J. 1997 S.H. 130431 IN THE SUPREME COURT OF NOVA SCOTIA BETWEEN: GRANVIEW FARMS LIMITED, body corporate AND ­- CBCL LIMITED, body corporate DECISION HEARD: At Halifax, Nova Scotia before the Honourable Justice Allan P. Boudreau in Chambers on November 24th and 25th, 1997. OF ORAL DECISION: November 28th, 1997 WRITTEN RELEASE OF DECISION: January 28, 1998 COUNSEL: Michael Wood, for the Plaintiff T. Arthur Barry, for the Defendant BOUDREAU, J. (ORAL): This is the decision in the applications of Granview Farms Limited and CBCL Limited. OVERVIEW Granview Farms Limited, which is the plaintiff in the present action, is the successor corporate entity of Turf Masters Landscaping Limited by virtue of an amalgamation of the two companies. During 1989 Turf Masters obtained subcontract to perform most of the work on recreational park and sports field for the City of Dartmouth. The consultants for the City on the project were the present defendants, CBCL Limited. CBCL had been involved in the evaluation of the land for the site of the park for previously planned international calibre soccer and sports field. In this earlier evaluation CBCL and Jacques Whitford had produced reports indicating subsurface site instability with significant potential problems. As result, the City had abandoned the idea of an international calibre field and instead proceeded with recreational park with some playing fields. In 1989 Turf Masters bid on and obtained the subcontract for most of the construction without being aware of the two consultants' reports regarding site problems as these were not included or otherwise disclosed during the tendering and contract process with the City. Shortly after commencing the work Turf Masters recognized there were significant subsurface problems with the site which made and would obviously make their work more difficult and costly. This resulted in disputes over the contract, but at no time during the work did Turf Masters elect or declare the contract frustrated or otherwise terminated. It finished the work during 1990 and 1991 but in the meantime had commenced an action under the Mechanics' Lien Act, which will refer to as "the first action" for unpaid monies, which in the end consisted primarily of claim for extra or additional work which had to be performed because of the alleged undisclosed site conditions. The first action which was commenced under the Mechanics' Lien Act against the City was continued but was ultimately framed as claim in quantum meruit under the Act and was adjudicated as such all the way to the Supreme Court of Canada. Prior to the trial of this first action CBCL had been joined as third party by the City. At trial Turf Masters obtained judgment against the City and CBCL jointly and severally, but that was overturned on appeal and leave to appeal to the Supreme Court of Canada was denied. Granview commenced the present action in 1996 directly against CBCL alleging negligent misrepresentation based on the non-disclosure of the pre-existing site reports and claiming the damages not recovered in the first action as well as significant additional damages against CBCL. CBCL has made this first application to strike out the statement of claim in the present action on the basis of res judicata or "cause of action estoppel", as it is sometimes known, and abuse of process. Granview has made subsequent application to strike out certain parts of CBCL's defence to Granview's negligent misrepresentation claim alleging some of these questions have already been decided in the first action and that the doctrine of "issue estoppel" applies to those questions or issues. At the prehearing conference directed that the two applications be heard together at the hearing set for November 24th and 25th, 1997 because of the significant overlap and common issues of fact and law. For the purposes of these applications Granview and Turf Masters are one and the same. FACTS It is common ground that the two site evaluation reports prepared by CBCL and Jacques Whitford were not provided or otherwise brought to Turf Masters attention prior to Turf Masters bidding, obtaining and entering into the contract and commencing the work about October of 1989. CBCL was the project consultants to the City during the tendering process and through to the completion of construction. As stated earlier, the work was commenced about October of 1989 and Turf Masters became aware of significant subsurface site problems shortly thereafter and prior to stopping work for the season in November of 1989. In December of 1989 Turf Masters filed lien claim against the City and commenced court action pursuant to the Mechanics' Lien Act. There were discussions between the parties about site problems and resulting extra work as early as the spring of 1990. Turf Masters resumed the work in the late spring or early summer of 1990 and in July 1990 it filed further lien claim. Turf Masters had retained experts or consultants as early as the spring and early summer of 1990. Turf Masters continued to advance and amend its claim during 1990 while at the same time continuing to work pursuant to the contract. Turf Masters became aware of the CBCL and Jacques Whitford site reports in late 1990 or early 1991 as result of discovery examinations which took place during that time. In January of 1991 Turf Masters filed third or further amended statement to the claim of its original action and completed the work in the early summer of 1991. During August of 1991, Mr. Alan Streatch of Turf Masters sent detailed letter to the general contractor outlining Turf Masters' claims because of the alleged site problems resulting in extra work, materials and costs. During the late spring of 1992, Turf Masters changed its solicitors from McInnes Cooper Robertson to Charles Lienaux and soon thereafter applied to the court for further amendment to the statement of claim which application was granted. It is in this new lengthy and very detailed statement of claim that the first action was in effect reframed in quantum meruit. It alleged in clear terms non-disclosure of the soil reports of CBCL and Jacques Whitford as basis for the claim. This amended statement of claim claimed the liability of the City for non-disclosure of the reports flowed in part at least from the agency relationship between the City and its consultants, CBCL. As result, the City joined CBCL as third party to the action in September of 1992 claiming indemnity from CBCL and alleging, inter alia, negligent misrepresentation or negligence on the part of CBCL. By the end of 1992 Turf Masters had settled all its claims with the general contractor. There were no other outstanding claims arising out of the Mechanics' Lien Act except for the first action. The remaining action was between Turf Masters, by then called Granview, the City, and third party indemnity claim by the City against CBCL which alleged negligence or negligent misrepresentation on the part of CBCL. The action was then an action in quantum meruit commenced as Mechanics' Lien claim and containing third party claim now alleging cause of action in tort against the third party. The claim had up to this time continued within the framework of the original Mechanics' Lien action without any apparent serious consideration of the appropriate forum or jurisdiction for the action as it was then cast. However, that changed significantly in early 1993. On January 5th, 1993 Turf Masters' counsel, Mr. Lienaux, wrote to then Chief Judge Palmeter of the County Court raising concern about the appropriateness of continuing the first action pursuant to the Mechanics' Lien Act in view of the fact that the Mechanics' Lien aspect of the case appeared to have been settled and because the one remaining claim outstanding against the City was then framed in quantum meruit and not on the contract which led to the filing of the original lien action. It is clear Turf Masters was at this time considering its options as to which forum was appropriate to continue its remaining claims or causes of action arising from the non-disclosure of the site reports. Mr. Lienaux states the following in the last paragraph on page of his January 5th, 1993 letter. The purpose of requesting the Pretrial Conference is to seek determination of the issue whether this matter should continue in the County Court as Mechanics' Lien claim or if it would be proper at this stage to seek consent Order to convert/transfer the matter into the general Court which will be consolidated into one Supreme Court as of January 31, 1993." Paragraphs 11 and 12 of the Agreed Statement of Facts filed August 11, 1997 are also very pertinent as to Turf Masters' position with regard to the course it would choose for any further litigation of its claim, and quote these two paragraphs: "11. Charles Lienaux, solicitor for Turf Masters Landscaping Limited, wrote to Jean McKenna, solicitor for the City of Dartmouth copying Michael Pugsley, solicitor for CBCL and Alan Streatch, on March 3, 1993 enclosing copy of Mr. Mac Williams' Expert Report `relating to problems experienced by Turf Masters Landscaping Limited in the course of completing the Akerley Boulevard Park.', and noting that Mr. Lienaux would be filing an amended pleading with respect to the amounts being claimed. Notification was also given that Mr. Lienaux would be pursuing claims based either upon quantum meruit or upon negligent misrepresentation. Mr. Lienaux stated on page of that letter that: 'I also note that no longer see any sense in pursuing claim under the Contract between TAG (being the General Contractor) and Turf Masters. The claims which shall be pursing on Turf Masters' behalf shall be based either upon quantum meruit or alternatively upon negligent misrepresentation.' (Emphasis added). He stated further: ‘According to Mr. Williams' findings CBCL knew at the time it issued the tender call for the work that it would be necessary for Turf Masters to do extensive extra work at this site because of subsurface soil conditions described in two reports in CBCL's possession. However, CBCL did not disclose this information.' 12. Charles Lienaux, solicitor for Turf Masters Landscaping Limited, wrote to Michael Pugsley, solicitor for CBCL, copied to Jean McKenna, on April 13, 1993 enclosing copy of the brief filed with the Court respecting the Plaintiffs application for leave to amend its Statement of Claim. After setting out the law when the Civil Procedure Rules permit party to amend and the purpose of amendments, Mr. Lienaux took the position that if his amendments are not allowed, the Plaintiff would be vulnerable to defence that the Plaintiff Turf Masters was splitting its cause of action and any such relief sought in second or subsequent action would be barred by the doctrine of res judicata. Mr. Lienaux referred to the principle that '...all potential reliefs arising out of cause of action must be dealt with in the one action or such relief is thereafter merged by the doctrine of res judicata', citing Smith's Field Manor Development Limited v. City of Halifax (No. 2) (1988), 87 N.S.R. (2d) 1. (Emphasis added) At page of his brief, Mr. Lienaux stated ‘If the Plaintiff is not permitted to make the amendments requested the Plaintiff would be barred from raising such allegations in any future action because they would be barred according to the foregoing legal authority.’” The above quoted paragraphs indicate clearly that Turf Masters was, as far back as March 3, 1993, considering all its legal remedies and avenues for relief for the non-disclosure of the site reports. It not only considered the doctrine of quantum meruit, but also the doctrine of negligent misrepresentation as the two possible remedies or avenues of relief to recover damages allegedly flowing from the non-disclosure. It had by this time all but abandoned the pursuit of relief under the contract which had been the basis for the initial lien claim and resulting action. While Turf Masters had originally sued the City only, by this time CBCL was an involved third party to the litigation. The City in its third party claim had alleged negligence on the part of CBCL. Turf Masters in its letter of March 3, 1993 had also alleged the possible negligent misrepresentation of CBCL because of the failure to disclose but ultimately claimed relief for this non-disclosure only against the City. This was apparently based on the agency principle that the negligence of CBCL was also the negligence of its principal, the City. Turf Masters made no attempts whatsoever at any time during the first action to recover any damages directly against CBCL but relied on the non-disclosure of CBCL to justify its claim in quantum meruit against the City. By March 3, 1993 and well before the trial of the first action, the County Court had merged with the Supreme Court and therefore there were no jurisdictional impediments to Turf Masters or Granview commencing an action against CBCL in the same Court, seeking additional relief. This was not done or attempted. Turf Masters thereafter continued its action against the City only and only in quantum meruit with the City continuing against the third party, CBCL, for indemnity alleging breach of contract or negligence against CBCL. After very extensive discoveries, the trial was held over 18 days between June of 1993 and January of 1994. The trial judge rendered judgment in favour of Turf Masters in September of 1994 against the City and CBCL jointly and severally. This decision and judgment were appealed in June of 1995 and in August of 1995 the Court of Appeal granted an order allowing the appeal and the decision and order of the trial judge were set aside. Turf Masters applied for leave to appeal to the Supreme Court of Canada and in March of 1996 the Supreme Court denied the leave application. There can be no question the litigation of the first action has been very expensive for all the parties; to the point where the trial judge commented: "It seems to me that the cost of this litigation far exceeded the amount of the claim". Mr. Streatch states in his affidavit that Turf Masters and Granview have spent in excess of $250,000.00 on legal, expert and survey fees and one can only infer that the City and CBCL have also expended very significant amounts to defend the first action all the way to the Supreme Court of Canada. During the latter half of 1996 Granview commenced the present action against CBCL directly, alleging negligent misrepresentation on the basis of the same failure to disclose the two site reports which was litigated on quantum meruit basis in the first action. Granview has not only claimed the same damages as claimed in the first action, but seeks additional economic loss damages as well as some $250,000.00 expended on the first action which failed due to Turf Masters not being able to establish its case on quantum meruit basis. The principle justifications advanced by Granview in opposition to CBCL's application to stay these proceedings is that an action in tort is not enforceable under the Mechanics' Lien Act and that it was therefore not possible to litigate the issue of the negligent misrepresentation against CBCL within the four corners of the first action. Granview also takes the position, as stated in the affidavit of its former solicitor Mr. Lienaux, and at page of its brief, that it was reasonable to take "wait and see" attitude with respect to what damages may be left unrecovered after the first action. For this reason and also because damages for economic loss were allegedly still accruing during or around 1993, Granview decided to hold back its potential claim in negligence in order to later claim further or unrecovered damages. ISSUES will first set out the issues which pertain to the application of CBCL to strike out the statement of claim of Granview and to stay or dismiss the proceedings. 1. Should Granview's statement of claim be struck out on the basis of res judicata/cause of action estoppel? 2. Should Granview's action be stayed or dismissed as an abuse of process of the court? Res Judicata While CBCL's application is undertaken pursuant to Civil Procedure Rule 14.25 and the Courts' power on such applications pursuant to Rule 37.10, it is clear the basis for the motion are the doctrines of res judicata and abuse of process. Granview has raised as its first issue the question of whether its present claim could have been pleaded in the first action under the Mechanics' Lien Act. While this question is clearly relevant as factor which the court may consider in deciding the two issues which have previously stated; in my view, it is not by itself determinative issue. This aspect should be considered along with the other relevant factors outlined in the authorities where courts have considered the issues of res judicata and abuse of process. These issues were recently considered by our Court of Appeal in Montreal Trust Company of Canada et al v. Hoque in its October 27, 1997 decision, being docket: C.A. #137284 and indexed as Hoque v. Montreal Trust Company of Canada 1997 CanLII 1465 (NS CA), [1997] N.S.J. No. 430. In that decision Justice Cromwell reviews the authorities for the unanimous court and lays down and explains the tests to be applied and the considerations courts must weigh in resolving there issues. These are not remedies granted lightly because of the obvious serious consequences for the parties. Justice Cromwell begins his analysis by stating the two competing fundamental legal principles at p.14 as follows: "This ... involves the interplay between two fundamental legal principles: first, that the courts should be reluctant to deprive litigant of the opportunity to have his or her case adjudicated on the merits; and, second, that party should not, to use the language of some of the older authorities, be twice vexed for the same cause. Distilled to its simplest form, the issue ...is how these two important principles should be applied to the particular facts of this case." Justice Cromwell then lays out the two main or broad principles of res judicata at page 15 as follows: “Res judicata is mainly concerned with two principles. First, there is principle that '...prevents the contradiction of that which was determined in the previous litigation, by prohibiting the relitigation of issues already actually addressed.': see Sopinka, Lederman and Bryant, The Law of Evidence in Canada (1991) at p.997. The second principle is that parties must bring forward all of the claims and defences with respect to the cause of action at issue in the first proceeding and that, if they fail to do so, they will be barred from asserting them in subsequent action. This '...prevents fragmentation of litigation by prohibiting the litigation of matters that were never actually addressed in the previous litigation, but which properly belonged to it."' He goes on to say at p.16 that; "Cause of action estoppel is usually concerned with the application of this second principle because its operation bars all of the issues properly belonging to the earlier litigation. As was the case in the Hoque appeal, it is this second principle which is being relied upon by CBCL in this application. CBCL's principle submission is that all matters or legal remedies which should have been raised in the first action, the facts of which were actually raised in the first action, cannot now be relitigated under different legal concept. Justice Cromwell goes on to state that; firstly; res judicata requires that the previous court decision be final and between the same parties or their privies. There can be no question that the first decision is final, leave having been denied by the Supreme Court of Canada. While CBCL was not originally named as defendant in the first action, it became full third party litigant by being joined for indemnity by the City. This resulted because of the allegations of non-disclosure by CBCL raised in the pleadings of Turf Masters against the City. find that both of the first two basic requirements of res judicata are met. Justice Cromwell reviews several authorities then summarizes the test to be applied in the following manner at page 19 and 20. The submission that all claims that could have been dealt with in the main action are barred is not borne out by the Canadian cases. With respect to matters not actually raised and decided, the test appears to me to be that the party should have raised the matter and, in deciding whether the party should have done so, number of factors are considered.” Justice Cromwell then reviewed good many cases and analyses the various tests considered in those cases and summarizes the authorities at page 24 as follows: Although many of these authorities cite with approval the broad language of Henderson v. Henderson, supra, to the effect that any matter which the parties had the opportunity to raise will be barred, think, however, that this language is somewhat too wide. The better principle is that those issues which the parties had the opportunity to raise and, in all the circumstances, should have raised, will be barred. In determining whether the matter should have been raised, court will consider whether the proceeding constitutes collateral attack on the earlier findings, whether it simply asserts new legal conception of facts previously litigated, whether it relies on 'new evidence that could have been discovered in the earlier proceeding with reasonable diligence, whether the two proceedings relate to separate and distinct causes of action and whether, in all the circumstances, the second proceeding constitutes an abuse of process." (Emphasis added) Justice Cromwell then goes on to review many cases from factual point of view to analyse how the stated principles are applied and again summarizes the test at pages 38 and 39 as follows: My review of these authorities shows that while there are some very broad statements that all matters which could have been raised are barred under the principle of cause of action estoppel, none of the cases actually demonstrates this broad principle. In each case, the issue was whether the party should have raised the point now asserted in the second action. That turns on number of considerations, including whether the new allegations are inconsistent with matters actually decided in the earlier case, whether it relates to the same or distinct cause of action, whether there is an attempt to rely on new facts which could have been discovered with reasonable diligence in the earlier case, whether the second action is simply an attempt to impose new legal conception on the same facts or whether the present action constitutes an abuse of process." I find that, on the basis of all of the affidavits, the first action as amended from time to time and as adjudicated, the agreed statement of facts and the present pleadings, that the application of CBCL ought to be granted. am satisfied that Granview/Turf Masters should have raised the point now asserted in the second action, at the very latest, in early 1993 and well before trial. It appears to have been well aware of the factual basis for the present allegation well before that time, namely in late 1990 and early 1991. find that the question of whether an allegation in tort can be adjudicated in Mechanics' Lien action may have accounted for an initial reluctance to proceed directly against CBCL for non-disclosure, but it does not justify the "wait and see" attitude adopted by Granview during 1993. In my opinion, the memo to file of then Chief Judge Palmeter dated January 21, 1993 does little, if anything, to justify or excuse the "wait and see" attitude of Granview in its failure to bring forward claim in negligent misrepresentation. If anything, the memo shows willingness on the part of the Court to accommodate the proceedings as economically and expeditiously as possible, altogether. This sentiment was also expressed by Justices Bateman and Jones at the various Court of Appeal proceedings before trial. This inaction deprived CBCL of the opportunity to have the matter litigated once and for all. Well before trial, there were no impediments to having either separate action heard at the same time as the first action in consolidation or joinder of causes. In fact, Granview was aware as far back as January 1993 that, for all practical purposes the Mechanics' Lien aspects of its claim were gone. It threatened to proceed in negligent misrepresentation against the City and CBCL but never did. By not doing so, it deprived, with very significant prejudice might add, CBCL of the opportunity to have the same factual argument litigated at that time. If the present action proceeds, CBCL intends to join the City as third party this time and the same factual assertions will be relitigated. find no reasonable justification for the "wait and see" attitude of Granview in the circumstances of this case and the factual assertions made by Granview and contained in the first action. I find that the present cause of action is the very same one litigated in the first action, simply under a different legal concept. The fact that different legal concepts may bear different damages does not change the cause of action. find that Granview clearly chose its legal concept in the first action and cannot now choose different legal concept to expand its available damages. That is precisely one of the justifications advanced by Granview in support of its opposition to CBCL's application. The increased potential damage pool as result of the application of different legal concept does not constitute new facts which could not have been discovered with reasonable diligence. In all the circumstances of this case, the "wait and see" attitude of Granview is not justified. When one considers the opportunities for Granview to plead its entire case before the trial in 1993 and the horrendous costs encountered in that first action, the denial of any opportunity for CBCL to attempt to have all the allegations heard at that time constitutes serious prejudice. In my opinion it was possible to have the entire allegations heard at one trial, or at the very least it should have been attempted. I am satisfied that to allow Granview to now basically relitigate the same action on the same factual basis on a different legal concept which it considered but did not proceed with would be an abuse of process of the court. Many tens of thousands of dollars by the parties, not to mention court time and resources, would have to be expended on relitigation of the same factual cause of action. I therefore grant CBCL\'s application and strike out the statement of claim and dismiss the present action. The second application heard was that of Granview requesting that certain paragraphs of CBCL's defence be struck out pursuant to Civil Procedure Rule 14.25 on the basis of res judicata and abuse of process. This application originally claimed that the issue of CBCL's negligence had been decided by combination of the trial judge's and the Court of Appeal's decisions in the first action. In effect, Granview was initially claiming summary judgment of its negligence action with damages to be assessed. During oral argument Granview scaled down this claim and argued that only certain aspects of negligence had been decided by the previous decisions in the first action. As understand the last position of Granview in this application it is that breach of the standard of care, and possibly some aspects of causation should be the subject of res judicata, in other words, issue estoppel. While it is not technically necessary to decide this second application in view of my ruling on the first application of CBCL, can say would have no hesitation in dismissing this application. Firstly, agree with CBCL's contention that there is no final decision or judgment on any of the issues alleged by Granview to be the subject of issue estoppel. There is no final decision at all in Granview's favour. The entire decision and order of the trial judge was set aside by the Court of Appeal and many of the findings were called into question. Secondly, the comments of the Court of Appeal on certain factual matters surely cannot constitute res judicata or final judgment on cause of action which Granview says was not litigated in the first action, namely the alleged misrepresentation of CBCL. There appears to me to be fundamental inconsistency in that argument. The application of Granview is therefore dismissed. Costs of $2,500.00 are awarded to CBCL in the first application, plus its disbursements to be taxed if they cannot be agreed upon. presume they may be able to be agreed upon if they are not too extensive. also award costs of $1,000.00 to CBCL on the second application, plus disbursements to be taxed if they cannot be agreed upon. J. Halifax, Nova Scotia
The plaintiff was subcontracted by the City of Dartmouth to build a sports field. The defendant were the project consultants for the City, and were involved throughout the tendering process and construction. Their report indicated a number of significant potential problems. The plaintiff was not made aware of the report when it bid on the project. The plaintiff subsequently became aware of the problems, which made their work more costly. After completing the work, it commenced a claim for the additional work which had to be performed due to the undisclosed site conditions. The defendants were joined by the City as a third party to that action. The plaintiff was successful at trial, but the decision was overturned on appeal. The plaintiff then commenced the present action directly against the defendant, alleging negligent misrepresentation. The defendant applied to strike the action on the basis of res judicata and abuse of process. Granting the application, that the present cause of action is the same one litigated in the first action, simply under a different legal concept. To allow the plaintiff to relitigate the same action on the same factual basis would be an abuse of process.