 878 Plan 2152 Iqaluit, particulars of which are as follows: (

i) Building 1326 1989 (building 1) (ii) Building 1328 1991-2 (building 2) (iii) Building 1334 1994 (building 3) (iv) Building 1338 1998 (building 4)

(

v) Building 1336 2003 (building 5) [ 8 ] Although all the buildings have different dimensions, the design of the floors is the same. The method of construction of the floors is known as “Floors-On-Ground” as described in

Section 9.16 of the National Building Code (NBC). In this design the concrete slab floors are not a structural element of the buildings and are not supported by piles. Instead the concrete slab is supported by granular fill sitting on the existing soil. This design enables the slab floor to rise or fall as the soil conditions change underneath. [ 9 ] Frobuild adapted the Floors-On-Ground design to address the unique problems posed by the permafrost soils of Iqaluit. To prevent or retard the melting of the permafrost, Frobuild sprayed polyurethane insulation between the slab and the granular fill.

Frobuild also used this design on other projects in Iqaluit for itself and third parties. The floors were designed so that they could move with the changing conditions in underlying soils without impacting the structural integrity of the exterior walls that were supported by piles. [ 10 ] The design was much cheaper than the alternative of using piles to support the concrete slab but it was not as stable.

Belleau anticipated that the floors might settle over time and become uneven but believed they could still be used as light warehouses. [ 11 ] Belleau, who had two years training as an architect, designed buildings 1 and 2 for use by Frobuild but hired an engineer for the roof trusses. Marcel LeBlanc (LeBlanc), a professional engineer licenced to practice in Quebec and the Northwest Territories, designed buildings 3, 4 and 5.

He incorporated the same Floors-On-Ground design with granular fill and insulation used by Belleau. [ 12 ] Between 1989 and 1999, Four-Way leased the four existing buildings to third parties and received cash flow of about $13,000 per month. Although all the floors settled a little, the tenants did not complain because the unevenness of the floors did not impact the use of the buildings as light warehouses. [ 13 ] A Coca-Cola bottler and distributor was the tenant of building 2 until 1996. When Four-Way regained possession of the building in 1997 it discovered the tenant had cut out concrete from a

section running the length of the slab. It had also modified other parts of the slab to create drainage channels across the floor to the cut out area that was used as a sump pit to drain liquids. [ 14 ] Belleau also discovered that the illegal modifications of the tenant caused significant sagging in the floor slab. Four-Way decided to repair the damage to the floors so that the building could be rented again as light warehouse storage. The concrete trenches were broken up and removed. New granular fill and insulation was put down and new concrete poured.

Four-Way used slab jacking to salvage the remainder of the floor slab. This consisted of spraying foam under the slab to jack it up until it was level. On completion Belleau was satisfied that the floor was restored to its original condition and rented the building to Public Works Canada. [ 15 ] Since Dolan resided in Alberta, Belleau negotiated with Sage who then passed on information to Dolan. Belleau provided them with an appraisal of the buildings that suggested a market value of $1,800,000.

Since negotiations started before building 5 was completed, the Plaintiff requested a term that it be permitted to install the mechanical and heating system. Four-Way agreed to the term and gave the Plaintiff a $200,000 credit toward the purchase price. [ 16 ] Dolan sent Belleau the informal agreement to purchase on June 21, 2002, offering to purchase the buildings for a price of $1,700,000 with the Plaintiff receiving a credit of $200,000 for the installation of the mechanical and heating system.

The balance of the purchase price was to be paid by a cash payment of $100,000 with Four-Way taking back a mortgage of $1,400,000. Four-Way accepted the offer and the lawyers for both parties drafted the Agreement of Sale. [ 17 ] Paragraphs 12 (b)(ii) and 12 (c)(iii) of the Agreement of Sale contain warranty clauses that state the buildings were in good repair and free from defects. [ 18 ] Sage carried out the formal inspection specified in paragraph 10 of the Agreement of Sale.

A. Was Frobuild negligent in the construction of the concrete foundations for the warehouses? (

i) Plaintiff argument [ 19 ] Paragraph 12 of the Statement of Claim alleges Frobuild was negligent in the construction of the floors of all the buildings in four respects. First, it failed to prepare the subsurface for the concrete floors in a proper and efficient manner to prevent thawing of the permafrost and subsequent settling of the concrete floor slabs. Second, it failed to use adequate insulation to prevent the melting of the permafrost beneath the floor slabs. Third, it failed to use thermal siphons or other devices to prevent thawing of the permafrost beneath the floor slabs.

Fourth, in taking inadequate and insufficient measures to correct earlier settlement of the floor slab. [ 20 ] The Plaintiff relies on the expert opinion of Surrinder K. Aggarwal (Aggarwal), a geotechnical engineer with Trow Associates Inc. (Trow), to argue that the Plaintiff did not meet a reasonable standard of care in the construction of the buildings. Aggarwal testified that a person constructing a Floors-On-Ground floor slab in permafrost should plan for two considerations. First, the person should ensure that the heat from the building does not degrade the permafrost.

Second, the person should ensure that the material in the active layer consists of free draining granular material. [ 21 ] To meet the first consideration, it is necessary to insulate between the slab and the ground below or to allow space under the building for the free flow of air. The Floors-On-Ground design method is usually used for warehouses.

The heat that penetrates the insulation is removed by using thermal siphons. [ 22 ] To meet the second consideration, it is necessary to remove the active layer that lies between the start of the permafrost and the bottom of the slab and replace it with engineered fill (crushed rock). [ 23 ] Aggarwal testified that the boreholes drilled by Trow in April indicated that the active layer did not contain engineered fill and was not sufficiently thick to replace the active layer. Using 1.5 metres as the minimum thickness of the active layer, the fill was below the minimum in 3 of the 5 holes.

He also indicated there was no heat removal system used and that the insulation varied in thickness from 75 mm to 150 mm. (ii) Defendant’s argument [ 24 ] The Defendant argues that the thickness of the active layer varies considerably depending on the time of year it is measured. It would be much thinner in April than it would be in July.

Aggarwal acknowledged that the Defendant’s use of a test pit in July would be an acceptable way to determine the thickness of the active layer. [ 25 ] Aggarwal also acknowledged that the only way to determine the actual depth of the active layer was to have the records from when the permafrost was exposed in the test pit. Since these records were not available, he was really speculating on the thickness of the active layer. [ 26 ] The Defendant argued that Aggarwal conceded that insulation does not stop the transfer of heat but rather retards it. The big variable is the temperature inside the buildings.

Building 1338 was kept at a temperature of 5 degrees but experienced very little settling despite having less than 1.5 metres of fill placed in the active layer. Aggarwal also admitted that thermal siphon technology was very expensive and not used in Iqaluit until recently. It was used in large warehouses like the new Canadian North warehouse or the new Inuksugait apartment units. [ 27 ] The Defendants submit that the buildings were built in accordance with the standard local practice that was approved by the City of Iqaluit. It removed the active layer and applied insulation.

It did not use thermosiphons because the technology was not available in Iqaluit. If the technology was available it was not economical for small warehouses. The problems with building 2 were repaired to a reasonable standard. (iii) Analysis

[ 28 ] Belleau had two years education as an architect when he moved to Iqaluit in 1977. He obtained some construction experience working on the Baffin Regional Hospital and then incorporated Frobuild to do work as a construction company. Frobuild obtained a significant number of contracts working for the different governments and became familiar with the specifications for building in the permafrost soils in the Baffin region. Since the specifications required insulation to protect the permafrost, Frobuild entered the business of spraying polyurethane insulation beneath building foundations in 1983.

Because Frobuild was the only contractor doing this type of work in Iqaluit, it worked on most new buildings constructed in the City after 1983. [ 29 ] It also installed the foundation for the firehall in Kimmirut, a parking garage for the airport in Pangnirtung and a number of other buildings.

Belleau became familiar with the government plans and specifications and developed an expertise in installing a northern version of the Floors-On-Ground design mentioned in the NBC, using foam insulation and poured reinforced concrete floor slabs. [ 30 ] In 1989 Belleau decided to erect building 1 to accommodate the growing space requirements of his business. The building was larger than Frobuild needed and it hoped to be able to lease out part of the building. It was divided into four quadrants and at first Frobuild occupied two of them and leased the other two.

Later all four quadrants were leased. [ 31 ] When Belleau constructed building 1 he used the same method he had used for the other buildings erected by Frobuild. (

a) First he dug a test pit to ascertain the level of the active layer; (

b) Then he hired a local contractor to scrape the topsoil from the ground to expose the permafrost; (

c) Next, he had local material called “pit run” placed over the permafrost. This fill material was naturally occurring gravel deposited by the retreating glaciers with the large boulders removed. It was the only source of gravel in Iqaluit and was used by all the contractors; (

d) The pit run was then compacted using a compactor or sometimes a bulldozer; (

e) The fill was deposited until a sufficient height was reached so the local piling contractor Canadrill could move its equipment into to place to install the piles supporting the walls; (

f) Canadrill then drilled holes into the permafrost soil and inserted steel piles. The spaces between the walls of the permafrost soil and the piles were then filled with grout to bind the piles to the permafrost; (

g) The piles were installed at regular intervals around the perimeter of the building and then a steel I-beam was welded to the piles to support the walls of the building; (

h) The underside of the I-beams was sprayed with foam insulation to reduce the transfer of heat from the walls of the building to the piles; (

i) The fill on the inside of the building was compacted leaving about 18 inches from the top of the fill to the level of the top of the walls. About 4 or 5 inches of sand was added to provide a level surface for the foam insulation that was sprayed on top of the sand; (

j) The foam insulation was allowed to set overnight and then wire mesh was placed over the hardened foam insulation; (

k) Concrete was then poured over the foam insulation and wire mesh. As the concrete was poured the mesh was lifted and centered in the middle of the 4-inch thick concrete that would become the floor slab after hardening. The slab was then finished to provide a level concrete floor; (

l) The walls and roof were erected on the I-beam and the building completed. However, the floor was not attached to the walls so that the floor slab could move independently from the walls consistent with the Floors-On-Ground design. [ 32 ] Belleau followed the same method when he put up building 2 without an engineer. [ 33 ] Belleau retained Leblanc to design buildings 3, 4 and 5. Leblanc prepared drawings for building 5 that were marked as exhibit “J”. He testified the plans for the design of buildings 3 and 4 were similar to building 5 and used the same Floors-On-Ground design for the floor as that used by Belleau in buildings I and 2.

[ 34 ] The buildings were constructed over a 14-year period and all experienced some settlement. There were waves in the concrete floors and gaps between the floors and nonbearing party walls. However, except for the special problems caused by the Coke plant in building 2, the settlement issues had no impact on the use of the buildings and there were no complaints by the tenants at the time of the sale in 2003. [ 35 ] The buildings were approved by the City of Iqaluit and were an acceptable method of construction in Iqaluit at the time.

I am satisfied that Frobuild was not negligent in the construction of the floor slabs of the buildings. [ 36 ] Frobuild also repaired the problems with the slab in building 2 that were caused by the Coke plant to a reasonable standard. It reinstated the slab close to its original condition by removing the damaged concrete and slab jacking the undamaged concrete. B. Was Four-Way in breach of a warranty or representation in the Agreement of Sale with respect to alleged defects in the floors of the warehouses? [ 37 ] This issue concerns the

interpretation of warranties and representations in the Agreement of Sale. There are two sub-issues that were argued. First is the applicability of the NBC and the second is whether there were breaches of the warranties and representations concerning defects in the buildings. [ 38 ] In paragraph 12 (

b) of the Agreement of Sale, Four-Way represents that the buildings and fixtures are located, constructed and completed in accordance with: (

i) Development or Building permits validly issued by the Municipal and/or Territorial authorities; (ii) Plans and specifications approved by the Municipal and/or Territorial authorities; (iii) All relevant site plan, development and other municipal agreements, whether registered or unregistered; and (iv) All laws applicable to such construction and completion. [ 39 ] At the examinations for discovery, Dolan admitted that Four-Way had complied with all of these clauses. However, without amending its pleadings, the Plaintiff raised an issue at trial about Four-Way’s compliance with the NBC.

It called evidence from expert witnesses without objection from Four-Way on the application of the NBC to the construction of the floor slabs. It argues that Four-Way did not comply with the NBC and thereby breached subparagraph (iv) of the Agreement of Sale. (

i) National Building Code D.i.1 Plaintiff argument [ 40 ] The Plaintiff relies on the expert evidence of Henry Hutchinson (Hutchinson) to argue that

Part 4 of the NBC was applicable to the construction of the floor slabs rather than

Part 9 as used by Belleau and LeBlanc. [ 41 ] Hutchinson states in his report (s. 5.0, para 2): “The size classification of the building determines which part of the NBC is applicable. Buildings of this type that are less than 600m2 can be constructed predominantly under

Part 9.” [ 42 ] After acknowledging that only building 1 was slightly over 600m2 he went on to state (s. 5.0, para 3):

Regardless of the size classification of a building,

Section 9.15.1.3 (NBC 1985 and sentence 9.15.1.2 of NBC 1990 and NBC 1995) indicates that “Buildings erected on permafrost shall have foundations designed by a designer competent in this field in accordance with the appropriate requirements of

Part 4” (it should be noted that all italicised words have specific

definitions in the NBC. However, in the preceding sentence “designer” is only italicized in the NBC 1995). A foundation is defined in the NBC as: “a system or arrangement of foundation units through which the loads from a building are transferred to supporting soil or rock.”A building is defined in the NBC as “any structure used or intended for supporting or sheltering any use or occupancy”. Accordingly, any concrete floor slab constructed on permafrost would have to conform to the foundation requirements of

Part 4 of the NBC, not

Part 9. [ 43 ] Hutchinson then argues that Four-Way did not comply with

Part 4 of the NBC which resulted in a breach of paragraph 12 (b)(iv) of the Agreement of Sale. D.i.2 Defendant argument [ 44 ] Four-Way does not dispute that the floor slabs were not built in compliance with

Part 4. However, it relies on the expert opinion of Toan Tran (Tran) and LeBlanc to argue that Hutchinson’s

interpretation is incorrect because he did not take into account other sections of the NBC. [ 45 ] Tran argues that because the floor slabs of the buildings are Floors-On-Ground they do not come within the definition of foundations because they do not transfer load from the structure. As a result

section 9.1.6 is applicable. [ 46 ] LeBlanc confirmed that the structural parts of the building were built in accordance with

Part 4 and the floor slabs in accordance

Part 9 stating: All structural members of each building, roof trusses, outside and inside bearing walls were always on pile systems in accordance with

Part 4 of N.B.C. and all ground level floor were treated in accordance with

Part 9 as a floor-on-ground to which the requirement in 9.16.1.1 ob N.B.C. Apply [sic]. [ 47 ] Four-way also argues that it is necessary to look at

Part 2 to understand the underlying rationale of the NBC.

Section 2.1.3.1 states: “Except as provided in subsection 2.1.5,

Part 9 applies to buildings of 3 storeys or less in building height, having a building area not exceeding 600 m2 and used …” [ 48 ] If the building is over 3 storeys or 600m2

section 2.1.2.1 is applicable and Parts 3, 4, 5, and 6 apply. [ 49 ] All the buildings are under 600 m2 except building 1 which is 603 m2. Acknowledging in cross-examination that a moderate tolerance of + or - 1% was acceptable, Hutchinson agreed that 2.1.2.1 was not applicable to the buildings and that 2.1.3.1 was the applicable section. [ 50 ] Four-Way argues that a careful review of sections 9.15 and 9.16 supports the opinion of Toan and LeBlanc. Hutchinson relied on the 9.15.1.2 reference to permafrost as requiring the foundations to be designed by a designer competent in his field in accordance with

Part 4. However the reference to permafrost appears in the

Section that is described by the heading “Footings and Foundations”. Since the type of floors used in the buildings are not mentioned in the definition of foundation they are governed by 9.18 that has the heading “Floors-On-Ground”. [ 51 ] The definition of foundation describes a system or arrangement of foundation units that transfer loads from a building to the soil or rock. The definition of foundation units then elaborates on what is included as a structural member using the words “such as a footing, raft, or pile”.

Four-Way argues that if Floors-On-Ground were a foundation unit it would have been included in the examples. Since it was not included it must be excluded. Hutchinson on the other hand argues that since it was not excluded it may be applicable.

[ 52 ] Four-Way concedes that a slab can be a foundation unit if the slab carries the structural weight of the walls. However, the buildings were designed so that independent piles supported the structural weight of the walls rather than the slab. D.i.3 Analysis [ 53 ] I am satisfied that Four-Way’s

interpretation is the correct one. The NBC envisaged that erecting foundations in permafrost in accordance with

Part 4 would be expensive because it would require the additional costs of a thorough geotechnical investigation. If the investigation confirmed the presence of permafrost, construction would be more expensive because the owner would have to use piles to support the foundation or use thermal siphons to ensure the permafrost remained frozen. As a result it created a cheaper exception for small buildings under 600 m2 and provided special requirements in

Section 9.16. [ 54 ]

Section 9.16.1.1 states: “1) This

section applies to floors supported on the ground or on granular fill that do not provide structural support for the superstructure.” [ 55 ]

Section 9.16.1.2 states: “1) Floors-On-Ground that support loads from the superstructure shall be designed in conformance with

Part 4”. [ 56 ] The key idea that differentiates the sections is structural support. As noted by Hutchinson at p. 6 of his report, slabs can be designed to support structures but they are heavier and more heavily reinforced than the slabs used by Belleau. These are known as “raft slabs”. If raft slabs are used and support the superstructure they must be built in compliance with

Part 4. Because the slabs in the building do not support the structure

Part 9 governs them. [ 57 ] Hutchinson argues that the ambiguity in the definition of foundation unit is resolved by focusing on the word “buildings” in

Section 9.15.1.2 that states: “Buildings erected on permafrost shall have foundations designed by a designer competent in this field in accordance with the appropriate requirements of

Part 4”. [ 58 ] Building is defined as: “Building means any structure used or intended for supporting or sheltering any use or occupancy”. [ 59 ] The use of the word “building” in the definition of foundation and foundation units means that the buildings in question in this litigation come within

Part 4 because they are structures sheltering a use or occupancy and are built on permafrost. [ 60 ] The principles of statutory

interpretation are applicable to subordinate legislation such as a building code. One of the key principles is the presumption of coherence described by Ruth Sullivan : It is presumed that the provisions of legislation are meant to work together, both logically and teleologically, as parts of a functioning whole. The parts are presumed to fit together logically to form a rational, internally consistent framework; and because the framework has a purpose, the parts are presumed to work together dynamically, each contributing something toward accomplishing that goal.

This presumption is the basis for analyzing legislative schemes, which is often the most persuasive form of analysis. The presumption of coherence is also expressed as a presumption against internal conflict. It is presumed that the body of legislation enacted by a legislature does not contain contradictions or inconsistencies, that each provision is capable of operating without coming onto conflict with any other.

[ 61 ] Hutchinson’s

interpretation fails to take into account the purpose of

Section 9.16 and how it fits in with

section 9.15. He relies on the definition of buildings without taking into account the clear exception created for Floors-On-Ground. The

interpretation advanced by the Defendants avoids the conflict or inconsistency created by Hutchinson’s

interpretation. It is more consistent with the apparent legislative intention to create an exception for small buildings because of the high cost of engineering foundations in permafrost. (ii) Breach of warranty D.ii.1 Plaintiff arguments [ 62 ] The Plaintiff relies on warranties and expert evidence in the Agreement of Sale to support its argument that Two-Way breached the contract because defects in the concrete slabs developed after the closing. It claims damages for the cost of repairing 2 slabs and part of another and putting them in the same condition they should have been in at the date of the closing.

It also claims damages for the anticipated costs of repairing the remaining slabs at some point in the future. [ 63 ] Trow conducted a geotechnical investigation for the Plaintiff at the site where the buildings are located. The floor slabs of buildings 1, 2 and 3 showed evidence of extensive settlement and cracking. There was minor settlement at building 4 and no signs of distress at building 5.

Aggarwal supervised the testing and prepared an expert report filed as exhibit “N”. [ 64 ] The Plaintiff argues that Aggarwal’s report proves that the slabs of buildings 1, 2 and 3 are defective in breach of the warranties contained in paragraphs 12 (b)(2) and 12(c)(ii) of the Agreement of Sale. It also relies on paragraph 14 of the Agreement of Sale that provides the warranties survive the completion date and the vendor’s certificate that certifies the representations and warranties are true as of the closing date. [ 65 ] The defects from the Aggarwal report can be summarized as follows: (

a) The concrete in the floors of buildings 3 and 5 was less than the 6-inch minimum specified by LeBlanc (

b) The insulation in buildings 3 and 4 was not sufficiently thick to support the slab and prevent transfer of heat to the permafrost soil (

c) The granular fill beneath the insulation was not sufficiently thick in buildings 1 and 5 (

d) The wire mesh reinforcing for building 1 was installed too low in the concrete to fully bond and was rusting in some locations (

e) The on-site soils beneath the granular fill are not suitable for slab-on-grade floor design due to the presence of organic silt seams, layers and/or pockets in the natural soils at the site (

f) Fairly extensive settlement and cracking of the floor slabs in buildings 1, 2 and 3 (

g) Degradation of the permafrost under all five buildings [ 66 ] The Plaintiffs also rely on the evidence of Dolan and Sage to support the claim that the buildings were defective. Both claim they did not know the buildings were constructed using the Floors-On-Ground and relied on the expertise of Belleau. They observed floor settlement in some of the buildings of up to 10 inches. [ 67 ] The defects were severe enough to convince Public Works Canada to send the letter dated October 23, 2006, at Tab 15 of Exhibit A.

It states that the floor “is now a critical safety hazard”. [ 68 ] While the Plaintiff acknowledges buildings 4 and 5 exhibited only minimal settlement at the date of trial, it argues the same problems will eventually happen because of the inadequate design of the floors. [ 69 ] The Plaintiff argues there was no limitation on the extent or the length of the warranty. There was no “as is where is” clause. There is no restriction on the use of the buildings or the level of heat that could be used and the warranties survive the closing.

[ 70 ] The Plaintiff elected to have Héneault et Gosselin Inc. (HG) repair the defects by installing piles beneath the floors of two buildings and one quarter of a floor of a third building at a cost of $892,727.03, and claims damages in that amount. D.ii.2 Defendants arguments [ 71 ] Four-Way disagrees with the Plaintiff’s

interpretation of the Agreement of Sale. It argues that paragraph 12 simply has a title “Representation and Warranties by the Vendor” and then lists the various obligations. However, it omits the words “represents and warrants to” as found in the title “Representations and Warranties by the Purchaser” in paragraph 15. As a result the list may contain representations or warranties but the vendor does not promise to do anything. [ 72 ] Paragraph 12 (b) (ii) states there are no structural, mechanical or other defects “in the Buildings and/or the fixtures and the Chattels”.

However, it omits any reference to soil or subsoil support like the floor slabs. Therefore, there was no warranty about the condition of the floor slabs. [ 73 ] Four-Way acknowledges that the vendor’s certificate catches some of these problems but it also contains some important limitations. It says the vendor certifies that the representations and warranties are true to the best of its knowledge and belief as of the date of the closing.

If Frobuild was not negligent in the construction of the slabs, the representations and warranties were true at the date of the closing because both Dolan and Sage acknowledge the slabs were in good condition on the closing date and the buildings were ready for occupancy. [ 74 ] The Defendant’s argue that the Plaintiff acknowledges the buildings were constructed in accordance with building plans approved by the City of Iqaluit and passed all government inspections. [ 75 ] In addition, Sage had actual knowledge of the design of the buildings, the manner of their construction, their condition, their utility and their maintenance history.

He worked near the buildings and was in them many times over the years doing maintenance. He observed the construction of building 5 and had every opportunity to inspect the construction. If he did not know the design was Floors- On-Grade he was willfully blind. [ 76 ] Both Sage and Dolan were aware of the problems with building 2 from the Coke plant. Sage and Belleau had many discussions about the problems with that floor and the repairs that were carried out. Dolan admitted he was required to exercise due diligence and yet Sage only inspected three of the five buildings as part of the closing inspection.

Given their knowledge of the problems with building 2, they could have retained an expert to examine the state of the slabs of all the buildings but chose not to do it. [ 77 ] The Plaintiff had the right, under the Agreement of Sale, to demand production of the drawings and the piling certificates before the closing. When they were not provided, Dolan and Sage chose to talk to Canadrill, the contractor who installed the piles that supported the walls of the buildings. Dolan testified that Canadrill confirmed that all the piling was done correctly.

This meeting with Canadrill should have provided them with the knowledge that the floors were not tied to the buildings. If it did not they would have found out by looking at the piling certificate. [ 78 ] This evidence demonstrates willful blindness or lack of interest and supports the Defendant’s

interpretation of the Agreement of Sale. Both parties understood there were issues with the floors but they were in acceptable condition at the closing. The fact that there was some settlement was not considered a defect. While all the buildings had settled to some degree they were suitable for the intended purpose of light warehouses and were producing revenue. [ 79 ] The Defendants relied on the observations contained in the report of HG to support its argument that the settlement was on the low end of the scale and did not render the buildings unfit for their intended purpose as light warehouses.

HG was the contractor that carried out the repairs to the buildings and recorded measurements of the degree of settlement from level in the buildings in 2007. Building 5 where Narwhal is located had sunk 2 inches. Building 4 occupied by Nunastar had sunk two inches. Both the Trow and the Concentric reports indicated there was no evidence of settlement in these buildings.

As a result, no damages have been proven about these buildings and they should not be considered in the analysis of the alleged defects. [ 80 ] HG recorded the settlement in building 2, where the Coke Plant was located and was then occupied by the Department of Public Works, as being 3 and ¾ inches and 2 and ¾ inches. The Defendants argue that this settlement was not significant enough to require

being repaired because there was no evidence of loss of functionality. That building did not require repairs to be done. [81] If the Defendants are responsible for the repairs of buildings 1,2 and 3, it argues it should only pay for the cost of slab jacking andnot the very expensive piling that the Plaintiff used. D.ii.3 Analysis Basic principles of contract

interpretation [82] Geoff Hall writes that contract

interpretation is an exercise in giving effect to the intentions of the parties. This is accomplished byexamining the words used by the parties and the context in which those words have been used. As expressed by the Supreme Court ofCanada in Eli Lilly & Co v Novopharm, (SCC), [1998] SCJ No 59, [1998] 2 SCR 129, where the words of a contractare clear, the interpretative exercise can end with the words. On the other hand it is rare that a court can interpret a document without anyknowledge of the context.

As noted by Goudge J. of the Ontario Court of Appeal in Kentucky Fried Chicken Canada v Scott’s FoodServices Inc, (ON CA), [1998] OJ No 4368, 114 OAC 357 at para 25: “I agree with this approach. While the task of

interpretation must begin with the words of the document and their ordinary meaning, thegeneral context that gave birth to the document or its "factual matrix" will also provide the court with useful assistance.” [83] The exercise of interpreting a contract is objective rather subjective (See Gilchrist v Western Star trucks Inc, 2000 BCCA 70, [2000] BCJ No 164, 73 BC LR (3d) 102). [84] In Toronto-Dominion Bank v Leigh Instruments Ltd (Trustee of), (ON CA), [1999] OJ No 3290, 45 OR (3d)417, the Ontario Court of Appeal described the exercise as follows: [9] The process of determining the meaning to be given to words in a document is governed by the same principles regardless of whetherthe process is engaged in the context of a contract claim or a tort claim.

Those principles are identified by the trial judge at pp. 105-111and recently reviewed by the Supreme Court of Canada in Eli Lily and Co. v. Novapharm Ltd., (SCC), [1998] 2 S.C.R.129 at 166-167. Essentially, the process is captured in the following question: Bearing in mind the relevant background, the purpose of the document, and considering the entirety of the document, what would theparties to the document reasonably have understood the contested words to mean? [85] Where there is a written contract the well-known parole evidence rule must be applied.

In Gallen v Butterley, (BCCA), [1984] BCJ No 1621, 9 DLR (4th), Lambert J. described the rule as follows: “[10] The rule of evidence may be stated in this way: Subject to certain exceptions, when the parties to an agreement have apparently setdown all its terms in a document, extrinsic evidence is not admissible to add to, subtract from, vary or contradict those terms.” [86] As noted by Lambert J., the rule has many exceptions including one that permits evidence to be admitted to dispel ambiguities: [11] So the rule does not extend to cases where the document may not embody all the terms of the agreement.

And even in cases wherethe document seems to embody all the terms of the agreement, there is a myriad of exceptions to the rule. I will set out some of them.Evidence of an oral statement is relevant and may be admitted, even where its effect may be to add to, subtract from, vary or contradictthe document: (

a) to show that the contract was invalid because of fraud, misrepresentation, mistake, incapacity, lack of consideration, or lack ofcontracting intention;

(

b) to dispel ambiguities, to establish a term implied by custom, or to demonstrate the factual matrix of the agreement; (

c) in support of a claim for rectification; (

d) to establish a condition precedent to the agreement; (

e) to establish a collateral agreement; (

f) in support of an allegation that the document itself was not intended by the parties to constitute the whole agreement; (

g) in support of a claim for an equitable remedy, such as specific performance or rescission, on any ground that supports such a claim in equity, including misrepresentation of any kind, innocent, negligent or fraudulent; (

h) in support of a claim in tort that the oral statement was in breach of a duty of care. I do not consider that I am setting out an exhaustive list. I am only showing that appropriate allegations in the pleadings will require that the evidence be admitted. [ 87 ] The parties are presumed to intend the legal consequences of their words . [ 88 ] Courts may use dictionaries to assist in determining the meaning of disputed words . [ 89 ] As noted by Hall, the expressio unius principle is applicable to the

interpretation of contracts where there is an express enumeration of certain items in a document. When this occurs the court may conclude that non-enumerated items are excluded. Omission of words in para 12 [ 90 ] The drafting of paragraphs 12 and 15 is different about the date applicable to the warranties because they serve different purposes.

Section 15 is meant to be as of the date of the execution because it relates to the appropriate corporate action by the Defendants in the execution of the contract.

Section 12 is missing the words “the vendor represents and warrants to the vendor that” found in paragraph 15. However, I think the intent is clear enough from the title of the paragraph to indicate that the Defendant’s were warranting to the Plaintiff about the defects specified in 12 (b)(ii). Meaning of the word “Buildings” [ 91 ] Belleau and Sage are experienced businessmen who have worked in Iqaluit for many years. Dolan is an experienced businessman who managed the affairs of the Plaintiff from Alberta. All were familiar with the Iqaluit construction business.

Sage had operated the Narwhal plumbing business for about 12 years when the negotiations commenced in 2002. Narwhal was located next to building No. 5 that was constructed in 2002. He visited the construction site and eventually installed the heating system. Narwhal had carried out maintenance in the other buildings from time to time and Sage was familiar with the Defendant’s businesses. [ 92 ] Sage testified he was aware of the problems with the floor slab of building 2 and knew it had been repaired. [ 93 ] During the negotiations Sage visited building 2 to satisfy his concerns about the repaired floor.

Sage testified that Belleau told him the floor had been fixed but if he wanted a level floor he could pour concrete over it. He also testified that Belleau stated that the floor was fixed and there would be no problems with it. Sage testified that he was also aware that there had been some slight settlement of the floor in building 3. He asked Belleau about it and Belleau repeated what he had said about pouring concrete over the floor of building 2 to make it even. [ 94 ] Dolan testified that he knew about the problem with the floor of building 2 and was concerned about it.

He told Sage to make sure the floor was good. Dolan confirmed Sage’s evidence about the discussion on the floor of building 3. Dolan recalled that Sage told him that he repeatedly asked Belleau if they would have problems with the floors and Belleau replied there would be no problems with the floors. [ 95 ] Sage testified he only inspected buildings 2 and 3 before the closing. In cross-examination Dolan qualified his evidence about what

Belleau said about the floors of the buildings. At p. 134 of the transcript of the trial evidence, counsel for the defendants reviewed the answers Dolan gave at discovery. The following questions and answers then took place: Q. Do you recall being asked those questions and giving those answers? A. Yes I do. Q. And there was nothing said there, was there, about repeated discussions with Mr. Belleau about floors? A. Was it said there; no. Q. And there was nothing said in this transcript about Mr. Sage reporting to you on discussions with Mr. Belleau about other floors? A.

No. [ 96 ] Dolan’s evidence on this point was hearsay. Sage testified that he talked to Belleau about problems with the floors of building 2 and 3. There was no discussion about problems with the other floors. [ 97 ] I am satisfied that Dolan and Sage were concerned about the floor slab of building 2 because of the problems with the former Coca Cola bottler who rented the building. There was also some noticeable settling in building 3 that was discussed.

However, there was no concern about the other buildings and Belleau’s words were only directed to those two buildings. [ 98 ] Sage and Dolan wanted some assurance from Belleau about the condition of the floor slab of building 2 because they knew it had been repaired. Belleau assured them that the floor had been restored to its original condition and was serviceable. In other words it was suitable for its intended purpose as a light warehouse despite the fact that the floor slab had settled a little and was uneven.

If they were concerned about a smoother floor they could pour some concrete on it to make it more level. The same was true about building 3. [ 99 ] With the comfort of Belleau’s assurances, Dolan and Sage decided to make an offer because it was a good business proposition for them. They would obtain an expanded office warehouse for Narwhal and the other buildings would generate a cash flow of $13,000 per month.

With the mortgage payment of $11,758 the buildings would pay for themselves and build up significant equity over time. [ 100 ] Dolan prepared and sent the informal agreement to Belleau setting out the basic terms of the agreement.

There is no mention of any warranties except the statement: “I am sure there are some other items that need to be covered but the lawyers could deal with those.” [ 101 ] The lawyers for both parties prepared the Agreement of Sale that contained paragraph 12 (b)(ii) where the vendor warranted there were no defects in the buildings. [ 102 ] The defects clause states: “there are no structural, mechanical or other defects in the Buildings and/or the Fixtures and the Chattels (for greater certainty, such defects shall include, without limitation, defects in footings, floors, bearing walls and roofs)”. [ 103 ] This clause is taken from a standard precedent used in real estate transactions in southern Canada.

It is identical to form 2.05B in the textbook by Barry D. Lipton I found in the Court Library and suggests the lawyers were not given any specific instructions about warranting the condition of the floor slabs. Rather, they used a standard precedent that was directed at standard building construction in southern Canada where permafrost is not found and a concrete foundation is an integral part of the structure. [ 104 ] There was no evidence presented that indicated the lawyer for the Plaintiff was given specific instructions to address the concerns over the construction of the floor slabs of buildings 2 and 3.

Given the unique construction issues and concerns of Sage and Dolan, I have

no doubt the standard wording would have been altered to address those concerns if the lawyers had been instructed to address it. [ 105 ] The explanation provided by Sage and Dolan for not giving those specific instructions is that they relied on the expertise of Belleau and his assurances that there would be no problems with the floor slabs.

Both professed ignorance about the floor slabs not being attached to the building walls and neither saw the building plans or piling certificates. [ 106 ] Sage testified that he made no other investigation into the repair of the floor slab of building 2 “because Jacques told me it was done and I trusted him.” Dolan testified that he asked Sage if he could trust Belleau and was satisfied when Sage said he could be trusted. Dolan’s concerns were further satisfied when he found out from Belleau that Canadrill was the piling contractor.

Dolan trusted Canadrill and Belleau confirmed that piles supported the building walls. [ 107 ] Dolan accepted he was required to exercise due diligence about the purchase. He testified that he exercised due diligence by requesting copies of the building plans and piling certificates. The Defendants did not produce them and Dolan acknowledged that the Plaintiff waived this requirement of the Agreement of Sale, stating at p. 118 of the transcript: Q. Well you closed without reviewing the plans? You waived your right? A. Correct, correct. Q. You waived your right to review the plans? A. I mean, Mr.

Webber, those plans would mean nothing to me. I’m not an engineer. Q. You’re the purchaser, sir. A. Correct. Q. It doesn’t matter if you’re an engineer. You have the obligation to do due diligence; correct? A. I have the obligation to ask the person that is selling me that and he signed a warranty that those floors were not good. That is my, that’s my due diligence.

My due diligence is to ask the person who made them if those floors are going to sink and then on top of that he warrantied that those floors would not sink. [ 108 ] If Dolan and Sage did not know the floor slabs were not attached to the building and were not supported by piles they were willfully blind. Both knew there were risks with the floor slabs because they saw the settlement in buildings 2 and 3. However, they were satisfied from their discussions with Belleau that the floor slabs were suitable for use as a light warehouse despite the obvious settlement because the tenants had not complained.

Despite the lack of complaints from the tenants they were concerned about how the floors would perform in the future. They had a choice to seek information from Belleau or to obtain expert advice. They chose to rely on Belleau’s vague assurances that the floor would be okay and accepted the risk there might be problems in the future. If they wanted to transfer this risk to Belleau they should have directed their lawyer to include wording to clarify their understanding about what he meant.

If that had happened Belleau would have been able to negotiate about the issue and would likely have placed some limitation on the life of the floor because he had an entirely different intention about what he meant by saying the floors would be okay. [ 109 ] Belleau knew there was a risk that the settling could get worse but was not sure because he had some good experiences with his construction method. As he stated at p. 144-145 of the transcript: Q. All right.

So the decision you consciously made was to disconnect the floor from the building and allow it to float up and down with the seasonal variances in the sub-soil? A. Yeah. Q. And you did that without any investigation of the sub-soil of course; right? You told me that already. A. Yeah. Q. That's just based upon how you’ve always done things and how you understand---- A. How things have been done across the north by a number of people with success and without success. Q. Right.

A. Without, without a definite answer as to why there was a success and why there was no success. Q. There’s a risk. A. We owned at the same time at the other end of that street, about 20,000 square feet of similar warehouse spaces and except for about 500 square feet, we had great success. So who’s to tell and how to tell why there was a success in one place and why there was a failure in the other. We have the same situation in what those five buildings were, unlike we said at the earlier proceedings you know, since 2005, two are perfectly - - Q. For now, for now. A.

Two are perfectly stable. [ 110 ] As noted in p. 135-136 of the transcript, Belleau thought the warranty was included to protect the Plaintiff from defects that appeared from the date the agreement was signed until the closing date. His thinking was revealed at p. 169 when he was questioned about why he made an offer to pay $50,000 to fix the problem with building 2. Q. Why offer fifty thousand? Why not a hundred thousand? Was it a question of money or was it just throw away money? A. It wasn’t throw away, no money is thrown away money. Q.

Was the fifty thousand dollars based on a reasonable estimate of repair from someone? A. I would say so, mine. Q. Whose? A. I remember being - - Q. Who would fix these floors for fifty thousand? A. Would fix the area of the surface that was in my mind the worst. Q. Well you fixed the surface once? A. Yes. Q. When - - A. In ’97. Q. Well, right, it didn’t work. A. Eight years later. Q. It didn’t work? A. Eight years later. Q. Why would you fix something that didn’t work before in the same way? A.

The only reasonable method to do it in terms of cost. [ 111 ] Belleau’s approach was based on the economics of construction in permafrost. You can spend a lot more money as the Plaintiff did by using piles to support the floor or you can use the much cheaper method he did but with the expectation that you might have to spend more money at a later date to slab jack the floor. He thought eight years was a good result for the repair work that he did on building 2 in 1997.

He expected the Plaintiff to do the same thing if repairs were required. [ 112 ] Belleau appears to have believed that the Plaintiff could have taken the same approach to satisfy the complaint of Public Works Canada. Kudlik Construction Ltd. estimated the cost to slab jack the floor at $206,609 and Belleau was prepared to contribute $50,000 toward that cost.

However, the negotiations broke down when the Plaintiff insisted that repairs be carried out over a four-year period on all the buildings even though the other tenants had not complained. [ 113 ] I am satisfied that the parties had entirely different intentions and expectations about the floor slabs when they entered the informal agreement. Dolan gave no instructions to his lawyers about drafting the warranty clause to address his concerns. Both parties accepted the risks and are saddled with the wording produced by the lawyers.

[ 114 ] After applying the canons of contract

interpretation I accept the Defendant’s

interpretation. [ 115 ] The words foundation, soils or sub-soils are not mentioned and indicate an intention to exclude them on the expressio unius principle. [ 116 ] The words “footings”, “floors” and “bearing walls” are potentially applicable to assist in interpreting the meaning of building. [ 117 ] The Oxford English Dictionary (Oxford) defines footing as follows: “The foundation, ground, or basis on which anything rests or from which it springs” [ 118 ] This definition is consistent with the NBC that defines a foundation as: “a system or arrangement of foundation units through which the loads of a building are transferred to supporting soil or rock.” [ 119 ] Foundation units are defined as: “one of the structural members of the foundation of a building such as a footing, raft or pile.” [ 120 ] Oxford defines “floor” as: “The framework or structure of joists, etc. supporting the flooring of a room” and “A surface on which something rests; a foundation” [ 121 ] The use of the word “joists” suggests typical wooden floor construction rather than concrete.

The alternate wording that uses the word “foundation” makes it similar to the definition for footings. [ 122 ] The characteristic similar to both “footings” and “floors” is the idea of supporting something that is placed on top of it. It is also consistent with the word “bearing wall”. [ 123 ] I am satisfied that the defects clause was intended to apply to those parts of the buildings that supported the above ground structures. It would take much clearer drafting to turn these words into an unlimited guarantee about all the floor slabs.

It is significant that the legal guarantee given by HG for the piling installed to support the floor slabs is limited to five years, with ten years for the stability of the piles. [ 124 ] Since the floor slabs do not support the building they are not caught by the defects clause. As result there is no need for me to decide whether there were any defects in the floor slabs. Oral representations and collateral contract [ 125 ] I am satisfied that Belleau’s representations with respect to buildings 2 and 3 were a factor that induced Sage and Dolan to enter into the contract.

They are potentially enforceable by the Plaintiff as a collateral contract. As stated by Fridman :

The

interpretation of a written contract (and, therefore, proper ascertainment of the obligations of the parties thereunder) may be complicated by the alleged existence of some additional extrinsic agreement between the parties, affecting the meaning or scope of the written instrument. What is involved is some statement made by one party to the ultimate contract inducing the other party to enter into such contract. The statement in question, if not a term of the contract, could be nothing more than a mere representation. It would therefore be legally ineffective, unless the statement were made fraudulently.

To give such statements legal consequence, English courts evolved the idea that in appropriate circumstances statements of this kind could have independent contractual status. They were not terms of the contract eventually concluded between the parties. They were more significant than representations inducing such contract. They could amount to a distinct collateral contract to the main contract made between the maker of the statement and the one to whom the statement was made. [ 126 ] However, the parties signed the Agreement with full knowledge that it contained an “entire agreement” clause.

Para. 22 states: This agreement and the schedules attached hereto constitute the entire agreement between the Vendor and the Purchaser in respect of the Purchased Assets. Each of the parties acknowledges that, except as contained in this Agreement, there is no representation, warranty, collateral agreement or condition (whether a direct or collateral condition or an express or implied condition) which induced it to enter into this Agreement. [ 127 ] This type of clause is enforceable where the parties are sophisticated and have access to legal advice .

An entire agreement clause also appears to be broader than the parole evidence rule. [ 128 ] This clause is a complete defence to any claim by the Plaintiffs that they were induced to enter into the contract by the oral representation of Belleau concerning the condition of the floor slabs. C. Did Four-Way make fraudulent misrepresentations about alleged defects in the floors of the warehouses? (

i) Plaintiff arguments [ 129 ] Paragraph 9 of the Statement of Claim pleads that the good repair representations in the Agreement of Sale were fraudulent because the foundations had previously settled.

It is clear that this pleading was directed at the problems with building 2 and the representations made by Belleau. [ 130 ] The Plaintiff argues that Belleau knew there was problem with the floor of building 2 and Belleau concealed it from Sage and Dolan knowing they were relying on his expertise and knowledge of the construction of the floor and the repair that was carried out. (ii) Defendant arguments [ 131 ] The Defendants argue that they fully disclosed to the Plaintiff that some of the floors had settled. In particular they disclosed the problems with the floor of building 2.

Although there are issues with the contractual representations, they argue the oral representations were not fraudulent. (iii) Analysis [ 132 ] As noted in Di Castri, the essence of fraud or as it is also known at common law, an action for deceit, is that the representor did not believe the statement was true. To successfully defend the action the representor must show that he or she had reasonable grounds to believe and did believe the representation was true. [ 133 ] In 688350 Ontario Ltd v Piron, [1994] OJ No 2844, 51 ACWS (3d) 1378 , Epstein J. noted a tendency by courts to find fraud where

the vendor of a property has concealed latent defects. [134] Di Castri described a patent defect as one that arises either to the eye or by necessary implication from something that is visible tothe eye. On the other hand a latent defect is one that is not discoverable by mere observation. The general rule for a patent defect that isdiscoverable by inspection is caveat emptor (buyer beware). Caveat emptor also applies to a latent defect if the vendor had no knowledgeof it.

However, if he had knowledge of the defect and conceals it from the purchaser he is liable in fraud. [135] Fraudulent concealment about a foundation occurred in Domokos v Phillips, [1996] NBJ No 410, [1996] NBR (2d) (Supp) No 1.In that case the purchasers noticed a repaired crack on the outside of the foundation wall. They asked the vendor if water was cominginto the garage and he assured them “there was nothing to worry about, there is no water coming in anywhere”. After the closing thepurchasers discovered there was a problem with water leakage in the foundation.

McLellan J. held the vendor liable for a fraudulentmisrepresentation because the defendant made the statement when he did not honestly believe it to be true. [136] I am satisfied that Belleau did not fraudulently conceal a defect in the foundation of building 2. Sage and Dolan were both aware ofthe problems with the foundation. Sage visited and inspected the building with Belleau and knew the foundation had been repaired. Sagecould see the floors were uneven and it concerned him.

He asked Belleau about it and Belleau assured him that, even though the floorswere uneven, the building was fit for its intended purpose as a light warehouse. I am satisfied that Belleau honestly believed that he hadsatisfactorily repaired the foundation of the building for its intended purpose of being used as a light storage warehouse. As he testified,all the floor slabs of the buildings were designed to allow some movement that was difficult to predict. There was mixed success inIqaluit with the method of construction and he was surprised to discover the problems two years later. D.

Did Four-Way make negligent misrepresentations about alleged defects in the floors of the warehouses? (

i) Plaintiff argument [137] The Plaintiff also pleaded in the alternative in paragraph 9 of the Statement of Claim that Belleau made a negligentmisrepresentation about the state of repair of the floors. It argues that the representation was inaccurate because he knew or ought tohave known the floors had previously settled. (ii) Defendant argument [138] Four-Way argues that it became apparent in examination for discovery that this pleading referred solely to the floor slab in building2.

It argues that the past history of the building was fully disclosed and as a result the representation was therefore not made negligently. (iii) Analysis [139] In Carman Construction Ltd v Canadian Pacific Railway Co, (SCC), [1982] SCJ No 49, (1982), 136 DLR (3d)193, the Supreme Court of Canada accepted and applied the principles arising out of Hedley Byrne & Co v Heller & Partners, [1963] 2All ER 575, [1964] AC 465. [140] To establish liability, the Plaintiff must establish there was a duty of care and a negligent misrepresentation. [141] Belleau and Sage and Dolan were experienced businessmen with equality of bargaining power.

Sage was aware of the history ofthe buildings. There was no special relationship that created a duty of care. [142] I am satisfied that the representation was in respect to the buildings 2 and 3. Sage was concerned about the repair and wanted someassurance from Belleau that the repair had solved the settlement problem. Belleau gave that assurance believing that he had fixed theproblem.

[ 143 ] The Plaintiff has not satisfied the requirements for a negligent misrepresentation. E. What damages or judgment should be awarded? [ 144 ] The Plaintiff’s action is dismissed and the Defendant Four-Way is granted judgment on its counter-claim. IV.

CONCLUSION [ 145 ] The amount of the counterclaim owing at February 1, 2011, was $1,451,476.50 and Four-Way is granted judgment for that amount. [ 146 ] Counsel may speak to costs and prejudgment interest at a date to be arranged with the Administrator, Court Scheduling. [ 147 ] The money paid into court by the Plaintiff will be paid out to Four-Way with interest on the unpaid balance at the prime business rate in effect on January 1, 2011, pursuant to section 54(2)(

a) of the Judicature Act S.N.W.T. 1998 c. 34, as duplicated for Nunavut by s. 29 of the Nunavut Act, S.C. 1993, c. 28 . Dated at the City of Iqaluit this 17th day of June, 2011 ___________________ Mr. Justice Earl D. Johnson Nunavut Court of Justice