Giffels v. Eastern Construction, [1978] 2 SCR 1346

Supreme Court of Canada

Giffels v. Eastern Construction, [1978] 2 S.C.R. 1346

Date: 1978-02-07

Giffels Associates Limited (Defendant) Appellant;

and

Eastern Construction Company Limited (Defendant) Respondent;

and

Dominion Chain Company Limited (Plaintiff);

and

Roof Engineering and Inspection Co. Limited (Defendant).

1977: October 19, 20; 1978: February 7.

Present: Laskin C.J. and Martland, Ritchie, Spence, Pigeon, Dickson and Beetz JJ.

ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO.

Negligence—Contribution—Building contract—Contribution as between general contractor and engineer as joint-tortfeasors—Guarantee period of general contractor—The Negligence Act, R.S.O. 1970, c. 296, s. 2(1).

The issues before the Supreme Court arose from an action by the plaintiff Dominion against Giffels and Eastern for damages for a defective roof on a new plant constructed by Eastern as general contractor. Giffels was the engineer for the project under a contract with the plaintiff to prepare specifications and to supervise the construction. A separate contract was entered into between the plaintiff and Eastern as the general contractor. The trial judge found that because of certain construction practices by Eastern in the winter of 1964-65 which involved keeping the building as closed in as possible and using artificial heat, high humidity and the resulting condensation adversely affected the roof which blistered or buckled in 1970. He also found that responsibility for this lay with both Giffels and Eastern. Giffels had approved the roof as satisfactory on November 3, 1965, and Eastern’s one-year guarantee had expired on September 30, 1966. As to Eastern however he found that the plaintiff had not brought itself within the terms of the contract and that the action against it would have to be dismissed but for The Negligence Act. This reservation by the trial judge concerned the liability of Eastern not to the plaintiff but to Giffels for contribution and in the result Eastern, although not directly

[Page 1347]

liable to the plaintiff was to bear 75 per cent of the damages awarded to the plaintiff against Giffels. The Court of Appeal dismissed Giffels’ appeal but allowed by a majority that of Eastern, the majority reasons holding that it was a precondition of Giffels’ right to contribution that Eastern be found liable to the plaintiff and that s. 2(1) of the Act applied only as between tortfeasors and that in this case Giffels and Eastern were under a duty of care in a tort sense apart from their liability in contract. On further appeal Giffels contended that (1) the plaintiff could properly pursue a remedy in tort for negligence, despite the existence of contracts with Giffels and Eastern out of which the plaintiff’s relationship with them arose; (2) this made s. 2(1) of The Negligence Act clearly applicable but, in any event, that provision was wide enough to embrace breach of contractual duty to exercise reasonable care as well as breach of duty in tort of negligence; and (3) it was not a precondition of the right to invoke s. 2(1) for contribution that there be a finding of liability on Eastern’s part to the plaintiff.

Held: The appeal should be dismissed.

It is not necessary to come to a final determination on whether s. 2(1) is broad enough to embrace contractual liability when other provisions like ss. 3 and 9 clearly do not. It is however difficult to read a contract basis for contribution into one provision of a statute which has interrelated provisions dominated by a reference to tortfeasors. But, even assuming that a tort claim in negligence was open to the plaintiff, two considerations are preclusive against Giffels’ right to contribution, namely, the giving of the final certificate in terms of Eastern’s contract, and the finding at trial that the guarantee period fixed by that contract had run in Eastern’s favour. A contractor protected by a valid contractual limitation of liability cannot in these circumstances be said to have contributed to any actionable loss by the plaintiff, a result which must follow whether the claim for contribution is based on a liability in tort for negligence or on contract.

APPEAL from a judgment of the Court of Appeal for Ontario allowing an appeal from a judgment of Lerner J. at trial. Appeal dismissed.

W.H.O. Mueller and F.A. Platt, for the appellant.

D.K. Laidlaw, Q.C., for the respondent.

[Page 1348]

The judgment of the Court was delivered by

THE CHIEF JUSTICE—By an order dated June 1, 1976, the Ontario Court of Appeal gave leave to the appellant Giffels to appeal its judgment dated April 23, 1976 to this Court on six questions, stated to be questions of law, formulated as follows:

(a) whether the ‘contribution’ provision of Section 2(1) of The Negligence Act is applicable because both Giffels and Eastern have been ‘found to be at fault or negligent’, even though Eastern has not been found ‘liable’ to the plaintiff by reason of a special defence held to be available to Eastern as against the plaintiff alone;

(b) whether either or both Articles 17 and 28 of the construction contract, being standard terms within such contracts, is or are sufficient to exempt Eastern from liability for negligent construction, subsequent to and consequent upon the giving of Giffels’ ‘final certificate’ as to completion of construction;

(c) whether Giffels’ ‘final certificate’ may be disregarded, for the purpose of eliminating it as a bar to the bringing of an action for damages for negligent construction, in the event of it being shown that Eastern which is seeking to shield itself from liability by virtue of such certificate, concealed from Giffels material evidence that would have influenced the decision of Giffels in releasing such certificate;

(d) whether the contribution and indemnity provision of Section 2(1) of the Negligence Act is applicable in respect of contract claims by the plaintiff against both Giffels and Eastern based upon their negligent failure to exercise reasonable care in carrying out their contractual duties requiring simply that reasonable care be exercised;

(e) alternatively, whether actions against either or both of Giffels as engineers and Eastern as building contractors may be alternatively asserted either in contract or in tort;

(f) whether Giffels has status to appeal a finding that its co-defendant Eastern is not ‘liable’ to the plaintiff in order to maintain a right to contribution and indemnity from Eastern (in the event that ‘liability’ of Eastern is a precondition to contribution).

[Page 1349]

There is one peculiarity about the order For leave on which I must comment. Question (f) raises an issue which was not canvassed by the Ontario Court of Appeal, being, indeed, one which was not originally raised in the appellant’s notice of appeal to that Court. After the Ontario Court of Appeal gave judgment in the appeal on April 23, 1976, the appellant Giffels moved to amend its notice of appeal to that Court to raise the point taken in question (f). Leave to do so was given nunc pro tunc by an order of May 21, 1976 but the Ontario Court of Appeal then refused to rehear the appeal in respect of that point. Instead, it has purported to allow the appellant to argue the point here. I do not think that this was either a regular or a proper thing to do. It is for this Court alone to determine whether it will give leave to argue here a point not taken or argued or considered by the Court appealed from. If the Ontario Court of Appeal was not prepared to rehear the appellant, there was no reason for allowing an amendment to the notice of appeal after judgment was delivered, and less reason to add the point of the amendment to the questions to be argued in this Court.

In my opinion, question (f) of the order for leave to come to this Court is not open for consideration here. Moreover, the point taken in the question goes beyond mere status to challenge the dismissal of the plaintiff’s action against Eastern and involves a claim to argue the propriety of the trial judge’s dismissal of the plaintiff’s action against the respondent Eastern. This Court would necessarily be caught up in a reassessment or review of questions of fact, and I would be unwilling to undertake this in the present case.

The issues brought to this Court by the appellant Giffels arise out of an action instituted by the plaintiff Dominion Chain Company Limited against Giffels and Eastern to recover damages for a defective roof on a new plant constructed for the plaintiff by Eastern, the general contractor for the building. The roof was constructed by a sub-contractor but nothing turns on this in this case. Giffels was the engineer for the project under a contract with the plaintiff to prepare the specifica-

[Page 1350]

tions and to supervise the construction. A separate contract was entered into between the plaintiff and Eastern as the general contractor for the building. The trial judge, Lerner J., found that because of certain construction practices by Eastern in the winter of 1964-1965, which involved keeping the building as closed-in as possible and using artificial heat, high humidity with resulting condensation adversely affected the roof which blistered or buckled in 1970, five years after its construction. He also found that responsibility for the substantial injury to the roof lay with both Giffels and Eastern.

The contract between the plaintiff and Eastern, which was prepared by Giffels, contained, inter alia, the following provisions:

Article 10. Engineer and Contractor. The Engineer is, in the first instance, the interpreter of the Contract and the judge of its performance; he shall use his powers under the Contract to enforce its faithful performance by both parties hereto. The Contractor shall however have complete control, subject to Article 12, of his organization.

Article 11. The Engineer’s Decisions. The Engineer shall decide on questions arising under the contract documents, whether as to the performance of the work or the interpretation of the specifications and drawings; but should the Contractor hold such decisions to be at variance with the contract documents, or to involve changes in work already built, fixed, ordered or in hand in excess of the contract, or to be given in error, he shall notify the Engineer before proceeding to carry them out. The Engineer has authority to stop the work whenever such stoppage may be necessary to ensure the proper execution of the Contract.

…

Article 17. Correction after Final Payment. Neither the final certificate nor payment thereunder, nor any provision in the contract documents shall relieve the Contractor from responsibility for faulty materials or workmanship, which appear within a period of one year from the date of substantial completion of the work, and he shall remedy any defects due thereto and pay for any damage to other work resulting therefrom which appear within such period of one year. The Owner shall give notice of observed defects promptly. Questions arising under this Article shall be decided as provided in Article 11. Notwithstanding the provisions of this Article, if any section of the Quebec Civil Code in the case of work

[Page 1351]

performed in the Province of Quebec, creates a more extended liability for faulty materials or workmanship, then that section of the Civil Code shall apply.

…

Article 28. Certificates and Payments. If and so often as the Contractor has made application for payment by submitting to the Engineer the invoice provided for in Article III of the Agreement, the Engineer shall, within Ten (10) days of receipt of the application, approve the account for payment or advise the Contractor promptly in writing why the account is amended or disapproved. Such approval may provide for holdbacks sufficient to protect the Owner against all liens and may be withheld if the Engineer has not received information that payments due to sub‑contractors have not been made.

No payment made to the Contractor and no partial or entire use or occupancy of the work by the Owner shall be construed as an acceptance of any work or material not in accordance with this contract. The issuance of the final certificate shall constitute a waiver of all claims by the Owner otherwise than under Articles 17 and 29 [dealing with liens] of these conditions and the acceptance of such final certificate by the Contractor shall constitute a waiver by him of all claims except those previously made and still unsettled if any. Should the Owner fail to pay the sum named in any certificate of the Engineer upon demand when due, the Contractor shall receive, in addition to the sum named in the certificate, interest thereon at the rate of 6%.

I need not dwell on the evidence or findings of the trial judge that Giffels, in the words of the trial judge, “failed in its contractual obligations or duties and was negligent in the performance of its professional skills” in respect of the damage to the roof. Giffels had approved the roof as satisfactory on November 3, 1965, and Eastern’s one year guarantee expired on September 30, 1966, this being accepted (according to the trial judge) by all parties at trial as a fact. As to Eastern, although the failure of the roof was the result of its faulty construction procedures, the findings of the trial judge were that the plaintiff had not brought itself within article 17 of the contract, and that since Giffels itself had delivered to Eastern on April 15, 1967 the final certificate contemplated by article 28 of the contract, the action against it would have to be dismissed “but for The Negligence Act”. This reservation by the trial judge concerned the liability of Eastern not to the plaintiff but to

[Page 1352]

Giffels for contribution. The trial judge found that The Negligence Act, R.S.O. 1970, c. 296, provided a basis for apportioning liability between Giffels and Eastern inter se, and that Eastern, although not itself liable to the plaintiff, must bear 75 per cent of the damages awarded to the plaintiff against Giffels.

Lerner J. arrived at this conclusion by holding, first, that The Negligence Act could be invoked only as between tortfeasors; second, by finding that both Giffels and Eastern were negligent in a tort sense in the carrying out of their respective obligations, apart from breach of contract; and, third, that it was not necessary under s. 2(1) of The Negligence Act, as it was under s. 3, that each tortfeasor be found liable to the plaintiff as a precondition of liability to make contribution to the other.

Both Giffels and Eastern appealed to the Court of Appeal, the former from the judgment of Lerner J. holding it liable to the plaintiff and the latter from the judgment against it for contribution in favour of Giffels. The Court of Appeal disposed of Giffels’ appeal adversely to it in oral reasons and reserved judgment on Eastern’s appeal. This appeal was allowed but the Court was not unanimous in its reasons. The majority reasons of Jessup J.A., Zuber J.A. concurring, proceeded on the ground that it was a precondition of Giffels’ right to contribution that Eastern be found liable to the plaintiff, but in the course of arriving at this conclusion, the learned judge also held that s. 2(1) of The Negligence Act applied only as between tortfeasors and that in the present case Giffels and Eastern were under a duty of care in a tort sense, apart from their liability in contract. Madame Justice Wilson was of the opinion that any liabilities of Giffels and Eastern arose only in contract and that no separate cause of action lay through the tort of negligence.

In its appeal to this Court, Giffels through its counsel, in a wide ranging argument, contended that (1) the plaintiff could properly pursue a

[Page 1353]

remedy in tort for negligence, despite the existence of contracts with Giffels and Eastern out of which the plaintiff’s relationship with them arose; (2) this made s. 2(1) of The Negligence Act clearly applicable but, in any event, that provision was wide enough to embrace breach of contractual duty to exercise reasonable care as well as breach of duty in tort for negligence; and (3) it was not a precondition of the right to invoke s. 2(1) for contribution that there be a finding of liability on Eastern’s part to the plaintiff.

Sections 2(1) and 3 of The Negligence Act read as follows:

2.(1) Where damages have been caused or contributed to by the fault or neglect of two or more persons, the court shall determine the degree in which each of such persons is at fault or negligent, and, except as provided by subsections 2, 3 and 4, where two or more persons are found at fault or negligent, they are jointly and severally liable to the person suffering loss or damage for such fault or negligence, but as between themselves, in the absence of any contract express or implied, each is liable to make contribution and indemnify each other in the degree in which they are respectively found to be at fault or negligent.

…

3. A tort feasor may recover contribution or indemnity from any other tort feasor who is, or would if sued have been, liable in respect of the damage to any person suffering damage as a result of a tort by settling with the person suffering such damage, and thereafter commencing or continuing action against such other tort feasor, in which event the tort feasor settling the damage shall satisfy the court that the amount of the settlement was reasonable, and in the event that the court finds the amount of the settlement was excessive it may fix the amount at which the claim should have been settled.

The history of the Act, of the changes and additions to it since its original enactment as a simple contributory negligence statute in 1924 (see 1924 (Ont.) c. 32) were fully canvassed by the appellant’s counsel and as well by respondent’s counsel. The former laid particular stress on the substitution in 1935 of the words in the opening lines of s. 2(1), “except as provided by subsection 2, where two or more persons are found at fault or negligent”, for the words “where two or more persons

[Page 1354]

are found liable”. For him, this change fortified his contention that a finding of liability or proof that liability could have been found was not an essential basis for a claim of contribution. Respondent’s counsel urged on his part that an appraisal of the Act as a whole in the light of its history made it abundantly clear that the Act was concerned with tort liability and not with contractual liability.

In my opinion, it is not necessary in this case to come to a final determination on whether s. 2(1) of The Negligence Act is broad enough to embrace contractual liability when other provisions of the Act, like ss. 3 and 9, clearly do not. I incline, however, to the view advanced by counsel for the respondent in this respect. I think it difficult to see how a contract basis for contribution can be read into one provision of a statute which has interrelated provisions dominated by a reference to tortfeasors. Similarly, I am of the view that it is a precondition of the right to resort to contribution that there be liability to the plaintiff. I am unable to appreciate how a claim for contribution can be made under s. 2(1) by one person against another in respect of loss resulting to a third person unless each of the former two came under a liability to the third person to answer for his loss. Hence, even assuming that a tort claim in negligence was open to the plaintiff against Giffels and Eastern in the present case—and I need not come to a determination on this issue here—there are two considerations which are preclusive against Giffels’ right to contribution under s. 2(1). They are, first, the giving of the final certificate under article 28 of Eastern’s contract and, second, the finding by the trial judge that the guarantee period fixed by article 17 of that contract has run in Eastern’s favour.

I do not think that any comfort is available to Giffels from the “exculpatory clause” cases which hold that, unless negligence is expressly mentioned, exculpation from liability will not cover liability for negligent conduct if there is subject matter for the clause without reference to negligence. Faulty material or wokmanship is expressly

[Page 1355]

covered in article 17 and article 28 must be read to exclude all claims under or in respect of the performance of the contract, and hence it is immaterial whether they arise in contract or in tort. In the present case, it was the same negligence, whether regarded as a breach of contract or as a basis for an independent tort claim, which lay at the base of any claim by the plaintiff against Eastern for damages.

Moreover, whether Giffels bases its claim for contribution on s. 2(1) or outside of that provision, the same result adverse to Giffels must follow. I am prepared to assume, for the purposes of this case, that where there are two contractors, each of which has a separate contract with a plaintiff who suffers the same damage from concurrent breaches of those contracts, it would be inequitable that one of the contractors bear the entire brunt of the plaintiff’s loss, even where the plaintiff chooses to sue only that one and not both as in this case. It is, however, open to any contractor (unless precluded by law) to protect itself from liability under its contract by a term thereof, and it does not then lie in the mouth of the other to claim contribution in such a case. The contractor which has so protected itself cannot be said to have contributed to any actionable loss by the plaintiff. This result must follow whether the claim for contribution is based on a liability to the plaintiff in tort for negligence or on contractual liability. In either case there is a contractual shield which forecloses the plaintiff against the protected contractor, and the other contractor cannot assert a right to go behind it to compel the former to share the burden of compensating the plaintiff for its loss.

What we have here is a case where the immunity of Eastern from liability did not arise from some independent transaction or settlement made after an actionable breach of contract or duty, but rather it arose under the very instrument by which Eastern’s relationship with the plaintiff was established. Giffels had no cross-contractual relationship with Eastern upon which to base a claim for

[Page 1356]

contribution; and once it was clear, as it was here, that Eastern could not be held accountable to the plaintiff for the latter’s loss, any ground upon which Giffels could seek to burden Eastern with a share of that loss disappeared.

I would dismiss the appeal with costs.

Appeal dismissed with costs.

Solicitors for the appellant: Outerbridge, Manning & Mueller, Toronto.

Solicitors for the respondent: McCarthy & McCarthy, Toronto.