2018 NLCA 42, 2018 NLCA 42

Community Mental Health Initiative Inc. (appellant) v. Summit Lounge Ltd. (first respondent) and Power Development and Consulting Inc. (second respondent) and Jacques Whitford Stantec Limited (third respondent) and Stantec Consulting Ltd. (fourth respondent) (14/90) Indexed As: Community Mental Health Initiative Inc. v. Summit Lounge Ltd. 2018 NLCA 42 3 C.A.N.L.R. 150 Court of Appeal of Newfoundland and Labrador Welsh, Harrington and Hoegg JJ.A. July 23, 2018

Summary: The appellant, Community Mental Health Initiative Inc , entered into an agreement to purchase property from the respondent Summit, containing a condition that Summit provide CMHI with an Environmental Site Assessment verifying that the property was free from any environmental contaminants. Summit retained the respondent Stantec to conduct an environmental assessment of the property and prepare a report, which it did.

After the transaction closed, CMHI became aware of petroleum contamination on the property and commenced litigation against Summit, Power Development, and Stantec alleging that the environmental assessment report contained misstatements and incomplete information. Stantec sought

summary dismissal of CMHI’s claim which was granted by the

summary trial judge. The judge found that the wording in the disclaimer portion of the terms of the contract between Summit and Stantec, excluded Stantec’s liability to third parties. Held: Appeal dismissed. Harrington J.A. (Welsh and Hoegg JJ.A. concurring):

Summary judgment motions must be granted whenever there is no genuine issue requiring a trial. The

summary trial judge held, citing the contents of the Stantec Report, that it had been prepared for the sole benefit of Summit’s owner. He further held that there was no duty of care owed by Stantec to CMHI on two grounds: (

i) there was no transmission of its report directly to CMHI; and (ii) the express disclaimer clause, known to CMHI, precluded any duty of care being owed by Stantec to CMHI. The trial judge found that the evidence did not support CMHI’s claim that Stantec had provided a copy of its report to a CMHI executive. Moreover, while courts have consistently recognized a duty of care for negligent misrepresentation, there is the right of the issuer of such statements to disclaim any liability or a duty of care.

Stantec, being a professional services firm, had turned its mind to the issue of third party reliance on its work product. In its retainer letter and in its ultimate report to its client, Stantec was careful to set out a disclaimer of liability. The intent of the disclaimer language is clear to an objective reader. CMHI had knowledge of the disclaimer; it was provided with a copy of the Stantec report by its real estate agent prior to the closing of the transaction. The disclaimers therefore fully preclude any claim by CMHI against Stantec.

The trial judge did not err in finding there was no genuine issue for trial.

Cases cited: Noble v. Business Development Bank of Canada, 2013 NLCA 63 Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87 Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd., [1963] 2 All E.R. 575 Haig v. Bamford, (SCC), [1977] 1 S.C.R. 466 Edgeworth Construction Ltd. v. N.D. Lea & Associates Ltd., (SCC), [1993] 3 S.C.R. 206 Wolverine Tube (Canada) Inc. v. Noranda Metal Industries Ltd. (1995), (ON CA), 26 O.R. (3d) 577 (C.A.) Kokanee Mortgage M.I.C. Ltd. v. Burrell, 2018 BCCA 151 Counsel: Dean A. Porter, for the appellant; No appearance by the first and second respondents; Ruth E.

Trask, for the third and fourth respondents. This appeal was heard on February 14, 2018 before Welsh, Harrington and Hoegg JJ.A. The following judgment was delivered on July 23, 2018 by Harrington J.A. for the Court. ______________________________________________________________ Harrington J.A.: INTRODUCTION [1] The appellant, Community Mental Health Initiative Inc. (CMHI) appeals the decision of a

summary trial judge granting asummary trial application made by two related engineering companies, the third and fourth respondents collectively referred to hereafteras Stantec, pursuant to rule 17A of the Rules of Supreme Court, 1986. CMHI’s claim against Stantec alleged negligence in the conductof an environmental assessment of a parcel of land purchased by CMHI from the first respondent, Summit Lounge Ltd. (Summit). Thesummary trial judge found that there was no genuine issue for trial and dismissed CMHI’s claim against Stantec.

For the reasons whichfollow, I would dismiss CMHI’s appeal to this Court with costs to Stantec. BACKGROUND [2] CMHI, a not-for-profit entity, entered into an agreement with Summit to purchase property on which CMHI intended toconstruct public housing for persons with mental illness. The agreement contained a condition that Summit provide CMHI with a Phase 1 Environmental SiteAssessment (ESA) verifying that the property was free from any potential or actual environmental contaminants.

To fulfill its obligationto obtain an environmental assessment report, Summit and its owner, Charles Conway, retained Jacques Whitford Limited, now Stantec,to conduct an environmental assessment of the property and prepare a report. There were two contractual agreements between Stantecand Charles Conway/Summit which stipulated that Charles Conway/Summit was the client and that the assessment by Stantec wasprepared solely for them. [3] Correspondence from Stantec to Mr.

Conway outlined the terms and conditions by which an environmental assessment reportwould be prepared for the purpose of facilitating the sale of Summit’s property to CMHI. The Stantec Project Agreement, whichcontained detailed terms and conditions, was enclosed with the correspondence. A key provision of the agreement between Stantec andSummit stated that third parties were barred from relying on the Stantec Report.

The Stantec disclaimer read in material part: Third Party Reliance Only the Client shall be entitled to rely on the Documents provided by Jacques Whitford [Stantec] in the performance of the Services. The Documents relate solely to the Services for which Jacques Whitford has been retained and shall not be used or relied upon by theClient or any third party for any variation or extension of the Services, any other project or any other purpose. Any unpermitted use bythe Client or any third party is strictly prohibited. [4]

Section 7 of the Stantec Report set out the following disclaimer:

This report has been prepared for the sole benefit of Mr. Charles Conway. The report may not be used by any other person or entity without the express written consent of Mr. Charles Conway and Jacques Whitford [Stantec]. All parties are subject to the same limit of liability as agreed to in the contract under which the work was completed. Any use which a third party makes of this report, or any reliance on decisions made based on it, are the responsibility of such third parties.

Jacques Whitford [Stantec] accepts no responsibility for damages, if any, suffered by any third party as a result of decisions made or actions taken based on this report. (Emphasis added.) [ 5 ] CMHI engaged its own consultant, Power Development and Consulting Inc. (Power Development), in the proposed transaction. [ 6 ] Stantec carried out its assessment and a report was submitted to Mr. Conway and Summit. The transaction closed. The prospect of litigation arose when CMHI became aware of petroleum contamination on the property it had purchased from Summit.

CMHI commenced litigation against Summit, Power Development, and Stantec. CMHI’s claim against Stantec alleged that the environmental assessment report prepared for Summit by Stantec contained misstatements and incomplete information. After pleadings closed and discoveries had taken place, Stantec filed a

summary trial application seeking dismissal of CMHI’s claim. CMHI and Power Development responded alleging that the

summary trial proceeding proposed by Stantec was not appropriate and requested that the dispute be the subject of a full trial. [ 7 ] Stantec’s application for a

summary trial was allowed by the

summary trial judge. He found that the issue was a narrow and straightforward one and appropriate for a

summary trial resolution. He dismissed CMHI’s claim against Stantec with costs, citing the precise and clear wording in the disclaimer portion of the terms of the contract between Summit and Stantec. CMHI appeals the dismissal of its claim. ISSUES [ 8 ] The issues on appeal are as follows:

(1) Did the

summary trial judge err in law or in fact in finding that there was no genuine issue for trial?

(2) Did the

summary trial judge err in law or in mixed fact and law in finding that it would not be unjust to decide issues by

summary trial? STANDARD OF REVIEW [ 9 ] In Noble v. Business Development Bank of Canada , 2013 NLCA 63 at para. 33 this Court outlined the standard of review to be applied regarding a commercial matter under appeal: The standard of review applicable in this case is that set out in Housen v.

Nikolaisen , 2002 SCC 33 , [2002] 2 S.C.R. 235 : questions of law are reviewable on the standard of correctness; questions of fact are not to be disturbed unless the trial judge made a palpable and overriding error; and questions of mixed fact and law are subject to the standard of palpable and overriding error unless the trial judge made an extricable error of law, in which case the standard of correctness applies. ANALYSIS [ 10 ] Rule 17A.01(1) of the Rules of the Supreme Court , 1986 provides for

summary trials: A plaintiff or defendant may, after defence has been filed and at any time prior to the proceeding being placed on a trial list, apply to the Court with supporting affidavit material or other evidence for

summary trial seeking judgment on or dismissal of all or part of the claim in the statement of claim, as the case may be. [ 11 ] Rule 17A.03 provides for judgment in a

summary trial: Where the Court is satisfied that there is no genuine issue for trial with respect to a claim or defence, the Court shall grant

summary judgment accordingly.

(2) Where the Court decides that there is a genuine issue with respect to a claim or defence, a judge may nevertheless grant judgment in favour of any party, either upon an issue or generally, unless (

a) the judge is unable on the whole of the evidence before the Court on the application to find the facts necessary to decide the questions of fact or law; or (

b) it would be unjust to decide the issues on the application. [ 12 ] The Supreme Court of Canada restated the criteria for the grant of

summary judgment motions in Hryniak v. Mauldin , 2014 SCC 7 , [2014] 1 S.C.R. 87 , at paragraphs 47–50 . Karakatsanis J. wrote for the Court: [47]

Summary judgment motions must be granted whenever there is no genuine issue requiring a trial (Rule 20.04(2)(a)). In outlining how to determine whether there is such an issue, I focus on the goals and principles that underlie whether to grant motions for

summary judgment. Such an approach allows the application of the rule to evolve organically, lest categories of cases be taken as rules or preconditions which may hinder the system’s transformation by discouraging the use of

summary judgment. [48] The Court of Appeal did not explicitly focus upon when there is a genuine issue requiring a trial. However, in considering whether it is against the interest of justice to use the new fact-finding powers, the court suggested that

summary judgment would most often be appropriate when cases were document driven, with few witnesses and limited contentious factual issues, or when the record could be supplemented by oral evidence on discrete points . These are helpful observations but, as the court itself recognized, should not be taken

as delineating firm categories of cases where

summary judgment is and is not appropriate. For example, while this case is complex, with a voluminous record, the Court of Appeal ultimately agreed that there was no genuine issue requiring a trial. [49] There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for

summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result. [50] These principles are interconnected and all speak to whether

summary judgment will provide a fair and just adjudication. When a

summary judgment motion allows the judge to find the necessary facts and resolve the dispute, proceeding to trial would generally not be proportionate, timely or cost effective. Similarly, a process that does not give a judge confidence in her conclusions can never be the proportionate way to resolve a dispute. It bears reiterating that the standard for fairness is not whether the procedure is as exhaustive as a trial, but whether it gives the judge confidence that she can find the necessary facts and apply the relevant legal principles so as to resolve the dispute. (Emphasis added.) [ 13 ] The

summary trial evidence was to the effect that Ed Power of Power Development, acting for CMHI, negotiated the property purchase transaction with the seller, Summit. There was no finding by the

summary trial judge that the realtor, George Wiseman, was acting as a dual agent for Summit and CMHI. Rather, Mr. Wiseman was found to have been acting solely for Summit, the property owner selling the property. [ 14 ] The

summary trial judge found that Stantec had released its report solely to its client, Summit. He further held that neither CMHI nor Power Development had any involvement with Stantec at any point during the conduct of the environmental assessment process, and that Summit’s owner signed Stantec’s work order thereby expressly accepting the terms and conditions of Stantec’s Project Agreement. [ 15 ] The

summary trial judge held, citing the contents of the Stantec Report, that it had been prepared for the sole benefit of Summit’s owner, Charles Conway, the seller. He further held that there was no duty of care owed by Stantec to CMHI on two grounds: (

i) there was no transmission of its report directly to CMHI; and (ii) the express disclaimer clause, known to CMHI, precluded any duty of care being owed by Stantec to CMHI. [ 16 ] CMHI argued on appeal that it had had no opportunity to examine Mr. Stephen Moores of Stantec during the

summary trial when the process does permit a responding party to seek leave to examine a material witness. In Hryniak , the Supreme Court of Canada held that the process permits oral evidence before a motions judge to assist the court in making findings relevant to the process. [ 17 ] However, the

summary trial record confirms that Mr. Moores of Stantec was subject to discovery examination by CMHI’s counsel and further that Mr. Moores’ principal, Keith Rowe, Project Manager of Stantec, gave

summary trial testimony in accordance with rule 17A.02(1). Counsel for CMHI had access to the viva voce evidence of Mr. Rowe and Mr. Moores’ discovery transcript as part of the

summary trial process. The evidence of Messers Rowe and Moores of Stantec was accepted by the

summary trial judge as confirmation that Stantec personnel had no contact with Mr. Power or Julie Crouse of CMHI. [ 18 ] CMHI alleged that Stantec had provided a copy of its report to a CMHI executive. The

summary trial judge held that the evidence did not support any such claim by CMHI. He further held that even if a copy of the Stantec report had been received by CMHI, this would not alter the effect of the express disclaimer of liability by Stantec. [ 19 ] The

summary trial judge concluded at paragraph 39: In any event, the assertion by Ms. Crouse [of CMHI] requesting and receiving the report from Stantec, in my opinion, is of little relevance. The respondents suggest that transmission of the report to CMHI by Stantec is an acknowledgment that CMHI is the client and, in some manner, that the disclaimer of liability by Stantec is no longer operative. No authority was provided to support this position. Notwithstanding the manner and time that the report was received, CMHI would have known that it had no remedy against Stantec when it read the contents of the report.

If CMHI had wanted the reliance terms expanded prior to the purchase of the property, it could have initiated further discussions with Stantec. [ 20 ] The

summary trial judge further held that there was no genuine issue for trial between CMHI and Stantec for reasons outlined at paragraph 43: In keeping with the direction of the Supreme Court of Canada, there will be no genuine issue requiring a trial when the judge is able to arrive at a fair and just determination on the merits of the application. The issue under review is narrow and fairly well defined and has been considered by authorities, some of which are binding on this Court.

CMHI and Power Development cannot dispute that while courts have consistently recognized a duty of care for negligent misrepresentation, there is the right of the issuer of such statements to disclaim any liability or a duty of care. Counsel did not attack the wording of the two disclaimers of responsibility clauses … The intent set out in these clauses is sufficiently precise and unambiguous. Stantec did not conduct itself in any manner that would disentitle its reliance on the disclaimer clauses.

As well, CMHI and Power Development did not provide any facts showing a genuine issue for trial. (Emphasis added.) [ 21 ] The

summary trial judge did not err in deciding and dismissing CMHI’s claim against Stantec. Stantec, being a professional services firm, had turned its mind to the issue of third party reliance on its work product. In its retainer letter and in its ultimate report to its client, Stantec was careful to set out a disclaimer of liability. The intent of the disclaimer language is clear to an objective reader. Importantly, CMHI had knowledge of the disclaimer; it was provided with a copy of the Stantec report by its real estate agent prior to the closing of the transaction.

If the disclaimer was found to be ineffective as against CMHI, it would be difficult to imagine even in hindsight what steps Stantec might have taken to protect itself against potential liability to a stranger, i.e. CMHI, with which it had no

contractual or business relationship. [22] The

summary trial judge relied on the decision of the House of Lords in Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd.,[1963] 2 All E.R. 575 in concluding that Stantec had no liability to CMHI. The ratio in Hedley Byrne was applied by the Supreme Courtof Canada in Haig v. Bamford, (SCC), [1977] 1 S.C.R. 466. [23] As well, the Supreme Court of Canada in Edgeworth Construction Ltd. v. N.D. Lea & Associates Ltd., (SCC),[1993] 3 S.C.R. 206 held that an express disclaimer of liability can be an effective bar against a claim by a third party who relied onwork in the knowledge of the disclaimer.

Permitting third parties to rely on reports which are expressly protected by a disclaimer wouldundermine the ability of contracting commercial parties to govern their own affairs. [24] The issue in the Edgeworth case was how a disclaimer of responsibility in a contract between the British Columbia governmentand a contractor affected a duty of care owed by a third party engineering firm. The government had retained an engineering firm to draftplans for roadwork, but the engineering firm was not a party to the contract.

The Supreme Court of Canada confirmed that thedisclaimer clauses could be effective in negating a duty of care to a third party. [25] The principles set out in Edgeworth were also applied by the Ontario Court of Appeal in Wolverine Tube (Canada) Inc. v.Noranda Metal Industries Ltd. (1995), (ON CA), 26 O.R. (3d) 577 (C.A.). [26] The proceeding involved an environmental consultant who prepared an environmental assessment for three of his client’sproperties, which the consultant expected to be sold.

The contract between the consultant and his client contained the followingprovision: Reports or memoranda resulting from this assignment are not to be used in whole, or in part, outside your organization without priorwritten permission. [27] The Ontario Court of Appeal held that a subsequent purchaser could not maintain a claim in negligence against a consultant inlight of the disclaimer clause which essentially negated any duty of care to the plaintiff’s purchaser. [28] The

summary trial judge held that the disclaimer clause in Wolverine was substantially similar to the one applied by Stantec inthe current proceeding. [29] A similar conclusion was reached in Kokanee Mortgage M.I.C. Ltd. v. Burrell, 2018 BCCA 151 (see paragraphs 38-40), recentlydecided by the British Columbia Court of Appeal. [30] The wording of the disclaimer clause was not challenged before the

summary trial judge, nor has it been challenged in theappellant’s submissions before this Court. Regardless of whether CMHI received a copy of the Stantec report from Stantec, which wasnever conclusively proven, this would not be sufficient to overcome the intent and effect of the express disclaimer of liability of whichCMHI was aware. The disclaimers fully preclude any claim by CMHI against Stantec. CONCLUSION [31] In the result, the

summary trial judge did not err in finding that there was no genuine issue for trial or in dismissing CMHI’sclaim against Stantec on

summary trial. Accordingly, I would dismiss the appeal. [32] Stantec shall have its costs of the appeal against CMHI. Appeal dismissed.