Wingold Construction Co. Ltd. v. Kramp, [1960] SCR 556

Supreme Court of Canada

Wingold Construction Co. Ltd. v. Kramp, [1960] S.C.R. 556

Date: 1960-04-26

Wingold Construction Company Limited (Plaintiff) Appellant;

and

W. A. Kramp (Defendant) Respondent.

1960: March 17, 18; 1960: April 26.

Present: Kerwin C.J. and Locke, Cartwright, Martland and Judson JJ.

ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO.

Contracts—Sale of goods—Breach of warranty of quality—Acceptance of goods—Damages confined to diminution of price contract—Whether buyer entitled to consequential or special damages—The Sale of Goods Act, R.S.O. 1950, c 345, ss. 34, 51(3).

A buyer who accepts goods inferior in the quality contracted for is entitled, pursuant to s. 51(3) of the Sale of Goods Act, to damages for breach of warranty, these damages being the difference between the value of goods at the time of delivery and the value they would have had if they had answered to the warranty. However, such buyer is not entitled to consequential or special damages for loss over and above that difference, when such loss was not one directly and naturally resulting, in the ordinary course of events, from the breach of warranty, but one resulting from the use made by the buyer of the goods with full knowledge of their quality.

APPEAL from a judgment of the Court of Appeal for Ontario1, reversing a judgment of Spence J. Appeal dismissed.

B. Grossberg, Q.C., for the plaintiff, appellant.

A. E. Moloney, Q.C., for the defendant, respondent.

The judgment of the Court was delivered by

[Page 557]

Judson J.:—The appellant sued the respondent for damages for breach of warranty arising from a contract for the sale of sand fill. The appellant accepted 831 loads of this fill and spread it in the basement of a building which it had under construction. It then refused to accept further deliveries and sued for damages. The respondent counterclaimed for $4,155, being the contract price for the 831 loads at $5 per load. The judgment at trial awarded the appellant damages of $5,466.99. On the counterclaim, judgment was given for $1,925, being the contract price for 385 loads out of 831, which, according to the learned trial judge, were in substantial compliance with the contract. The breach of warranty was therefore successfully set up in extinction of the price for 446 loads. The Court of Appeal2 allowed the appeal and dismissed the action. The respondent abandoned his appeal against the amount awarded on the counterclaim. The appellant now appeals to this Court from the dismissal of its action.

The question in issue is whether the appellant in the circumstances of this case is entitled to recover consequential damages for breach of warranty over and above the ordinary measure of the difference in values between the goods contracted for and those delivered and accepted. In my opinion there can be no such recovery here and the appeal fails for the reasons given in the majority judgment of the Court of Appeal.

Laidlaw J.A. accepted the finding of the learned trial judge that the parties entered into a contract for the supply of a good grade of sand fill but not the finding that the contract was for such fill to the extent necessary to fill up the foundation of the building. On the contrary, his conclusion, with which I agree, was that the contract was not an entire one but was a sale by the respondent and a purchase by the appellant of each separate load. The superintendent of the appellant accepted the loads as they were brought on the premises and dumped into the building. The nature of the fill was plain to be seen as it was delivered load by load and the case was not one for consequential damages. Damages in diminution of the price had already been awarded by the reduction of the counterclaim from $4,155 to $1,925.

[Page 558]

The appellant was engaged in the construction of an addition to an existing industrial building in the Township of Scarborough. It had excavated a basement with an area of approximately 40,000 square feet and had poured the concrete walls to a height of four feet above ground level. It proposed to put in the fill and then to erect the steel frame, walls and roof, install the services and, finally, pour the concrete floor. The respondent, having purchased 10 acres of vacant land in the Township of Scarborough, proposed to remove a hill from this property for the purpose of making it saleable and it was from this hill that the sand fill was to come to supply the contract. The respondent and the president of the appellant met at the site of the sand hill for the purpose of inspection and they there agreed upon a price of $5 per load. There is no doubt that the appellant knew that the sand was to come from this hill. There was no other possible source. Although there is much to be said for the inference that what the appellant bought was sand fill as it might be encountered by the shovel during the course of the removal of the hill, for the purpose of these reasons I take the finding of the learned trial judge, also adopted by Laidlaw J.A. in the Court of Appeal, that the contract was for the supply of a good grade of sand fill.

The respondent began delivering loads of the fill on September 16, 1955, and continued until October 21, 1955, when the appellant refused to accept further deliveries. From September 16 to September 30, 483 loads were delivered, and from October 1 to October 21, 348 loads. As each load was delivered it was dumped in the excavation and spread by a bulldozer and then rolled and watered to provide a firm foundation for the concrete floor. The appellant's superintendent of construction, or someone acting for him, signed for all the loads as they arrived at the site. The condition of each load was plain to be seen, both in the truck and after it had been dumped in the excavation. Everything that was delivered was spread and used. The superintendent of the appellant said that the first 150 loads were of good quality but that subsequent loads began to contain a mixture of sand and clay. He made some complaints to the truck drivers and when about half of the quantity had been delivered, he made a complaint to the respondent. He said that the

[Page 559]

respondent promised that the quality would improve. The appellant rejected no deliveries until October 21, when three loads were rejected. No further loads were delivered by the respondent. The appellant purchased the rest of the fill that it needed from another source.

The month of October was a wet month. The excavation was still uncovered and the rain turned the fill into a quagmire, which later froze in the month of November. In February, 1956, the appellant began to remove this frozen mass after being put to considerable expense to make it workable. Some of the fill was removed and it was replaced by about 100 loads of sand fill purchased from another source.

The appellant's first contention is that it did not accept these goods and that, at most, there was a mere receipt. In spite of continual grumbling about the deterioration in the quality of the loads, the appellant spread the material in the basement and subjected it to a certain amount of treatment in order to provide a firm foundation for the concrete floor. In these circumstances, it seems to me to be beyond argument, and it has been so found both by the trial judge and in the Court of Appeal, that there was an acceptance of these goods within the meaning of s. 34 of the Sale of Goods Act and that the appellant's claim must, in consequence, be confined to damages for breach of warranty.

Sections 51 and 52 of the Act read:

51. (1) Where there is a breach of warranty by the seller, or where the buyer elects, or is compelled, to treat any breach of a condition on the part of the seller as a breach of warranty, the buyer is not by reason only of such breach of warranty entitled to reject the goods, but he may,

(a) set up against the seller the breach of warranty in diminution or extinction of the price; or

(b) maintain an action against the seller for damages for the breach of warranty.

(2) The measure of damages for breach of warranty is the estimated loss directly and naturally resulting in the ordinary course of events, from the breach of warranty.

(3) In the case of breach of warranty of quality such loss is prima facie the difference between the value of the goods at the time of delivery to the buyer and the value they would have had if they had answered to the warranty.

(4) The fact that the buyer has set up the breach of warranty in diminution or extinction of the price does not prevent him from maintaining an action for the same breach of warranty if he has suffered further damage.

[Page 560]

52. Nothing in this Act shall affect the right of the buyer or the seller to recover interest or special damages in any case where by law interest or special damages may be recoverable, or to recover money paid where the consideration for the payment of it has failed.

The Act deals only with general damages and merely saves the law relating to the right of the buyer to recover special damages. In the present case, the learned trial judge has found that the breach of warranty is one of quality. The Court of Appeal has accepted this finding. The loss is therefore governed by subs. (3) of s. 51 and this has been fully covered in the counterclaim. The ratio of the majority judgment of the Court of Appeal is that the appellant is not entitled to consequential or special damages because its loss was not one directly and naturally resulting, in the ordinary course of events, from the breach of warranty, but one resulting from the use made by the appellant of the goods with full knowledge of their quality. The goods might have been rejected load by load if they were not in accordance with the contract. Instead of doing this the appellant accepted almost 700 loads after beginning to complain about quality. Whatever loss the buyer suffered resulted from its failure to mitigate its damage. It chose to use the goods with knowledge of the risk to be run from adverse weather conditions before the roof was on the building. In these circumstances, a buyer is not entitled to consequential or special damages. I adopt the statement of law on this point from Benjamin on Sale, 8th ed., p. 1005:

To enable a buyer, who has resold or otherwise dealt with the goods, to recover consequential damages for a breach of warranty over and above the ordinary measure of the difference in values, it is necessary that the buyer should not have been negligent in failing to detect the inferiority of the goods before he resells or deals with them, for otherwise the damages claimed do not "directly and naturally" result from the seller's breach of warranty, but are due to the buyer's own negligence. The circumstance that the defect in the goods is not readily discoverable is of course very material.

Statements to the same effect are to be found in 29 Halsbury, 2nd ed., p. 203; Williston on Sales, Revised ed., vol. 3, s. 490; and in Merrill v. Waddell3.

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The appeal should be dismissed with costs.

Appeal dismissed with costs.

Solicitors for the plaintiff, appellant: Levinter, Grossberg, Shapiro, Mayzel & Dryden, Toronto.

Solicitors for the defendant, respondent: Moloney & Hess, Toronto.