Vellacott v. Saskatoon StarPhoenix Group Inc., 2012 SKQB 359

by | Sep 6, 2012 | Articles & Research

Sean Sinclair, counsel for the StarPhoenix,  shares his summary and comments on Judge Danyliuk’s decision of August 2012 to dismiss a defamation case brought by Conservative MP Maurice Vellacott:

Justice Danyliuk in this decision does an excellent job of summarizing and applying the defences of responsible journalism, fair comment and qualified privilege.

The Plaintiff is a Conservative MP for Saskatoon-Wanuskewin, first elected in 1997.  In the 2002 Canadian Alliance Leadership race, Mr. Vallacott was a strong supporter of Stockwell Day who was running against Stephen Harper for leadership of the new political party.  During the leadership campaign, Mr. Vellacott distributed two mailouts to his constituents endorsing Mr. Day as party leader.  The campaign literature was sent using Mr. Vellacott’s MP free mailing privileges.  Supporters of Stephen Harper contacted the StarPhoenix and criticized Mr. Vellacott’s use of taxpayer money towards an internal party leadership campaign.

The first newspaper story published by the StarPhoenix contained many of the Harper supporters’ criticisms of Mr. Vellacott.  In the various interviews performed by the StarPhoenix, Harper supporters indicated that it was “crooked” to use the MPs’ free mailing privileges in an internal party leadership campaign and that Mr. Vellacott was elected to represent his constituents, not “steal” from them.  One individual went so far as to indicate that it had elements of “Jim and Tammy Faye Bakker”.  Mr. Vellacott was quoted in the story and defended his use of his mailing privileges.

The second newspaper story published the following day contained interviews of other politicians, particularly from the NDP, about their views on the use of Mr. Vellacott’s mailing privileges.  Some of the comments reported in the story were that Mr. Vellacott’s actions do not “pass the smell test” and that he broke the “spirit” of the MPs’ mailing regulations.

Mr. Vellacott took exception to both stories and sued the StarPhoenix and the tho reporters.

Justice Danyliuk ultimately dismissed the action.

On the issue of where there was any defamatory content, Judtice Danyliuk determined that the only content that could be considered defamatory in the first story were the sections where individuals were quoted using the words “crooked” and “stealing”.  He determined that the quote about Jim and Tammy Faye Bakker was not defamatory, as the comment was so outrageous and ludicrous as to be unbelievable; thus, it would not lower the plaintiff’s reputation in the minds of right-thinking individuals.  The rest of the story was determined not to be defamatory as it constituted fair, albeit strongly worded, criticism of Mr. Vellacott’s actions in the political arena. The second story was determined to have no defamatory content.

The defences of responsible journalism, fair comment and qualified privilege were then reviewed at some length by Justice Danyliuk.  He untimately determined that both newspaper stories, to the extent that there was any defamation, were saved under all three defences.

Of particular note with the defence of responsible journalism was Justice Danyliuk’s reliance on the defendant’s expert’s testimony, who gave evidence on what constitutes “best practices” in the news reporting industry.  Justice Danyliuk otherwise goes through the Supreme Court’s responsible journalism test from Grant v. Torstar, 2009 SCC 61, to determine that the articles were saved by this defence. The Court indicated that news agencies are not held to a standard of “stylistic blandness”.

Justice Danyliuk also does a significant review of the law of qualified privilege at paragraphs 84 to 94 of the deceision. He indicates that it may be that the defence of qualified privilege has been subsumed in the context of media defendants into the responsible journalism test.  However, he indicates that the common law trend is to expand the defenceof qualified privilege to media defendants and thus he was prepared to do the same in this case.

Finally, on the fair comment defence, Justice Danyliuk indicated that all of the facets of the defence were made out and, thus, the articles were successfully defended on this basis as well.  He contrasted the words spoken in this case with those in WIC Radio Ltd. v. Simpson, 2008 SCC 40, (where the plaintiff was compared to the KKK and many other notable extremists) to make the point that the content of these articles was rather benign.

The decision (available below)  is a good summary of the law of defamation claims.

Delay Claims

by | Apr 24, 2012 | Articles & Research

 By Bill Preston.

 

Today our Construction Industry is pressured by two overwhelming dynamics:  the methods of construction available to contractors are becoming more and more innovative, cutting edge, and specialized; while, owners “need” the design and construction phases of their project to be as quick and as cost effective as heavenly possible.  The confluence of these two dynamics often manifests in the impact costs of a delay from the initial schedule, which are becoming more and more expensive.  Still, the owner wants to keep the original completion date while also pushing back against paying money for these impact costs.  So, how is the law now fairly allocating these delay costs?  I propose to review two recent Ontario cases to give you some insight.

In Bre-ex v. Hamilton, the City in 2001 issued an Invitation to pre-qualified bidders to install a drainage system and construct a pumping station at its Glanbrook Landfill site for the purpose of stemming the leaking of contaminated water beyond the Landfill’s boundaries.  Included among the pre-qualified bidders was the operator of the landfill, Canadian Waste Services. Eventually the project was awarded to Bre-ex and it eventually completed a good project. But, Bre-ex’s delay claim remained in dispute until the fall of 2011 (11 years!), when the Court awarded Bre-ex $850,860.00 + court costs. 

The facts in this Bre-ex case were a bit different:

  •          The Contract Documents included the Bid Documents, unlike the standard CCDC 18;
  • Thus, the Construction Contract included a Bid Term not only requiring that the bidder describe its proposed method of work, but also prescribed:

Under no circumstances shall any of the investigations proceed prior to acceptance of the proposed methodology.

  •           This is also unlike CCDC 18 which provides:

The consultant will not be responsible for and will not have control, charge, or supervision of construction means, methods …or procedures, …required in connection with the Work…

While, the Bid Documents as well provided:

The City will require that Work commence immediately following award of the Contract, and will require the Work to be completed approximately the end of July, 2002.

Bre-ex proposed an ingenious methodology for laying the drainage pipe up to 16 meters below the surface of the existing garbage mound, and bid $3.2mil, roughly 43% of the next lowest bid being that by the existing landfill operator, Canadian Waste.  The advantage of Bre-ex’s bid was technical innovation. While the others proposed an open trench system involving the costs of dewatering, rodent/seagull control, and odour management, Bre-ex proposed using stacked trench boxes and hydraulic sleeve and rollers guided from the surface by laser technology. No open trench; no significant odour; minimal dewatering; and no rodent/seagull costs!  City Council loved the price and some of its knowledgeable staff recommended this proposed method.  But others in City Hall as well as the City’s outside consultant were not convinced. On December 11, 2001, City Council awarded the project to Bre-ex.  But, the doubters stalled delivery of the award letter to Bre-ex until Jan. 24th and obfuscated the Construction Contract’s terms such that it was not signed until April the 12th! Until then, Bre-ex did not start installing the drainage pipe, because it feared that the doubters might persuade the City to include a Contract Term giving the City a Right of Termination and paying only the value to date for Bre-ex’s work.  Thus, Bre-ex lost the opportunity of beneficial winter conditions from January 6th to April 12th. 

Here’s how the Court arrived at its award of $850,866.00 for Bre-ex’s delay claim:

  •   As is so frequent for projects today, the Construction Contract did not spec a specific schedule, except start immediately and complete approximately by the end of July.  
  • Thus, given there was no precise schedule, the Court accepted its mandate to determine a reasonable fair schedule in the circumstances of the project, the owners expectations, and the work expected of the Contractor.
  • This measure of reasonableness does not necessarily depend on the convenience of the Contractor.
  • Here, everyone was aware that Bre-ex’s method preferred winter conditions, thus the Court determined that it was reasonable that it ought    to have started work on January 6th.
  •  The City’s procrastinations concerning the terms of the Construction Contract were also found to be not reasonable, and accordingly the delay until the April 12th signing was caused solely by the City. 
  •  Thus, though the City agreed to extend the schedule to permit Bre-ex to perform during the Winter of 2002-03, Bre-ex was entitled to:
    1. Lost business opportunity reflecting that it couldn’t seek other jobs during the period of doubt and lost benefit of the better bid pricing for work done in 2002‑03;
    2. Increased expenses for rental equipment, fuel, and labour costs in 2002-03;  and,
    3. Financing costs to cash flow the extended schedule.

At the bottom line, the City paid $4.8mil for the late project it could have timely obtained for $3.2mil!  Owners don’t like that.  And thus some try to avoid paying money on delay claims by inserting weasel clauses into the Contract Terms.  The standard CCDC 18 is pretty straightforward:

6.5.3      If the contractor is delayed by… any other cause beyond the Contractor’s control… The Contractor shall not be entitled to payment for costs incurred by such delays unless such delays result from actions by the Owner.

But, other Owners prefer subtle terms like the following:

 32.5  Any delay resulting in increased cost which is the result of improperly scheduled Work shall be borne by the party responsible therefore.

32.6  Delays in the Work shall be resolved in accordance with GC56

What a Contractor will find if he reads further is that GC56 simply gives the Consultant a discretion to extend the remaining contract schedule; no mention is made of paying costs!

What will the law do?  The Ontario case of Dean Construction v. City of Toronto gives us an insight. The City of Toronto issued an Invitation to Bid for construction of the Harbourfont Fire Station.  This Invitation and the Construction Contract adopted soils reports which were misleadingly inaccurate.  Dean eventually claimed for its delay costs necessitated by the unexpected actual site conditions.  In turn, the City sought to hide behind the below weasel clause which it drafted into the Construction Contract:

In the event of delay caused by… any act of the… Corporation,… as, in the opinion of the Commissioner, the Contractor cannot reasonably be held responsible… the Commissioner may allow such additional time for completion as he may deem fair and reasonable.

The Court demolished the efficacy of the City’s attempt as follows:

I find that the … exclusionary clauses relied upon by Toronto … have no effect with respect to Dean’s claims …  These “exclusionary provision” are not effective … on all legal remedies, …  The clauses did not specifically and unambiguously exclude … legal remedies, …  Such broad general provisions granting an arbitrary power to the Commissioner must be drafted in the clearest and most precise language …

 

CONCLUSION 

My reading of these cases persuades:

1.       Owners should shy from Bid Invitation terms which get into choosing among the various methods of construction proposed by the bidders;

2.        The spec writer should prescribe only the Owner’s ultimate designed purpose together with the requisite contract security to transfer the risks of methodology to the surety industry.

3.        Also, use the fair and clear language of the standard CCDC terms to deal with delay,

4.        Rather than relying upon the hope that the Court will uphold the Owner’s weasel clauses as “perfect”.

5.        Judges will make every effort to wiggle around weasel clauses.

 

Construction Warranties

by | Jan 28, 2012 | Articles & Research

By Bill Preston.

 

In 2007 our Misty Alexandre reported a case where a Contractor was sued by an Owner on the basis that the constructed tenant improvements had a design fault which rendered the premises unfit for some of the Owner’s purposes (a tattoo parlour).  There was no written warranty for this project, yet the Owner claimed that the Contractor had impliedly warranted that the design was fit and alternatively, that the Contractor ought to have warned him that the Owner’s instructions were not suitable for all of the Owner’s business purposes.  Misty reported that, eventually, after paying legal costs, etc., the Contractor escaped responsibility because the Judge concluded that the Owner was more familiar with the health regulations governing a tattoo parlour than was the Contractor.  See Misty’s article:  Responsibility for Suitability of Design here.

Misty concluded her article by recommending to Contractors that they avoid these risks by requiring a contractual term like CCDC 2, GC 3.2 – the Contractor shall be responsible to the extent the design permits.

So, what have I recently noticed becoming a trend in our construction industry?  Particularly for industrial and institutional projects, it appears that Owners and their Consultants have been writing in broad warranty terms requiring that the Contractor guarantee that the design is fit for suppliers who are bidding these projects. Given that most of them cannot qualify for E&O Insurance which would transfer this risk to their Insurer, and most of them do not hire a design professional to check the Owner’s entire design, their only response is usually to either refuse to bid or ignore the risk and hope for the best!  A recent BC decision, Greater Vancouver Water District v. North American Pipe & Steel Inc. will give you a bit of an insight into what happens if the choice which is made is to hope for the best.

In 2005 Vancouver Water issued a public Invitation to Tender for the supply and delivery only of both 60″ and 84″ steel pipe for two large water main projects.  It included three significant provisions to this law case:

1.  The Owner’s detailed spec for quoting the pipe referenced the AWWA standard and was one which Vancouver Water had successfully used for 16 years,  but in part it conflicted with a recent amendment to the AWWA standard;

2.  The Invitation also permitted the bidder to supply an alternate design and price;

3.  While, the Construction Contract prescribed the following warranties:

4.4.3  The Corporation is relying on the Supply Contractor’s skill and …  The Supply Contractor warrants … that the Goods … will correspond with the description of the same in the Contract Documents, and … will be fit for the purpose for which they are to be used …; and

      4.4.4  The Supply Contractor warrants and guarantees that the Goods are free from … defects arising at any time from faulty design.

North American chose to bid and hope for the best by supplying to Vancouver Waters spec.   Well, the worst happened.

Even before all of the installation of the coated pipe had been completed, the coating began to de-laminate.  There were various theories as to the cause of these adhesion problems.  But, because it was urgent that the project progress to completion, various “without prejudice” fixes were tried while Vancouver Water refused to pay North American the $3.3 million balance of the Purchase Price.  That was 2006.  Eventually, these disputes were decided by a  Judge in 2011 after 23 days in Court.   

North American claimed its unpaid Contract price as well as a further $.5 million for remediation costs.  Vancouver Water defended on two alternate arguments:    

4.  North American’s coating was non-compliant with the Owner’s spec; or,

5.  If its design of this coating spec was unfit for the Owner’s purpose, then the broad warranty terms obliged North American to fix the coating for free or pay the Owner’s costs because North American failed to warn that there were design faults in its spec.

At trial, after listening to three experts opine that the conflict between the Owners 16 year old spec and the recent amendment to the AWWA standard was the cause of the de-lamination, the Judge had no hesitation in concluding that it was probably caused by the Owner’s faulty design.  Thus, Vancouver Water argued its alternate position — that North American was still liable because it had warranted the fitness of the Owner’s spec.  Here, the Judge struggled.  he had no difficulty in finding that North American was not aware at the time of coating and supplying the pipe, that the Owner’s design was unfit.  Yet, he had to also acknowledge that literally the warranty term was very broad and could make North American responsible for this faulty design.  Did North American escape this responsibility?

Yes, but only by the hair of its chinny, chin, chin after the Judge spent a number of pages wiggling around warranty term 4.4.4:

4.4.4  The Supply Contractor warrants and guarantees that the Goods are free from … defects arising at any time from faulty design.

He first recognized that a warranty term can trump the Contractor’s perfect performance of the Owner’s spec’d design, by making the Contractor responsible for the fitness of the Owner’s design.  He then noted that in this case the Owner’s Contract Documents were contradictory in that, if this warranty term was given its literal interpretation, then it would be contradictory with other terms requiring the Contractor to comply with Vancouver District’s spec.  He thus concluded that in the face of these contradictory provisions, he should attempt to reconcile them by giving effect to the parties’ intentions if at all possible.  Here, he concluded that neither party expected that Vancouver Water was relying upon North American to provide design services.  Thus, given this broad warranty term is found in Vancouver Water’s standard form frequently used for various types of purchasing, the Judge was more willing to narrow it down “to promote the true intent of the parties at the time of entry into the Contract”. “A literal meaning should not be applied where to do so would bring about an unrealistic result.”  The Judge thus ruled that this warranty term could be narrowed down to making North American responsible only for that design which Vancouver Water intended that North American would provide.  This interpretation does not make North American responsible for the design which Vancouver Water spec’d and relied upon without North American’s involvement.

Conclusions

1.  Legally, it is certainly possible for a Contractor, trade or supplier to agree to accept responsibility for the faulty work or design of others on the project;

2.  And, thus particularly for industrial and institutional projects, owners are asking their lawyers to download the risks of faulty design by broad warranty terms;

3.  But, Judges and Arbiters will exercise their best efforts to wiggle around an unfair, broad interpretation of these warranty terms; yet,

4.  Remember that it is an expensive risk process to have to go to Court or Arbitration if a problem arises and the bidder hasn’t transferred this risk to an Insurer.

 

 

Articles & Research