T-2294-89
Olympia Janitorial Supplies (136971 Canada
Ltd.) (Plaintiff)
v.
Her Majesty the Queen in Right of Canada as
represented by the Minister of Public Works
(Defendant)
INDEXED AS: OLYMPIA JANITORIAL SUPPLIES V. CANADA
(MINISTER OF PUBLIC WORKS) (T.D.)
Trial Division, Reed J.—Ottawa, May 23 and 28,
1991.
Crown — Torts — Motion to strike statement of claim as
not disclosing reasonable cause of action — Plaintiff furnish
ing cleaning supplies to general contractor holding contracts to
clean government buildings — Contracts containing security
and non-assignment clauses, and requiring statutory declara
tion suppliers paid before entitled to progress payments —
When general contractor assigning assets, Crown returning
security bond without assurance suppliers paid — Plaintiff not
paid — Having relied upon terms in government contract in
providing materials — Claiming in negligence — Crown argu
ing proximity of relationship between building owner and
supplier insufficient for application of Donoghue v. Stevenson
— Motion dismissed — Determination of proximate relation
ship depending upon specific situation and evidence in each
case — inappropriate to strike action as lack of merit not
plain and obvious — As supplier unable to file lien against
Crown property, could argue contract clauses designed to
protect suppliers and sub-contractors and therefore sufficient
ly proximate relationship between parties herein.
CASES JUDICIALLY CONSIDERED
DISTINGUISHED:
W. & R. Plumbing & Heating Ltd. v. R., [ 1986] 2 F.C.
195; (1986), 17 C.L.R. 291; I F.T.R. 229 (T.D.).
CONSIDERED:
Caparo Industries plc y Dickman, [1990] 1 All ER 568
(H.L.); Queen v. Cognos Inc. (1990), 74 O.R. (2d) 176;
69 D.L.R. (4th) 288; 38 O.A.C. 180 (C.A.) (leave to
appeal to S.C.C. granted (1991), 74 D.L.R. (4th) vii;
Edgeworth Construction Ltd. v. N.D. Lea & Associates
Ltd., [1991] 4 W.W.R. 251; (1991), 53 B.C.L.R. (2d)
180 (C.A.).
REFERRED TO:
Donoghue v. Stevenson, [1932] A.C. 562 (Hi.); Anns v
London Borough of Merton, [1977] 2 All ER 492 (H.L.);
Operation Dismantle Inc. et al. v. The Queen et al.,
[1985] 1 S.C.R. 441; (1985), 18 D.L.R. (4th) 481; 12
Admin. L.R. 16; 13 C.R.R. 287; 59 N.R. 1.
COUNSEL:
Justin R. Fogarty for plaintiff.
Ian M. Donahoe for defendant.
SOLICITORS:
Sadik & Fogarty, Ottawa, for plaintiff.
Deputy Attorney General of Canada for
defendant.
The following are the reasons for order ren
dered in English by
REED J.: The defendant seeks to have the plain
tiff's statement of claim struck out as disclosing no
reasonable cause of action. These reasons relate to
an order dismissing that application which was
given from the bench on Thursday, May 23, 1991.
The facts alleged in the present statement of
claim are: the plaintiff supplied what I will call the
general contractor, J.N.M. Maintenance Limited
("J.N.M."), with cleaning supplies; that company
held a number of contracts to clean various gov
ernment buildings in Ottawa: (i) National Reve
nue Taxation, located at Bronson and Riverside,
contract no. 7010-01/127-3; (ii) Cafeteria Building
at Confederation Heights, located at Riverside and
Brookfield, contract no. 603-520072-4033; (iii)
Surveys and Mapping, located at 615 Booth
Street, contract no. 7010-028-12; (iv) Standard
Lab, located at Tunney's Pasture, contract no.
7010-027/5; (v) Supreme Court, located at Well
ington Street, contract no. 705-526060-7014; (vi)
Sir Frederick Banting Building, located at Tun-
ney's Pasture, contract no. 7010-02 7 / 2 2-1; (vii) Sir
Charles Tupper Building, located at Heron Road
and Riverside, contract no. 7010-01/174; (viii)
Personnel Records, located at Tunney's Pasture,
contract no. 7010-027/19; (ix) La Promenade
Building, located at 151 Sparks Street, contract
no. 7010-01/236-3; (x) Lorne Building, located at
Elgin and Slater Streets, contract no. 7010-01/106
R; (xi) L.C.D.C., located at Tunney's Pasture,
contract no. 7010-02 7 / 1 1; and (xii) Environmental
Health Centre, located at Tunney's Pasture, con
tract no. 7010-01/69. The terms of those contracts
provided:
(i) ... the contractor shall not be entitled to any payment
until he has provided contract security [50% of the contract
amount] ...
(ii) the contractor shall not be entitled to second or subsequent
progress payments until he has provided a statutory decla
ration testifying as to the payment of labour, materials,
tools and equipment supplied under the contract.
Terms also specifically restricted the right of
J.N.M. to, assign the contracts without the approv
al of the Minister of Public Works.
The plaintiff alleges that because it knew that
the cleaning contracts contained the above-men
tioned security and non-assignment clauses and
because the general contractor had to provide
statutory declarations demonstrating that its sup
pliers and sub-contractors had been paid before it
was entitled to progress payments, the plaintiff
provided materials to J.N.M. on a continuing basis
and invoiced that company for them. On June 30,
1988 the plaintiff was owed $117,946.10 by
J.N.M. for cleaning materials. On that date, the
defendant approved an assignment of the assets of
J.N.M. to Les Services D'Entretien D'Immeuble
Staf 2000 Inc. ("2000 Inc."). The defendant
returned J.N.M.'s security bond without, any
assurance that amounts owing to its suppliers or
sub-contractors had been paid. The price paid by
2000 Inc. for the assets was $45,000. The plaintiff
alleges that this action by the defendant constitut
ed negligent conduct vis-Ã -vis the plaintiff and
caused the plaintiff damage.
The present motion to strike out the plaintiff's
statement of claim relies heavily on the Federal
Court decision in W. & R. Plumbing & Heating
Ltd. v. R., [1986] 2 F.C. 195 (T.D.). In that case a
supplier of labour, materials and equipment was
held not to have a cause in promissory estoppel or
unjust enrichment against the defendant when the
defendant did not follow her usual practice of
ensuring that suppliers and sub-contractors had
been paid before releasing amounts due under the
contract in question to the general contractor.
Extensive passages from that judgment are set out
as an appendix to these reasons because the fact
situation therein is very similar to that which is
alleged to exist in this case. * I am not convinced,
after a careful reading of that case, that it answers
the plaintiff's claim. The W. & R. case did not
address the question of whether an action in negli
gence might exist in the factual circumstances
under consideration. While Mr. Justice Addy
clearly was seeking to deal exhaustively with possi
ble causes of action which might arise out of the
fact situation before him, I could not conclude
that, in the absence of a claim in negligence being
specifically framed and put to him, that he decided
that issue.
Counsel for the defendant argues that the claim
in negligence is in any event unfounded. He argues
that the fact situation is a classical one of a
sub-contractor or supplier not having been paid by
the general contractor and that in such cases there
is no recourse by the supplier or sub-contractor
against the owner of the property (absent a
mechanics lien claim). It is argued that the facts
as alleged in the statement of claim simply do not
establish a close enough relationship between the
sub-contractor or supplier (the plaintiff) and the
owner of the buildings (the defendant) to found a
claim based on the tort of negligence, that there is
no case which has established that a proximate
enough relationship exists in such a situation to
warrant an application of the principles established
in Donoghue v. Stevenson, [1932] A.C. 562 (H.L.)
at page 580. The following decisions were also
cited in support of the defendant's position:
Caparo Industries plc v Dickman, [1990] 1 All
ER 568 (H.L.); Queen v. Cognos Inc. (1990), 74
O.R. (2d) 176 (C.A.), leave to appeal to S.C.C.
granted January 17, 1991 [(1991), 74 D.L.R.
(4th) vii]; and Edgeworth Construction Ltd. v.
* Not reproduced in this report.
N.D. Lea & Associates Ltd., [1991] 4 W.W.R.
251 (C.A.).
I would note, first of all, that the present fact
situation is not quite the classical one of a sub-con
tractor (or supplier) attempting to sue a building
owner for amounts owed to the sub-contractor (or
supplier) by the general contractor. The owner of
the buildings in this case is the Crown. A sub-con
tractor or supplier of materials cannot file a lien
against Crown property. Thus, there is a potential
argument that the clauses in the respective con
tract or contracts were specifically designed for the
benefit and protection of suppliers and sub-con
tractors. No argument was made to me that the
clauses were included in the contracts to benefit
the Crown. No argument was made that they
benefited the general contractor. If the clauses
were placed in the contracts to benefit suppliers
and sub-contractors, when no possibility of a lien
being filed exists, then, there is a very good argu
ment that the relationship between the plaintiff
and the defendant is very proximate indeed. These
considerations are matters to be addressed at trial,
not in these proceedings, but they do lead me to
conclude that I should not make a determination
at this stage, that no cause of action exists because
of a lack of a proximate relationship.
With respect to the Caparo, Cognos and Edge-
worth cases, I have not been convinced that those
decisions assist the defendant in her present
application. The Caparo decision dealt with finan
cial statements which were misleading and upon
which prospective shareholders relied in purchas
ing shares. The House of Lords, in that case,
resiled somewhat from the full implication of its
previous decision in Anns y London Borough of
Merton, [1977] 2 All ER 492 (H.L.) and held that
an auditor of a public company's accounts owed no
duty of care to a member of the public at large
who relied on the accounts to buy shares. The
headnote of the case states that [at page 569] "the
court could not deduce a relationship of proximity
between the auditor and a member of the public
when to do so would give rise to unlimited liability
on the part of the auditor." It was said, at pages
573-574:
What emerges is that, in addition to the foreseeability of
damage, necessary ingredients in any situation giving rise to a
duty of care are that there should exist between the party owing
the duty and the party to whom it is owed a relationship
characterised by the law as one of 'proximity' or 'neighbour-
hood' and that the situation should be one in which the court
considers it fair, just and reasonable that the law should impose
a duty of a given scope on the one party for the benefit of the
other. But it is implicit in the passages referred to that the
concepts of proximity and fairness embodied in these additional
ingredients are not susceptible of any such precise definition as
would be necessary to give them utility as practical tests, but
amount in effect to little more than convenient labels to attach
to the features of different specific situations which, on a
detailed examination of all the circumstances, the law recog
nises pragmatically as giving rise to a duty of care of a given
scope. Whilst recognising, of course, the importance of the
underlying general principles common to the whole field of
negligence, I think the law has now moved in the direction of
attaching greater significance to the more traditional categori
sation of distinct and recognisable situations as guides to the
existence, the scope and the limits of the varied duties of care
which the law imposes. We must now, I think, recognise the
wisdom of the words of Brennan J in the High Court of
Australia in Sutherland Shire Council y Heyman (1985) 60
ALR I at 43-44, where he said:
"It is preferable in my view, that the law should develop
novel categories of negligence incrementally and by analogy
with established categories, rather than by a massive exten
sion of a prima facie duty of care restrained only by indefi
nable `considerations which ought to negative, or to reduce or
limit the scope of the duty or the class of person to whom it is
owed'." [Underlining added.]
The Cognos case dealt with an individual who
had been persuaded to leave an employment posi
tion which he had held for many years and to take
one, the express terms of which stated that he
could be dismissed on a month's notice. While the
decision is not of direct assistance to the defendant
since the ratio was that the express contractual
term regarding notice could not be overridden by
prior collateral representations, reference was
made in that decision to both the Anns case and
the Caparo case [at page 182]:
Lord Wilberforce in Anns v. Merton (London Borough), [1978]
A.C. 728, [1977] 2 All E.R. 492, 121 Sol. Jo. 377 (H.L.) set
out an extended liability for economic loss in the following
passage, at p. 498 All E.R.:
First one has to ask whether, as between the alleged wrong
doer and the person who has suffered damage there is a
sufficient relationship of proximity or neighbourhood such
that, in the reasonable contemplation of the former, careless
ness on his part may be likely to cause damage to the latter,
in which case a prima facie duty of care arises. Secondly, if
the first question is answered affirmatively, it is necessary to
consider whether there are any considerations which ought to
negative, or to reduce or limit the scope of the duty or the
class of person to whom it is owed or the damage to which a
breach of it may give rise ...
The House of Lords in Caparo Industries plc v. Dickman,
[1990] 1 All E.R. 568, [1990] 2 W.L.R. 358 has recently
canvassed the scope of the duty of care which one party may
owe to another in these circumstances with particular reference
to this statement in Anns. As I understand their Lordships, they
found the description of the duty as stated in Anns to be overly
broad. They decided that we should proceed on a case by case
basis and determine by analogy with established categories of
negligence whether a duty of care is owed. As Lord Bridge of
Harwich stated at p. 574 All E.R.:
... I think the law has now moved in the direction of
attaching greater significance to the more traditional
categorisation of distinct and recognisable situations as
guides to the existence, the scope and the limits of the varied
duties of care which the law imposes.
Lord Bridge emphasized that liability for pure economic loss
is more difficult to establish than liability for injury to persons
or damage to property. In the former context, liability for
negligent misrepresentation is restricted to cases where the
economic loss resulted from detrimental reliance upon negligent
misstatements to a known recipient for a specific purpose.
[Underlining added.]
The Edgeworth decision dealt with inaccurate
plans and specifications in tender documents. That
decision also refers to the Caparo decision. The
following comments are found at page 256:
In determining whether there is a relationship of sufficient
proximity in a particular context where ample precedents have
established the existence or non-existence of a duty of care,
think the proper course is to follow the precedents. In cases
where there are no sufficient precedents, then I think the best
course is to consider the individual circumstances very carefully
rather than to apply one of the general theories of the law of
negligence which have come and gone over the last few years.
In reaching that conclusion 1 am adopting the view of Mr.
Justice Brennan in Sutherland Shire Council v. Heyman
(1985), 60 A.L.R. 1 at 43-44, 59 A.L.J.R. 564 (H.C.), which
was endorsed by the Law Lords in Caparo Industries plc v.
Dickman. Of course such a consideration involves, in novel fact
situations, an element of judgment. I prefer not to call that,
element of judgment a matter of policy and I prefer not to treat
it as grafting a new "just and reasonable" test onto the law of
negligence. Indeed, I consider that the House of Lords, which
was responsible for the "just and reasonable" addendum, has
now retreated from the "just and reasonable" test as an appro
priate separate test. See Caparo Industries plc v. Dickman and
Murphy v. Brentwood District Council, [1990] 3 W.L.R. 414,
[1990] 2 All E.R. 908 (H.L.). In neither of those cases was a
"just and reasonable" test applied. The "just and reasonable"
test was not adopted by the majority of this Court in London
Drugs Ltd. v. Kuehne & Nagel International Ltd., 45 B.C.L.R.
(2d) 1, [1990] 4 W.W.R. 289, 31 C.C.E.L. 67, 2 C.C.L.T. (2d)
161, 70 D.L.R. (4th) 51, but only by two out of five judges.
Instead, I think that the correct approach is to try to think of
the particularly significant elements in the whole factual con
text of the case being considered and to try to draw parallels
which are legally and practically meaningful between those
elements and similar or comparable elements in cases where a
duty of care has been found to exist or in cases where a duty of
care has been found not to exist. That approach to the judg
ment function bears all the hallmarks of traditional legal
reasoning. I propose to follow it, despite its defects, because
other approaches based on a general theory of liability have
proven to be less reliable and more unpredictable. [Underlining
added.]
As I understand counsel for the defendant's
argument, it is that by analogy to sub-contractor
cases when the owner of the building is a private
person, there has never been a circumstance in
which a duty of care has been found to be owed by
the building owner to the sub-contractor or sup
plier of a general contractor. Thus, it is argued
that there are no analogous cases to which the
present situation could be compared, in which a
duty of care has been found to exist. Accordingly,
it is argued that the present fact situation could
not come within the "proximity" requirement as
described in Caparo, Cognos and Edgeworth.
I draw a different conclusion from the Caparo,
Cognos and Edgeworth cases. While it is clear that
those cases indicate that some degree of restraint
is appropriate in determining the scope of the duty
of care in a negligence claim for pure economic
loss, consequent on the Anns decision, they also
indicate that the determination of proximate rela
tionship is one that is closely bound up with the
particular facts of each case. They indicate that an
assessment of whether a duty of care (or an analo
gous category) exists depends heavily upon the
specific situation and evidence in a case. For that
reason alone it seems to me it would be inappropri
ate to strike the plaintiff's claim at this stage of
the proceedings rather than allowing it to proceed
to trial.
In summary, I have not been persuaded that this
is the type of case in which the plaintiff's action
should be struck out. It is not plain and obvious
that the plaintiffs claim is without merit. It is not
a situation in which I would conclude that it was
beyond doubt that there was no reasonable cause
of action.'
' Operation Dismantle Inc. et al. v. The Queen et al., [1985]
S.C.R. 441; at pp. 475-476.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.