Argo Construction Ltd. v. Customold Fiberglass Ltd., [1976] 1 SCR 132

Supreme Court of Canada

Argo Construction Ltd. v. Customold Fiberglass Ltd., [1976] 1 S.C.R. 132

Date: 1974-05-27

Argo Construction Ltd. Appellant;

and

Customold Fiberglass Ltd. Respondent.

1973: November 21; 1974: May 27.

Present: Fauteux C.J. and Abbott, Martland, Ritchie and Pigeon JJ.

ON APPEAL FROM THE COURT OF QUEEN’S BENCH, APPEAL SIDE, PROVINCE OF QUEBEC

Contract—Decorative poles—Breakage—Non-compliance with specifications—Removal and reinstallation—Damages—Supplier entitled to the full amount of invoice—Non-intervention rule.

In 1966 appellant obtained from the Canadian Corporation for the 1967 World Exhibition (“Expo”) a contract including, inter alia, the erection of 63 decorative fiberglass poles, 53 feet high. According to the plans and specifications, these poles were to be designed to resist a wind gust of 90 m.p.h. without undue deflection or whip action. Appellant contracted with respondent for their manufacture, and installed them itself. In May 1967, three of these poles broke off and fell. As a safety measure “Expo” removed some of them and ordered appellant to remove others pending an investigation. After discussion appellant reinstalled the same poles, but cut to a length of 25 feet by respondent at its request, Expo agreeing to pay the costs of cutting, refinishing and reinstalling the poles. Expert opinion was obtained without respondent being represented. The pole tested gave way under force equal to that of an 80 m.p.h. wind. Respondent claimed from appellant the sum of $15,750, being the invoice price of $250 for each of the 63 poles. Appellant denied the claim, alleging that the breaking of three poles was due to the fact that they were not constructed according to specifications, and asked in a cross-demand that respondent be condemned to pay it the sum of $6,000 for damages. The action was allowed to the extent of $7,500 but the cross-demand was dismissed. On appeal, appellant was condemned to pay respondent the full amount claimed while the judgment of the Superior Court on the cross-demand was affirmed. Hence the appeal to this Court.

Held (Martland and Pigeon JJ. dissenting): The appeal should be dismissed.

Per Fauteux C.J. and Abbott and Ritchie JJ.: There is no error in the judgment of the Court of Appeal which would justify the intervention of this Court.

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Per Martland and Pigeon JJ., dissenting: The Court of Appeal erred in not sufficiently taking into account the importance of the advantage enjoyed by the trial judge who heard the witnesses and saw them give their explanations. At least two poles broke off and fell in the presence of witnesses. A third broken pole was seen in the workshop. The trial judge was surely justified in concluding from all this that there were three. breakages, and to hold that there was only one, as the Court of Appeal did, is to ignore the existence of conclusive evidence. It reversed the trial judge’s findings on the basis of a complete misapprehension of the proven facts. This requires the intervention of this Court.

Not only should the judgment of the Superior Court be restored but the cross-demand should be allowed to the extent of $4,000, because the trial judge was mistaken in holding that the damages claimed were not proven.

[Dorval v. Bouvier, [1968] S.C.R. 288, referred to.]

APPEAL from a judgment of the Court of Queen’s Bench, Appeal Side, Province of Quebec, reversing a judgment of the Superior Court on the principal demand but affirming this judgment with respect to a cross-demand. Appeal dismissed, Martland and Pigeon JJ. dissenting.

G.L. Echenberg, for the appellant.

G.H. Picket, for the respondent.

The judgment of Fauteux C.J. and Abbott and Ritchie JJ. was delivered by

ABBOTT J.—In this action the respondent, Customold Fiberglass Ltd., claimed from the appellant, Argo Construction Ltd., the sum of $15,750 as the contract price of 63 fiberglass poles, 53 feet in length, manufactured by Customold and delivered to Argo for use at Expo 67.

The facts which gave rise to the litigation are conveniently summarized in the reasons of Lajoie J.A. in the Court of Appeal:

[TRANSLATION] In the fall of 1966 Argo obtained an order from the Canadian Corporation for the World Exhibition of 1967 (which I shall refer to hereafter as “Expo ‘67”) for the supply and erection of sixty-three fibreglass poles or posts, plans and specifications of which are submitted as Exhibit D-1. The height of these

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poles is given as 53 feet. The specifications stipulated that the poles would be designed to withstand a wind gust of 90 miles an hour without undue deflection.

Argo contracted with Customold for the manufacture of these 63 poles, and after taking delivery of them around mid-April installed them itself.

On May 16, 1967, one of these poles fell down, and as a safety measure Expo ’67 removed those situated at La Ronde, and requested Argo to remove the others (Exhibit D-4), which was done.

After discussion between the parties concerned it was agreed, without prejudice to the rights of any party, that Argo would re-install the same posts, but cut to a length of 25 feet by Customold at Argo’s request (Exhibit P-3). All were so cut except for five, which were too badly damaged on removal.

Customold sued Argo, claiming from it the sum of $15,750.00, being a charge of $250.00 for each of the 63 poles, as invoiced on May 12, 1967.

Without making any offer Argo denied the claim, alleging that the breaking of three poles was due to the fact that they were not constructed according to specifications, and asked in a cross-demand that Customold be ordered to pay it $6,000.00 to offset the damages sustained as a result of Expo ’67’s request.

The principal question in issue here and in the Courts below is whether or not the poles in question complied with the specifications called for under the contract. The expert evidence on this point, at the trial, was contradictory.

The learned trial judge maintained the action to the extent of $7,500 but dismissed the cross‑demand, and both parties appealed that judgment to the Court of Appeal. That Court affirmed the judgment dismissing the cross-demand but allowed the appeal in the principal action and condemned Argo to pay the full amount claimed of $15,750 Argo appealed to this Court from that judgment.

In his reasons for judgment (which were concurred in by Owen and Rivard JJ.A.) Lajoie J.A., after carefully reviewing the evidence, summarized his conclusions as follows:

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[TRANSLATION] Though it is the rule that we do not intervene in the assessment of the evidence made by the judge at first instance, it is possible in this case to determine the basis of that assessment, and with respect, I feel the trial judge erred, first, by accepting as proven a fact which had not been proven, namely the spontaneous collapse of three poles, and then drawing from that a conclusion as to the weakness of all the poles which is not supported by the evidence. He had to be especially exacting as to the probative force of the evidence submitted by defendant-respondent as the latter had the burden of showing that the posts lacked strength. In my view, this burden was not discharged.

Appellant was therefore entitled to be paid, in accordance with the agreement, the price of the poles delivered, that is $15,750.00. The cross-demand cannot be allowed, for though Argo established that it sustained damages as a result of the removal and re‑installation of the poles, it did not prove that they were attributable to the failure by Customold to carry out its obligations.

The principles to be applied by a second Appellate Court in a case of this kind are well established: Dorval v. Bouvier[1], at p. 294.

I find no error in the judgment below which would justify the intervention of this Court and I would dismiss the appeal with costs.

The judgment of Martland and Pigeon JJ. was delivered by

PIGEON J. (dissenting)—Appellant Argo Construction Ltd. (“Argo”) obtained from the Canadian Corporation for the 1967 World Exhibition (“Expo”) a contract for the construction of information booths. This contract included the erection at each booth of decorative fiberglass poles in various colours. In most instances the poles, fifty-three feet high, were to be installed in three clusters of three each, their centres twelve inches apart, atop an equal number of steel pipes twelve feet high interconnected by a wide and sturdy horizontal steel plate welded thereto eleven feet above ground. There were in all sixty-three poles. Argo ordered them from the respondent, Customold Fiberglass Ltd. (“Customold”). The latter’s invoice gives the following description:

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63 Fiberglass poles 53′ long as per specification for Information booth, Expo 67

The specifications referred to in this document contain, inter alia, the following:

The poles shall be designed as free-standing as shown on the drawings, to resist a wind gust of ninety miles per hour (90 mph) without undue deflection or whip action.

In his testimony Paul Szasz, Customold’s manager, admitted that this was a performance specification, and he described its effect as follows:

Q. Would you tell the Court what your understanding is of performance specifications?

A. My understanding of a performance specification is that the customer or the architect or the engineer who designs these poles sets out an expected performance to which the items are to be manufactured.

Q. And would you say, Mr. Szasz, that the specifications are made or not made up, whether or not the items manufactured perform as specified or not?

A. Yes, I would say so.

Q. In other words, if the items do not perform, then they have not met the performance specifications, obviously?

A. That is correct, yes.

The poles were installed just before the Exhibition opened in April 1967. On May 18, Argo received a telegram from A.S. Dromlewicz, Expo’s assistant construction manager, in which one reads:

… You are to remove all fiberglass poles immediately due to safety problems—Stop Breaking of three poles was the initial cause—Stop The method of removal was to be entirely at your own discretion—Stop So far only three locations were removed—The balance is to be removed tonight May 18—

On May 26 Argo received a letter from the same Expo official, as follows:

Re: Information Booth—Fiber Glass Poles.

This will confirm our telephone conversation of this afternoon. I will briefly review the situation concerning the above subject. On the 16th of May the first break of the poles occurred on La Ronde. Altogether at the same location three fiber glass poles broke at various heights.

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The reports say that the weather was very windy, however, this was far short from the 90 miles/hour specified for the poles to withstand. In view of this, which created a serious safety hazard, we had no alternative but to request you to remove all poles pending while an investigation is done by the Corporation. We are requesting that you make a proposal under which those poles can be reinstalled with sufficient guaranty to the Corporation that breakage will not occur.

It will be appreciated if you attend to this matter at your earliest convenience. We feel that the absence of these poles must be considered as a contract deficiency.

Customold was apprised of the situation in different ways. On June 5, Szasz wrote Argo a long letter in which he discussed a meeting on June 2, and stated inter alia:

Firstly, to ascertain some facts whether there was one or several poles broken, C.C.W.E. claims that there were 3 poles broken at various lengths. Our eye witness who was on the spot at that time saw all poles intact and half an hour later saw one collapse. Talking to various people who were involved in the removal of the poles one could not obtain two descriptions of the event alike.

On August 11 a meeting was held at which all three parties were represented, and at the end of which it was decided that Expo would seek an expert opinion. Argo was advised by a letter dated August 25 that the Warnock Hersey Company Ltd. had been retained to conduct a test, and would advise it of the date on which the test would take place. A letter from Argo to Customold on August 29 refers to this letter. However, there is no evidence that Customold was advised of the day appointed for the test, which took place on September 1, in the presence of representatives of Expo, Argo and Fiberglass Canada Ltd. The report, dated September 12, concludes that the pole gave way under a force equal to that of an 80 m.p.h. wind. With regard to the pole subjected to the test, the report prepared by Mr. Meyer, an engineering expert, contains the following passage, which acquires considerable significance in view of the nature of the case:

… It was noted that only three (3) poles had remained which were of the full length. Of the three poles, none

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could be noticed to be in perfect condition; of one the top part was broken, the second one had serious cracks in the fiberglass and the third one had slight hairline cracks in the top horizontal binding and some slight hairline cracks in the fiberglass above this binding.

Mr. Dromlewicz informed the writer that the contractor had mentioned that he considered even the third pole damaged and not representative for testing. Upon close examination, we formed the opinion that the hairline cracks of the third pole were only surface cracks, which could only penetrate a maximum depth of the first layer of fiberglass and would not affect the strength capacity of the fiberglass pole. Therefore, to our judgment, one fiberglass pole was available for testing and it was decided that a testing program would be made and submitted to C.C.W.E.

The trial judge, after noting that the conclusions of Mr. Meyer’s report conflicted with those of the expert witness for Customold, the chemical engineer Mr. Halliday, who had done the design work on the poles and supervised their manufacture, made the following observations:

[TRANSLATION] The Court must however take into account certain facts which were established and would seem to be important in deciding the outcome of this case, and weighing the expert testimony presented by the two opposing parties. In the first place, the collapse of three poles, which, even if its cause was not definitely established, creates a sufficiently strong presumption of fact to indicate a conclusion that the poles did not have the required strength, and might have presented certain dangers. It was also admitted that these poles were all made in the same way and by the same method, and were all identical. Further, all parties agreed, though it is true they did so without prejudice, that the poles should be re-installed, but to a reduced height…

After analysing and weighing all the evidence, the Court prefers to accept the conclusions of the expert witness A.F. Meyer, which moreover are supported by certain facts established in evidence.

In my view, this conclusion by the trial judge was quite proper, and the Court of Appeal had no basis for substituting its own appreciation of the evidence. To begin with, it should be noted that there were several good reasons for accepting the Meyer report’s conclusions, and rejecting Mr. Halliday’s opinion.

First of all, Meyer was an independent expert who made a test before witnesses, in the presence

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of representatives from Expo and Argo, and made a detailed written report with supporting calculations. Halliday, on the other hand, is the man who did the design and supervised the manufacture on behalf of Customold. There was no one present to monitor his operations, he submitted no written report, and he furnished no detailed information.

Secondly, only Meyer checked what had to be checked, namely whether the poles as manufactured could resist a 90 m.p.h. wind. He made this check by applying to one pole a force equivalent to the pressure exerted by the wind, a force calculated in a manner which was not disputed. Halliday, on the other hand, did nothing to check the poles’ resistance to wind pressure. He merely ascertained the tensile strength of the material. All that he states is that the strength in question (37,700 lbs. per sq. in.) corresponds to that which, from his calculations, is required for the poles to resist a wind of over 90 m.p.h., or as he said, of 120 m.p.h. This, in no way establishes that poles manufactured from material having that tensile strength were in accordance with the specifications. The latter specified the projected wind force, not merely the strength of the material from which the poles were made. Moreover, the Meyer report indicates that the pole subjected to testing failed in compression, not tension, and this was admitted by Halliday. Therefore, his computation concerning only the other factor in the strength of the poles was entirely worthless. Lajoie J.A., who wrote the reasons of the Court of Appeal, completely misunderstood the nature of Halliday’s testimony when he stated:

[TRANSLATION] An identical, but unused and undamaged pole, which was the subject of the test conducted by Halliday, only broke under the stress of a force equal to a 120 m.p.h. wind.

It should be added that, as the trial judge pointed out, the Meyer report is corroborated by the facts. In addition to those he mentions the following should be noted: the first broken pole which the witness Lucien Poulin examined when he went to the La Ronde booth on the evening of May 16 had broken off exactly eighteen inches above the steel tube in which it was installed. Now,

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the pole tested by Meyer also gave way at exactly eighteen inches from the base. The sketch made by this witness indicates that, as he said, “the pole” was “broken, frayed into a fringe”. Unfortunately, the deposition as transcribed by the stenographer is not exactly easy to understand since, as most common people do, the witness spoke of “fer” (“iron”) instead of steel in reference to the pole supports. In transcribing his notes, the reporter confused “fer” with “verre” (glass), and put “verre” throughout. Accordingly, the record contains sentences such as this: “le tube de verre a cassé et il a cassé en bavelle; et pour les autres on a été obligé de les couper au vere (jusqu’au verrre). “[2]Clearly, the witness ended his sentence with the words “au fer” (“to the iron”), and not “au verre” (“to the glass”).

This is only one of the countless errors to be found throughout the depositions, which in many instances result in the reader having to guess at what the witness said, as when the word “racine” (root) is used instead of “résine” (resin). In my view, with all due respect for the contrary opinion, Lajoie J.A. erred in not sufficiently taking into account the importance of the advantage enjoyed by the trial judge who heard the witnesses and saw them give their explanations. Only this can account for Lajoie J.A. having written:

[TRANSLATION] It is a fact that a pole collapsed, but it was also necessary to explain the cause of that collapse, or at least—in order to raise a presumption of defective construction—to exclude the possibility of foreign causes not attributable to appellant, such as vandalism, damage during installation, being hit by a vehicle, and so forth. …

In fact, it is certain that at least two poles broke off and fell. The witness Poulin saw two which were broken, one eighteen inches from the base, the other at about ten feet up. The witness Gerry Dame also saw two broken poles at La Ronde. The third breakage was not observed on the spot, but one witness stated that he saw three broken poles in the workshop. Taking into account the evidence as a whole, the trial judge was surely justified in concluding from all this that there really were

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three breakages. To conclude there was only one is to ignore the existence of conclusive evidence.

So far as the exclusion of causes other than wind is concerned, I should like to know how the possibilities of vandalism and being struck by a vehicle can reasonably be considered if we take account, as we must, that the poles were not installed at ground level, but atop a steel structure twelve feet high. As to damages occurring during installation I think it suffices to point out that the poles were merely glued inside the steel pipes.

What of the fact, noted in the reasons of the Court of Appeal, that the weather reports showed only 11 m.p.h. winds on the day the poles collapsed? Here again, it must be said that the evidence was misconstrued. In fact, the notation at the bottom of the report reads: “Prevailing wind direction with total number of miles for each hour.” This means that the report gives only the average wind speed during a full hour at the observatory, whereas what matters is the momentary speed, as to which no information is given. Since we know from the actual statement of Customold’s manager, in his letter of June 5, that he had an eyewitness of the collapse of one of the poles, what more is needed? If that witness had been in a position to attribute the breakage to anything other than wind, Customold would certainly have called him to testify.

In the case at bar, therefore, I must hold that the Court of Appeal had no basis whatever for interfering with the trial judge’s findings on the evidence. While paying lip service to the non‑intervention rule, it actually ignored it completely and came to a contrary conclusion based on a complete misapprehension of the proven facts. Such misapprehension requires the intervention of this Court.

Counsel for appellant Argo asked not only that the judgment at trial reducing from $15,750 to $7,500 the sum payable for the 63 poles delivered to Customold be restored, but also that the Court

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allow to the extent of $4,079.44 the cross-demand for $6,000 damages. The trial judge dealt very briefly with this point:

[TRANSLATION] On the question of the cross-demand, the cross-plaintiff has not established the existence of damages to the satisfaction of this Court. Moreover, it incurred no additional expense for repairing and installing the poles.

It is quite true, as appears from a letter from Argo to Customold dated August 29, 1967, that Expo agreed to pay for all the costs incurred in cutting the poles to twenty-five feet in length, refinishing and re-installing them. However, as stated in its factum in this Court, those are not the expenses which Argo claims by its cross-demand in which the nature of its damages is not stated. The evidence submitted in this case shows that Expo has paid nothing for the poles, their installation and removal. The trial judge quite properly held on the principal demand that, even if the poles did not comply with the specifications, Argo should pay the value of what was used. He therefore more or less halved the amount of the invoice, just as the poles were halved before being re-installed. Expo’s refusal to pay the amount could not affect the supplier’s remedy. However, once it is found that the poles did not comply with the specifications, it follows that the costs incurred for the first installation and for the removal were not recoverable from Expo, and were therefore a loss to the contractor attributable to the fault of the supplier.

As Argo had contracted for the whole job, it had no breakdown of costs available for the initial installation of the poles. However, Expo having agreed to pay for the re-installation, these costs were noted and amounted to $3,096.53. Argo submits that it is reasonable to assume the initial cost was not less than that of the re-installation, and it accordingly claims an equal sum, not for the reinstallation costs, which were paid by Expo, but for the estimated cost of the initial installation. This is what the trial judge appears to have overlooked as well as the proof contained in a detailed

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statement included in the record that the removal of the poles cost $982.91.

In view of the conclusion which it reached on the principal demand, the Court of Appeal naturally did not give any consideration to the facts concerning the cross-demand which I have just noted. Such being the case, it cannot be said that there were concurrent findings of fact. In my view, therefore, there are grounds for intervening to allow the cross-demand to the extent of $4,000.

I conclude that the appeal should be allowed, the judgment of the Court of Appeal reversed, the judgment of the Superior Court on the principal demand restored and the cross-demand, allowed to the extent of $4,000 to be set off against the amount allowed on the principal demand so as to reduce the amount thereof to $3,500 with interest from the date of the writ, the whole with costs against respondent in all courts except on the principal demand in the Superior Court.

Appeal dismissed with costs, MARTLAND and PIGEON JJ. dissenting.

Solicitors for the appellant: Chait, Salomon, Gelber, Reis, Bronstein & Litvock, Montreal.

Solicitors for the respondent: Boisvert & Pickel, Montreal.