2003 NBCA 78, 2003 NBCA 78

COURT OF APPEAL OF NEW BRUNSWICK 62/03/CA ENBRIDGE GAS NEW BRUNSWICK INC., a body corporate (Defendant) APPELLANT ENBRIDGE GAZ NOUVEAU-BRUNSWICK INC., corps constitué, (défenderesse) APPELANTE - and - - et - MODERN CONSTRUCTION

(1983) LIMITED, a body corporate (Plaintiff) RESPONDENT MODERN CONSTRUCTION

(1983) LIMITED, corps constitué, (demanderesse) INTIMÉE - and - ROBINSON CONSTRUCTION COMPANY LIMITED, a body corporate and MRM TECHNICAL GROUP INC., a body corporate (Defendants) RESPONDENTS - et - ROBINSON CONSTRUCTION COMPANY LIMITED, corps constitué, et MRM TECHNICAL GROUP INC., corps constitué, (défenderesses) INTIMÉES Enbridge Gas v. Modern Construction, 2003 NBCA 78 Enbridge Gaz c. Modern Construction, 2003 NBCA 78 CORAM: The Hon.

Chief Justice Drapeau The Honourable Justice Turnbull The Honourable Justice Larlee CORAM: L’honorable juge en chef Drapeau L’honorable juge Turnbull L’honorable juge Larlee Appeal from a decision of: Savoie, J. April 3, 2003 Jugement de première instance : Savoie, j.c.b.r. le 3 avril 2003 Appeal heard: September 11, 2003 Appel entendu : le 11 septembre 2003 Judgment rendered: November 13, 2003 Jugement rendu : 13 novembre 2003

Reasons for judgment by: The Hon. Chief Justice Drapeau Motifs de jugement : L’honorable juge en chef Drapeau Concurred in by: The Honourable Justice Turnbull The Honourable Justice Larlee Souscrivent aux motifs : L’honorable juge Turnbull L’honorable juge Larlee Counsel at hearing: For the Appellant Enbridge Gas New Brunswick Inc.: David Duncan Young For the Respondent Modern Construction

(1983) Limited: Randy A. Roth For the Respondent Robinson Construction Company Limited: No one appeared For the Respondent MRM Technical Group Inc.: Deno P. Pappas, Q.C. Avocats à l’audience : Pour l’appelante, Enbridge Gaz Nouveau-Brunswick inc. : David Duncan Young Pour l’intimée Modern Construction

(1983) Limited : Randy A. Roth Pour l’intimée Robinson Construction Company Limited : personne n’a comparu Pour l’intimée MRM Technical Group Inc. : Deno P. Pappas, c.r. THE COURT The appeal is dismissed without costs. LA COUR L’appel est rejeté sans dépens. The following are the reasons delivered by DRAPEAU, C.J.N.B. [ 1 ] This is an appeal, with leave, from a decision of Justice Savoie of the Court of Queen’s Bench allowing the plaintiff, Modern Construction Ltd., to amend its Statement of Claim.

Enbridge Gas New Brunswick Inc., one of three defendants in the underlying action, appeals on the ground that some of the amendments allowed purport to bring into play the Mechanics’ Lien Act , R.S.N.B. 1973, c. M-6 (“the Act ”), a statute that, in its submission, is wholly inapplicable.

[ 2 ] After hearing counsel for Enbridge Gas as well as counsel for one of the respondents, MRM Technical Group Inc., we dismissed the appeal without costs. We indicated at that time that brief written reasons would follow. The Context [ 3 ] The essential facts are not disputed, at least for present purposes.

Accordingly, the following account borrows liberally from the parties’ written submissions. [ 4 ] On August 31, 1999, the Province and, inter alia , Enbridge Gas entered into a General Franchise Agreement authorizing the latter to distribute gas and provide related customer services in accordance with the Gas Distribution Act, 1999 S.N.B., c. G-2.11. On July 7, 2000, the Board of Commissioners of Public Utilities established by s. 2(1) of the Public Utilities Act , R.S.N.B. 1973, c.

P-27 , issued a permit to Enbridge Gas for the construction of the infrastructure required for distribution of natural gas in various New Brunswick municipalities, including the City of Moncton and the Town of Dieppe. [ 5 ] On August 14, 2000, Enbridge Gas entered into Municipal Operating Agreements with the City of Moncton and the Town of Dieppe.

Under the terms of those agreements, each municipality granted non-exclusive licenses to Enbridge Gas to enter upon all “highways” then, or at any time thereafter, under its jurisdiction and to install, construct, maintain, replace, remove, operate and repair a gas distribution system under those “highways”. [ 6 ] Three weeks earlier, on July 26, 2000, Enbridge Gas had contracted with MRM Technical for the construction of the gas pipeline under the “highways” in Moncton and Dieppe. MRM subsequently sub-contracted the work under its contract with Enbridge Gas to Robinson Construction Ltd.

The latter, in turn, hired Modern Construction to provide the necessary asphalt and paving. [ 7 ] Modern Construction alleges that it has not been fully paid for its services and materials. [ 8 ] By Notice of Action with Statement of Claim attached dated February 15, 2001, Modern Construction commenced the action giving rise to the present appeal against Enbridge Gas, Robinson Construction and MRM Technical alleging, inter alia , that they had acted together in directing it to supply various services and materials related to the gas distribution system in Moncton and Dieppe and that, in the alternative, the defendants had been unjustly enriched by the services and materials it provided.

In the further alternative, Modern Construction claimed damages against the three defendants for breach of trust, fiduciary duty and contract. [ 9 ] In its submission, Enbridge Gas emphasizes that it did not enter into any written contract or agreement to which either Modern Construction or Robinson Construction are named parties. Enbridge Gas adds that it had no relationship, contractual or otherwise, with either Modern Construction or Robinson Construction and that it did not request any materials or labour from them.

That position requires a close look at the precise meaning and effect of s. 4 of the Law Reform Act , S.N.B. 1995, c. L-1.2, which purports to reform the law of privity of contract as it developed at common law. However, whether that provision has any application to the case at hand need not be determined here. [ 10 ] Not surprisingly, Modern Construction’s submission is diametrically opposed to that of Enbridge Gas.

Modern Construction contends that its services and materials were provided to the gas distribution project in Moncton and Dieppe at the request of Enbridge Gas, MRM Technical and Robinson Construction.

Modern Construction asserts in its Respondent’s Submission that the three defendants worked as a “collective” on the project and that they represented that the project was “secured by appropriate security including trust funds and holdbacks as evidenced by the obligations of Enbridge to protect suppliers on the project in its master contract with MRM.” In that regard, Modern Construction points to the following provisions of the agreement between Enbridge Gas and MRM Technical: 4.2 Payment of Contract Compensation

a. Subject to the provisions of the Contract Documents (specifically including those set out in

Section 8 of the General Conditions) and in accordance with applicable legislation and regulations, including the obligation on the Company [Enbridge] to deduct a holdback of fifteen percent (15%) in accordance with the MLA [ Mechanics' Lien Act ], the Company: i. make monthly payments in Canadian funds to the Contractor on account of the Contract Compensation; ii. upon Total Performance of the Work as certified by the Inspector, pay to the Constructor the unpaid balance of the Contract Compensation then due... 7.1 Insurance, Workers' Compensation and Bond(

s) Required Before Work Commenced The Constructor shall not commence performance of the Work until the Company has received from the Constructor insurance, Workers' Compensation and bond(

s) in accordance with the requirements of Sections 12.2, 12.4 and 12.5 hereof . If the Company is not in receipt of these documents within a time period satisfactory to the Company, the Constructor shall be deemed to be in default of the Contract Documents and the Company may, without prejudice to any other right or remedy the Company may have, terminate the agreements contained therein without liability on its part to compensate the Constructor... 8.2 Payments b. Subject to obligations on the Company in respect of holdbacks under the MLA, the Company, will, no later than thirty (30) days after the receipt of an application for payment from the Constructor, submitted in accordance with

Section 8.2(

a) hereof make payment to the Constructor in accordance with the provisions hereof. c. Total Performance The Company will, no later than ten (10) days after the receipt of an application from the Constructor for payment upon Total Performance of the Work, make an inspection and assessment of the Work to verify the validity of the application. When the Company finds that Total Performance of the Work has been reached the Company shall, within five (5) days, make payment to the Constructor of the remaining monies due under the Contract Compensation less any required holdbacks.

The release of the remaining holdback monies shall become due and payable on the day following the expiration of the statutory limitation period stipulated in the MLA provided that the Constructor has submitted to the Company a sworn statement that all accounts for labour, subcontracts, products, construction machinery, equipment and other indebtedness which may have been incurred by the Constructor in the Total Performance of the Work and for which the Company might in any way be held responsible or liable, have been paid in full except holdback monies properly retained ... 12.5 Bonding... [Emphasis added] [ 11 ] As well, Modern Construction makes the following related allegations in its written submission: 6.

The Affidavit of Documents of MRM [Technical] dated October 26, 2001 sets out various accounting records between the parties thru to the date of October 23, 2001 depicting security holdbacks and retentions on the project. 7. A-40 and A-41 of the Affidavit of Documents of MRM [Technical] are relevant to the issue of "holdbacks/retentions" and "security"

on the project. These relate to the alleged statement of account between Robinson [Construction], Enbridge [Gas] and MRM [Technical] as at October 23, 2001. The retention (or holdback) depicted as at October 23, 2001 as held by Enbridge [Gas] on MRM [Technical] documentation was $859,979.27 (US Funds)(A-40). The retention depicted as at October 23, 2001 as held from Robinson [Construction] by MRM [Technical] on MRM documentation was $384,133.25 (US Funds)(A-41). 8.

Robinson [Construction] has consented to the claim of Modern [Construction] and has agreed that the goods and services provided by Modern [Construction] were reasonably required by all the Defendants in the construction of the gas pipeline and that the value of the goods and services set out in Modern [Construction's] Statement of Claim is valid. 9. The [parties’] adoption of a holdback regime is further evidenced by the series of documents attached as Exhibit "G" to the Affidavit of David Holt. 10.

The holdback was increased by 10% (to 25%) as stated in correspondence of MRM [Technical] dated April 25, 2001: Due to the increasing evidence of your vendors and suppliers not having been paid for work on the projects, it is necessary for MRM Technical Group, Inc. to increase the retention on invoices going forward. This was discussed between Mr. Robinson and Mr. Muller, our respective councils, the week of April 9th. Per that discussion we will hold an additional ten percent retention on current and future invoices.

As per your discussion on April 24th with Dale Anderson and Brad Olson, we are requesting a written copy of your proposed process that Robinson Construction will implement to satisfy all existing vendor debts pertaining to the Enbridge Natural Gas System. 11. Robinson [Construction] supports the decision of allowing amendment. 12. The Affidavit of Paul Gotto [MRM Technical] confirms a holdback regime as agreed to by the parties.

Paragraph 13 states: Under clause 4.2 of the Construction Agreement, Enbridge [Gas] was to deduct 15% from progress payments to MRM [Technical] as required by the Mechanics' Lien Act ... [Emphasis added] [ 12 ] On April 3, 2003, Modern Construction applied for leave to amend its Statement of Claim by adding the following paragraphs: 10.

Pursuant to the terms of their contract or contracts and the various parties' undertakings and commitments and the special nature of the project between Enbridge Gas and MRM, Enbridge Gas agreed to, and did, holdback 15% of the contract compensation in accordance with the Mechanics' Lien Act , R.S.N.B. 1973, ch. M-6 and amendments thereof. 11. Further, pursuant to the terms of the parties' contract or contracts and the various parties' undertakings and commitments, MRM agreed to, and did, holdback further trust funds of approximately $300,000 ( U.S. funds) for the protection of Modern's claim. 12.

In the alternative, Modern states that pursuant to the terms of the contracts and the special nature of the project Enbridge Gas and MRM agreed to, and did, subject themselves to the Mechanics' Lien Act , supra, and in particular to the trust provisions as set out therein. Modern states that the holdback and/or trust monies in the possession of Enbridge Gas, MRM and Robinson are therefore held in trust for the benefit of Modern. 13. In the further alternative, Modern states that by virtue of their actions, and in particular obligations by the parties to provide security

including holdback security pursuant to the Mechanics' Lien Act , supra, and the provision of other bond security and other holdbacks, Enbridge Gas and MRM and Robinson have thereby created a constructive trust. Modern pleads and relies upon the equitable principle of unjust enrichment. Modern states that the various holdback monies and bond security in the possession of Enbridge Gas, MRM and Robinson are therefore held in trust for the benefit of Modern. 17.

In the alternative a declaration that the holdback monies and bond security in the possession of Enbridge Gas, MRM and Robinson are the subject of a trust for the benefit of Modern, and an order for payment of said monies to Modern. [ 13 ] As noted in the introduction to these reasons, Justice Savoie allowed the application to amend the Statement of Claim. [ 14 ] Enbridge Gas’ appeal impugns only Justice Savoie’s decision to permit the inclusion of paragraphs 10, 12 and 13 in Modern Construction’s Statement of Claim.

Analysis and Decision [ 15 ] Rule 27.10 of the Rules of Court provides that unless prejudice will result that cannot be compensated by costs or an adjournment, the court may, in its discretion, grant leave to amend any pleading on such terms as may be just. The rule in question goes on to obligate the court to allow any amendment that is necessary for the purpose of determining the real questions in issue. The jurisprudence on point supports the view that amendments to pleadings that comply with the rules of pleadings found in Rule 27 should be only very rarely refused.

That approach is shaped by the direction articulated in Rule 1.03, namely that the rules are to be liberally construed to secure the just, least expensive and most expeditious determination of every proceeding on the merits.

As well, there is ample authority for the proposition that any decision to allow an amendment to a pleading, being discretionary in nature, calls for the application of a standard of appellate review impregnated with great deference for the judgment exercised in first instance. [ 16 ] That said, an amendment to a pleading designed to bring into the mix a clearly irrelevant fact or inapplicable statutory provision must be denied. See Braid Estate v. Whistler River Adventures Ltd. , [2000] B.C.J. No. 2442 (S.C.; Dorgan J.)(Q.L.).

While there is no specific New Brunswick rule of court on point, that proposition flows logically, inter alia , from the following:

(1) Rule 27.06(1), which requires that every pleading contain a concise statement of the material facts relied upon by the party pleading for his or her claim or defence;

(2) Rule 23.01(1)(

b) that empowers the court to strike out any pleading that does not disclose a reasonable cause of action or defence;

(3) Rule 27.09, which permits the striking out of any pleading, or other document, or any part thereof on the ground that it is frivolous or may prejudice, embarrass or delay the fair trial of the action; and

(4) Rule 27.06(14) that obligates a party to plead the specific

section that he or she is relying upon when the cause of action or defence is founded upon an Act . It would make no sense to allow an amendment that would then be struck out pursuant to any of those rules. [ 17 ]

Section 2 of the Mechanics Lien Act provides that the statute as a whole does not apply “in respect of a highway or any work done or caused to be done thereon by a municipality, or in respect of material furnished therefor.” The statute’s definitional provision, s. 1 , states that “highway” includes, inter alia , any road, road allowance, street, lane, thoroughfare and public place appropriated to the public use.

None of the provisions of the Act , including the trust-creating provisions, has application to any municipal street or any work done or caused to be done by a municipality, or in respect of material furnished therefor. See Western Surety Co. v. National Bank of Canada (2001), 2001 NBCA 15 (CanLII) , 237 N.B.R. (2d) 346(C.A.), leave to appeal denied, [2001] S.C.C.A. No 187 (QL).

The ratio decidendi of Western Surety is set out at paras. 48-52, 61 and 63: 48 Western Surety submits that Justice Miller erred in law in determining that s. 3(1) of the Act , the trust-creating provision, does not apply in respect of a highway or any work done or caused to be done thereon by a municipality, or in respect of material furnished therefor. In a judgment delivered from the bench, we rejected Western Surety's submission and advised the parties that written reasons would follow.

These are the reasons. 49 … [T]he question that must be resolved is whether the Act , including its trust-creating provision, applies to the work done and the material furnished by Alexander Frizzell's subcontractors and suppliers in connection with any of its bonded contracts. 50 Some legislatures have seen fit to provide that the trust-creating provision in their Mechanics' Lien legislation extends to highways, work done thereon by a municipality and material furnished in connection with that work. In its wisdom, the New Brunswick legislature

has chosen to follow a different course. Western Surety's submission ignores that important difference in legislative approach. 51 Western Surety cites Canadian Bank of Commerce v. McAvity & Sons Ltd., 1959 CanLII 9 (SCC) , [1959] S.C.R. 478 in support of the view that s. 3 of the Act has application to the work and material that went into the performance of Alexander Frizzell's bonded contracts.

In my view, that reliance is misplaced. 52 In McAvity, the Supreme Court of Canada held that the trust creating provision of the Mechanics' Lien Act, R.S.O. 1950, c. 227 extended to highways because, unlike this Province's legislation, the Ontario statute merely precluded the extension of the statutory lien to highways.

Section 2 of the Ontario statute read as follows: Nothing in this Act shall extend to any public street or highway, or to any work or improvement done or caused to be done by a municipal corporation thereon. [Emphasis added] ... 61

Section 2 [of the N.B. Act] does not purport to prevent certain parts of the Act , such as its lien-creating provision, from "extending" to certain lands, as was the case for the provision of the Ontario statute at issue in McAvity. Rather, s. 2 dictates, in unequivocal language, that the Act , as a whole, has no application in respect of: (1) a highway or (2) any work done or caused to be done thereon by a municipality, or (3) in respect of material furnished therefor. Significantly, s. 2 does more than make the Act inapplicable to a highway; it makes it inapplicable to certain work and material.

Obviously, McAvity is distinguishable and can have no application here. ... 63 While the wisdom of the New Brunswick legislature's policy choice may be open to debate (See K. Scott & R.B. Reynolds, Scott and Reynolds on Surety Bonds (Scarborough: Carswell, 1994), at pp. 6-35 and 6-36), this Court's duty is not. It must give effect to the will of the legislature. To be plain, no court is at liberty to rewrite legislation simply because it does not manifest the policy choices that it would have made. See Barrette v. Crabtree Estate, supra, Bérubé v.

Lévesque (1999), 1999 CanLII 5047 (NB CA) , 219 N.B.R. (2d) 8 (C.A.) , G.V. La Forest, "Some Impressions on Judging" (1986), 35 U.N.B.L.J. 145, at pp. 148-9 and G.V. La Forest, Judicial Lawmaking, Creativity and Constraints, in Gérard v. La Forest at the Supreme Court of Canada 1985-1997, (Canadian Legal History Project, Faculty of Law, University of Manitoba, 2000), at p. 4. [ 18 ] To the extent that the work done or materials furnished by Modern Construction are covered by s. 2 of the Act , the latter’s trust-creating provisions, as such, do not come into play.

If the amendments to the Statement of Claim purported to allege otherwise, they would be objectionable and could not stand. However, Modern Construction concedes that the Act , as such, is not determinative of the rights and obligations of the parties.

It argues that the amendments allowed in first instance merely allege that the facts – including the contractual arrangements entered into by the parties and their actions in furtherance of those contractual arrangements – lead to the conclusion that a trust-creating “regime”, akin to the one mandated by the Act , was assented to and governs the legal rights and obligations of the parties. At paragraph 17 of its Respondent’s Submission, Modern Construction explains the pith and substance of the amendments in these terms: ...

The amendments and reference to the Mechanics’ Lien Act are to clarify the holdback/retention regime of the parties thru their own contracts and commitments. The Mechanics’ Lien Act does not create these alleged rights. The parties adopted the regime themselves. ... [ 19 ] The Motions Judge described the purport of the proposed amendments to the Statement of Claim in the following terms: The Plaintiff wishes to refer in its Statement of Claim to the Mechanics Lien Act .

As I understand the proposed amendment, the Plaintiff does not allege that it has a claim under that Act but it wishes to refer to it as a clarification of the regime it alleges was created in the relationship between the parties. On that basis , I will allow the amendment, ... (Emphasis added) [ 20 ] It is settled law that a pleading ought not to be struck on the ground that it does not disclose a reasonable cause of action unless that conclusion is plain and obvious. The leading case on point is Hunt v. Carey Canada Inc., 1990 CanLII 90 (SCC) , [1990] 2 S.C.R. 959.

In that case, at para. 33, Wilson J., writing for a unanimous Court, formulates the following test to govern the application of provisions that empower courts to strike out pleadings that fail to disclose a reasonable cause of action : Thus, the test in Canada governing the application of provisions like Rule 19(24)(

a) of the British Columbia Rules of Court is the same as the one that governs an application under R.S.C. O. 18, r. 19: assuming that the facts as stated in the statement of claim can be proved,

is it "plain and obvious" that the plaintiff's statement of claim discloses no reasonable cause of action? As in England , if there is a chance that the plaintiff might succeed, then the plaintiff should not be "driven from the judgment seat". Neither the length and complexity of the issues, the novelty of the cause of action, nor the potential for the defendant to present a strong defence should prevent the plaintiff from proceeding with his or her case.

Only if the action is certain to fail because it contains a radical defect ranking with the others listed in Rule 19(24) of the British Columbia Rules of Court should the relevant portions of a plaintiff's statement of claim be struck out under Rule 19(24)(a). [ 21 ] Courts of this Province have consistently applied that test to the determination of motions under Rule 23.01(1)(b). See Lévesque v. Picard and Minister of Justice (1984), 1984 CanLII 4360 (NB KB) , 53 N.B.R. (2d) 169 (Q.B.; Creaghan J.), varied (1985), 1985 CanLII 4216 (NB CA) , 66 N.B.R. (2d) 87 (C.A.), RGL Properties Inc. et al. v.

Co-Operators Development Corp. (1992), 1992 CanLII 7017 (NB KB) , 129 N.B.R. (2d) 238 (Q.B.; Jones J.), Petrovics v. Canada et al. (1999), 1999 CanLII 33012 (NB KB) , 209 N.B.R. (2d) 237 (Q.B.; Russell J.), leave to appeal denied (1999), 1999 CanLII 32666 (NB CA) , 210 N.B.R. (2d) 109 (C.A.). In my view, that test should govern the determination that is required here. In making that determination, courts should accommodate drafting deficiencies by a generous reading of the contested text. [ 22 ] Paragraphs 10, 12 and 13 of the Amended Statement of Claim are indeed very poorly drafted.

Modern Construction readily concedes that they overstate the allegations and claims that it wishes to make. This Court has repeatedly emphasized the importance of properly drafted pleadings. In Parlee v. McFarlane (1999), 1999 CanLII 9446 (NB CA) , 210 N.B.R. (2d) 284 (C.A.), at para. 33 , the Court pointed out that the rules of pleading are primarily designed to ensure that the relevant issues are raised and clearly defined for the court and the litigants. See also ADI Ltd. v. 052987 N.B.

Inc. (2000), 2000 NBCA 55 (CanLII) , 232 N.B.R. (2d) 47 (C.A.), per Turnbull J.A. for the majority, leave to appeal denied [2001] S.C.C.A. No. 48 (Q.L.), Canadian Imperial Bank of Commerce v. Lush (2002), 2002 NBCA 58 (CanLII) , 251 N.B.R. (2d) 291, per Larlee J.A. for the Court and Holmstead and Watson's, Ontario Civil Procedure , Watson and Perkins, eds. Vol. 3 (Scarborough: Carswell, 1993)(looseleaf; updated to June 2003) at pp. 25-10 and 25-11. Opaque pleadings breed confusion and uncertainty.

Their legacy is invariably a waste of precious time and resources. [ 23 ] That said, the true reach of paragraphs 10, 12 and 13 of the Amended Statement of Claim is circumscribed by paragraph 17 of Modern Construction’s Respondent’s Submission and by the Motions Judge’s brief reasons for judgment.

At this stage of the proceedings, it is not plain and obvious to me that paragraphs 10, 12 and 13 of the Amended Statement of Claim thus explained and understood allege irrelevant facts or a trust-creating regime that cannot, as a matter of indisputable law, be judicially recognized at trial. [ 24 ] In closing, I should emphasize that these reasons are not intended to offer any opinion on the difficult legal issues properly raised by the Amended Statement of Claim and the impact, if any, of s. 4 of the Law Reform Act on the legal rights and obligations of the parties.

Those issues need to be clearly defined and closely examined by the parties in pre-trial proceedings and, if necessary, fully debated at trial. Disposition [ 25 ] For the foregoing reasons, Enbridge Gas’ appeal was dismissed at the hearing. The Court denied costs to the successful respondent, Modern Construction, because sloppy drafting on its part fully justified the concerns that drove Enbridge Gas to challenge the Motions Judge’s decision by way of the present appeal. _____________________________ J. ERNEST DRAPEAU, CHIEF JUSTICE OF NEW BRUNSWICK WE CONCUR:

______________________________ WALLACE S. TURNBULL, J.A. ______________________________ MARGARET E.L. LARLEE, J.A.