BG Checo International Ltd. v. British Columbia Hydro and Power Authority

BG Checo International Ltd. v. British Columbia Hydro and Power Authority
Collection
Supreme Court Judgments
Date
1993-01-21
Report
[1993] 1 SCR 12
Case number
21939, 21955
Judges
La Forest, Gérard V.; L'Heureux-Dubé, Claire; Sopinka, John; Gonthier, Charles Doherty; McLachlin, Beverley; Stevenson, William; Iacobucci, Frank
On appeal from
British Columbia
Subjects
Contract
Torts
Notes
SCC Case Information: 21939, 21955
Decision Content
BG Checo International Ltd. v. British Columbia Hydro and Power Authority, [1993] 1 S.C.R. 12
British Columbia Hydro and Power Authority Appellant
v.
BG Checo International Limited Respondent
and between
BG Checo International Limited Appellant
v.
British Columbia Hydro and Power Authority Respondent
Indexed as: BG Checo International Ltd. v. British Columbia Hydro and Power Authority
File Nos.: 21939, 21955.
1992: January 28; 1993: January 21.
Present: La Forest, L'Heureux‑Dubé, Sopinka, Gonthier, McLachlin, Stevenson* and Iacobucci JJ.
on appeal from the court of appeal for british columbia
Torts ‑‑ Negligence ‑‑ Negligent misrepresentation ‑‑ Concurrent liability in tort and contract ‑‑ Hydro calling for tenders to erect transmission towers and string transmission lines ‑‑ Tender documents stating that right‑of‑way would be cleared by others ‑‑ Parties incorporating tender documents into contract ‑‑ Right‑of‑way not properly cleared ‑‑ Whether plaintiff can sue in tort if duty relied on is also made a contractual duty by an express term of the contract ‑‑ If so, whether terms of contract excluded Hydro's potential liability for misrepresentation.
Contracts ‑‑ Breach of contract ‑‑ Hydro awarding contract to erect transmission towers and string transmission lines ‑‑ Contract stating that right‑of‑way would be cleared by others ‑‑ Right‑of‑way not properly cleared ‑‑ Hydro liable for damages for breach of contract.
Hydro called for tenders to erect transmission towers and string transmission lines. Checo had a representative inspect the area by helicopter before its tender was submitted. The representative noted that the right‑of‑way had been partially cleared, and also noted evidence of ongoing clearing activity. He assumed that there would be further clearing prior to the commencement of Checo's work. Hydro accepted Checo's tender and the parties entered into a written contract. The tender documents, which were subsequently incorporated in the contract, stated that clearing of the right‑of‑way would be done by others and formed no part of the work to be performed by Checo. They also stated that it was Checo's responsibility to inform itself of all aspects of the work and that should any errors appear in the tender documents, or should Checo note any conditions conflicting with the letter or spirit of the tender documents, it was Checo's responsibility to obtain clarification before submitting its tender. The tender documents also provided that Checo would satisfy itself of all site conditions and the correctness and sufficiency of the tender for the work and the stipulated prices. In fact, no further clearing of the right‑of‑way ever took place, and the improper clearing caused Checo a number of difficulties in completing its work.
Checo sued Hydro seeking damages for negligent misrepresentation, or, in the alternative, for breach of contract. The evidence at trial indicated that Hydro had contracted the clearing out to another company, and that, to Hydro's knowledge, the work was not done adequately. There was no direct discussion between the representatives of Checo and Hydro concerning this issue. During the trial Checo amended its statement of claim to include a claim in fraud. The trial judge found that Hydro had acted fraudulently in its dealings with Checo and awarded damages to Checo. Hydro appealed to the Court of Appeal, which rejected the finding of fraud, but found that there had been a negligent misrepresentation which induced Checo to enter into the contract. The Court of Appeal awarded damages for the misrepresentation, but reduced the trial judge's damage award, and referred the question of breach of contract and damages flowing therefrom back to the trial court.
The issues raised by Hydro's appeal are (1) whether a pre‑contractual representation which becomes a contractual term can found liability in negligent misrepresentation; (2) if so, whether the terms of the contract operate to exclude Hydro's potential liability for any misrepresentations; (3) if not, whether Hydro is liable for negligent misrepresentation; and (4) whether there was a breach of contract. Checo's cross‑appeal is to determine (1) whether Hydro should be liable for fraudulent misrepresentation and (2) whether the Court of Appeal correctly assessed Checo's damages for negligent misrepresentation.
Held (Sopinka and Iacobucci JJ. dissenting in part): The appeal should be dismissed and the cross-appeal allowed in part.
Per La Forest, L'Heureux-Dubé, Gonthier and McLachlin JJ.: Hydro is liable to Checo for breach of contract. The contract required Hydro to clear the right‑of‑way as specified and that duty was not negated by the more general clauses relating to errors and misunderstandings in tendering, site conditions and contingencies. Since Hydro did not remove the logs and debris from the right‑of‑way, it is liable for breach of contract.
The contract does not preclude Checo from suing in tort. The general rule emerging from this Court's decision in Central Trust Co. v. Rafuse is that where a given wrong prima facie supports an action in contract and in tort, the party may sue in either or both, subject to any limit the parties themselves have placed on that right by their contract. This limitation on the general rule of concurrency arises because it is always open to parties to limit or waive the duties which the common law would impose on them for negligence. The mere fact that the parties have dealt with a matter expressly in their contract does not mean that they intended to exclude the right to sue in tort. It all depends on how they have dealt with it. In so far as the tort duty is not contradicted by the contract, it remains intact and may be sued upon.
This principle is illustrated by consideration of the three situations that may arise when contract and tort are applied to the same wrong. The first class of case arises where the contract stipulates a more stringent obligation than the general law of tort would impose. In that case, the parties are hardly likely to sue in tort, since they could not recover in tort for the higher contractual duty. The vast majority of commercial transactions fall into this class. The right to sue in tort is not extinguished, however, and may remain important, as where suit in contract is barred by expiry of a limitation period. The second class of case arises where the contract stipulates a lower duty than that which would be presumed by the law of tort in similar circumstances. This occurs when the parties by their contract indicate their intention that the usual liability imposed by the law of tort is not to bind them. The most common means by which such an intention is indicated is the inclusion of a clause of exemption or exclusion of liability in the contract. Generally, the duty imposed by the law of tort can be nullified only by clear terms. The third class of case arises where the duty in contract and the common law duty in tort are co-extensive. In this class of case, like the others, the plaintiff may seek to sue concurrently or alternatively in tort to secure some advantage peculiar to the law of tort, such as a more generous limitation period. The case at bar falls into this third category. Hydro's common law duty not to negligently misrepresent that it would have the right-of-way cleared by others is not excluded by the contract, which confirmed Hydro's obligation to clear the right-of-way.
The availability of concurrent liability in contract and tort should not be predicated on whether the contractual term is express or implied. Using the express-implied distinction as a basis for determining whether there is a right to sue in tort poses a number of problems. The law has always treated express and implied terms as being equivalent in effect, and it is difficult to distinguish between them in some cases. It is not evident that if parties to a contract choose to include an express term in the contract dealing with a particular duty relevant to the contract, they intended to oust the availability of tort remedies in respect of that duty. Finally, the test will be difficult to apply in situations where the express contractual term does not exactly overlap the tort duty. Neither principle, the authorities nor the needs of contracting parties support the conclusion that dealing with a matter by an express contract term will, in itself, categorically exclude the right to sue in tort.
The contract did not limit the duty of care owed by Hydro to Checo, nor did Checo waive its common law right to bring such tort actions as might be open to it. Checo is thus entitled to claim against Hydro in tort.
In situations of concurrent liability in tort and contract it would seem anomalous to award a different level of damages for what is essentially the same wrong on the sole basis of the form of action chosen, though particular circumstances or policy may dictate such a course.
Checo is entitled to be compensated for all reasonably foreseeable loss caused by the tort. The Court of Appeal was justified in finding that had the misrepresentation not been made, Checo would have entered into the contract, but with a higher bid. It was of the view that Checo would have increased its bid by an amount equal to the cost of the extra work made necessary by the improperly cleared work site plus profit and overhead. To compensate only for the direct costs of clearing, however, is to suggest that the only tort was the failure to clear. The real fault is that Hydro misrepresented the situation and Checo may have relied on that representation in performing its other obligations under the contract. Having to devote its resources to that extra work might have prevented Checo from meeting its original schedule, thereby resulting in Checo incurring acceleration costs in order to meet the contract completion date. Such costs would also arguably be reasonably foreseeable. The matter should be referred back to the trial court for determination of whether any such indirect losses were the foreseeable result of the misrepresentation.
The breach of contract claims should be referred to the trial court for determination. Checo is to be put in the position it would be in had the work site been cleared properly, and is therefore to be reimbursed for all expenses incurred as a result of the breach of contract, whether expected or not, except to the extent that those expenses may have been so unexpected that they are too remote to be compensable for breach of contract. The damages in contract would thus include not only the costs flowing directly from the improperly cleared work site, but also consequent indirect costs such as acceleration costs due to delays in construction.
There was no evidence of an intention on the part of Hydro to deceive, and the Court of Appeal therefore correctly concluded that Hydro should not be liable for fraudulent misrepresentation.
Per Sopinka and Iacobucci JJ. (dissenting in part): In the circumstances of the case, Hydro may be liable in contract for the representations which Checo complains of, but it cannot be liable in tort. While as a general rule, the existence of a contract between two parties does not preclude the existence of a common law duty of care, contractual exclusion or limitation clauses can operate either to exclude or limit liability, or to limit the duty owed by one party to the other, whether in contract or in tort. In neither case will the plaintiff be permitted to use an action in tort to circumvent the limitation of liability or of duty in the contract. The contractual relationship can bring the parties into sufficient proximity to give rise to a duty of care, but no duty of care in tort can be concurrent with a duty of care created by an express term of the contract. If the duty is defined by an express term of the contract, the plaintiff will be confined to whatever remedies are available in the law of contract. A claim in tort is not foreclosed in all circumstances, however. A contextual approach should be adopted which takes into account the context in which the contract is made, and the position of the parties with respect to one another. The policy reasons in favour of the rule are strongest where the contractual context is commercial and the parties are of equal bargaining power. Here there is no question of unconscionability or inequality of bargaining power. If such issues, or others analogous to them, were to arise, however, a court should be wary not to exclude too rapidly a duty of care in tort on the basis of an express term of the contract, especially if the end result for the plaintiff would be a wrong without a remedy.
An action for negligent misrepresentation will survive the making of a contract between the parties. As in other areas of negligence, the plaintiff may have the option of concurrent actions in tort and contract. Here, however, the duty imposed in tort on Hydro by the clause in the tender documents is co‑extensive with the duty imposed in contract by the express clause in the contract. Consequently, subject to any overriding considerations arising from the context in which the transaction occurred, Checo is limited to whatever remedies may be available to it in contract for Hydro's breach of the contract. An assessment of the context strengthens the conclusion that Checo should be limited to any remedies that might be available to it under the contract. This transaction occurred in a commercial context. The parties are both large corporations, and there is no allegation or indication of any inequality of bargaining power or unconscionability. As well, the contract which was concluded by the parties was included as part of the tender documents. Checo knew when it was preparing its bid that if its bid were accepted, the representation as to the condition of the right‑of‑way would be a term of the contract. Checo knew, or ought to have known, that disputes as to the condition of the right‑of‑way would potentially be governed by the contract.
There is no clause in the contract or in the tender documents which serves either to limit or exclude Hydro's liability for the representation the contract contained. Hydro breached the express term of the contract that the right‑of‑way would be cleared and is accordingly liable for damages, which should be assessed at the new trial.
There was insufficient evidence to support a finding of deceit. The Court of Appeal properly concluded that Hydro should not be liable for fraudulent misrepresentation.
Cases Cited
By La Forest and McLachlin JJ.
Considered: Central Trust Co. v. Rafuse, [1986] 2 S.C.R. 147; referred to: Forbes v. Git, [1922] 1 A.C. 256 (P.C.), rev'g (1921), 62 S.C.R. 1; Hassard v. Peace River Co‑operative Seed Growers Association Ltd., [1954] 2 D.L.R. 50; Cotter v. General Petroleums Ltd., [1951] S.C.R. 154; Dyck v. Manitoba Snowmobile Association Inc., [1985] 1 S.C.R. 589; Elder, Dempster & Co. v. Paterson, Zochonis & Co., [1924] A.C. 522; Lister v. Romford Ice and Cold Storage Co., [1957] A.C. 555; Canadian Indemnity Co. v. Andrews & George Co., [1953] 1 S.C.R. 19; Dominion Chain Co. v. Eastern Construction Co. (1976), 68 D.L.R. (3d) 385 (Ont. C.A.), aff'd sub nom. Giffels Associates Ltd. v. Eastern Construction Co., [1978] 2 S.C.R. 1346; Batty v. Metropolitan Property Realisations Ltd., [1978] Q.B. 554; Jarvis v. Moy, Davies, Smith, Vandervell & Co., [1936] 1 K.B. 399; Rainbow Industrial Caterers Ltd. v. Canadian National Railway Co., [1991] 3 S.C.R. 3; Asamera Oil Corp. v. Sea Oil & General Corp., [1979] 1 S.C.R. 633; B.D.C. Ltd. v. Hofstrand Farms Ltd., [1986] 1 S.C.R. 228.
By Iacobucci J. (dissenting in part)
Considered: Central Trust Co. v. Rafuse, [1986] 2 S.C.R. 147; referred to: K.R.M. Construction Ltd. v. British Columbia Railway Co. (1981), 18 C.L.R. 159 (B.C.S.C.), aff'd in part (1982), 18 C.L.R. 159 (B.C.C.A.); Donoghue v. Stevenson, [1932] A.C. 562; Hedley Byrne & Co. v. Heller & Partners Ltd., [1964] A.C. 465; Rainbow Industrial Caterers Ltd. v. Canadian National Railway Co. (1988), 30 B.C.L.R. (2d) 273; Rainbow Industrial Caterers Ltd. v. Canadian National Railway Co. (1990), 43 B.C.L.R. (2d) 1, aff'd [1991] 3 S.C.R. 3; Catre Industries Ltd. v. Alberta (1989), 99 A.R. 321 (C.A.), leave to appeal refused, [1990] 1 S.C.R. vi; University of Regina v. Pettick (1991), 90 Sask. R. 241; Fletcher v. Manitoba Public Insurance Co. (1989), 68 O.R. (2d) 193; Pittman v. Manufacturers Life Insurance Co. (1990), 76 D.L.R. (4th) 320; Clark v. Naqvi (1989), 99 N.B.R. (2d) 271; Esso Petroleum Co. v. Mardon, [1976] 2 All E.R. 5; Leame v. Bray (1803), 3 East 593, 102 E.R. 724; Bretherton v. Wood (1821), 3 Brod. & B. 54, 129 E.R. 1203; Boorman v. Brown (1842), 3 Q.B. 511 (Ex. Ch.), 114 E.R. 603, aff'd sub nom. Brown v. Boorman (1844), 11 Cl. & Fin. 1 (H.L.), 8 E.R. 1003; Jarvis v. Moy, Davies, Smith, Vandervell & Co., [1936] 1 K.B. 399; Groom v. Crocker, [1939] 1 K.B. 194; Bagot v. Stevens Scanlan & Co., [1966] 1 Q.B. 197; Williamson v. Allison (1802), 2 East. 446, 102 E.R. 432; Legge v. Tucker (1856), H. & N. 500, 156 E.R. 1298; Turner v. Stallibrass, [1898] 1 Q.B. 56; Edwards v. Mallan, [1908] 1 K.B. 1002; Elder, Dempster & Co. v. Paterson, Zochonis & Co., [1924] A.C. 522; J. Nunes Diamonds Ltd. v. Dominion Electric Protection Co., [1972] S.C.R. 769; Dominion Chain Co. v. Eastern Construction Co. (1976), 68 D.L.R. (3d) 385; Batty v. Metropolitan Property Realisations Ltd., [1978] Q.B. 554; Anns v. London Borough of Merton, [1977] 2 All E.R. 492; New Brunswick Telephone Co. v. John Maryon International Ltd. (1982), 43 N.B.R. (2d) 469; V.K. Mason Construction Ltd. v. Bank of Nova Scotia, [1985] 1 S.C.R. 271; ITO‑‑International Terminal Operators Ltd. v. Miida Electronics Inc., [1986] 1 S.C.R. 752; London Drugs Ltd. v. Kuehne & Nagel International Ltd., [1992] 3 S.C.R. 299; Hall v. Brooklands Auto Racing Club, [1933] 1 K.B. 205; Peters v. Parkway Mercury Sales Ltd. (1975), 10 N.B.R. (2d) 703; Carman Construction Ltd. v. Canadian Pacific Railway Co., [1982] 1 S.C.R. 958; Queen v. Cognos Inc., [1993] 1 S.C.R. 000; Derry v. Peek (1889), 14 App. Cas. 337; Nocton v. Lord Ashburton, [1914] A.C. 932; Heilbut, Symons & Co. v. Buckleton, [1913] A.C. 30; De Vall v. Gorman, Clancey & Grindley Ltd. (1919), 58 S.C.R. 259; Kinsman v. Kinsman (1912), 3 O.W.N. 966; Howse v. Quinnell Motors Ltd., [1952] 2 D.L.R. 425; Chapman v. Warren, [1936] O.R. 145; Gardner v. Merker (1918), 43 O.L.R. 411; Kennedy v. Anderson (1919), 50 D.L.R. 105; Gilmour v. Trustee Co. of Winnipeg, [1923] 3 W.W.R. 177; Thurston v. Streilen (1950), 59 Man. R. 55; Scholte v. Richardson, [1951] O.R. 58; Candler v. Crane Christmas & Co., [1951] 1 All E.R. 426; Cann v. Willson (1888), 39 Ch. D. 39; Heaven v. Pender (1883), 11 Q.B.D. 503; George v. Skivington (1869), L.R. 5 Ex. 1; Clark v. Kirby‑Smith, [1964] 2 All E.R. 835; Kingu v. Walmar Ventures Ltd. (1986), 38 C.C.L.T. 51.
Authors Cited
Baker, J. H. An Introduction to English Legal History. London: Butterworths, 1979.
Blom, Joost. "Remedies in Tort and Contract: Where is the Difference?". In Jeffrey Berryman, ed., Remedies: Issues and Perspectives. Scarborough, Ont.: Carswell, 1991, 395.
Chitty on Contracts, vol. 1, 26th ed. By A. G. Guest. London: Sweet & Maxwell, 1989.
Fifoot, C. H. S. History and Sources of the Common Law: Tort and Contract. London: Stevens & Sons, 1949.
French, Christine. "The Contract/Tort Dilemma" (1983), 5 Otago L. Rev. 236.
Fuller, L. L., and W. R. Purdue, "The Reliance Interest in Contract Damages" (1936‑37), 46 Yale L. J. 52 and 373.
Johnson, Howard. "Contract and Tort: Orthodoxy Reasserted!" (1990), 9 Int'l Banking L. 306.
Lewison, Kim. The Interpretation of Contracts. London: Sweet & Maxwell, 1989.
McLachlin, Beverley M., and Wilfred J. Wallace. The Canadian Law of Architecture and Engineering. Toronto: Butterworths, 1987.
McLauchlan, D. W. "Assessment of Damages for Misrepresentations Inducing Contracts" (1987), 6 Otago L. Rev. 370.
McLauchlan, D. W. "Pre‑Contract Negligent Misrepresentation" (1977), 4 Otago L. Rev. 23.
APPEAL and CROSS‑APPEAL from a judgment of the British Columbia Court of Appeal (1990), 44 B.C.L.R. (2d) 145, 4 C.C.L.T. (2d) 161, 41 C.L.R. 1, [1990] 3 W.W.R. 690, reversing in part a judgment of Cohen J. (1988), 10 A.C.W.S. (3d) 312, [1988] B.C.D. Civ. 971‑01, [1988] B.C.W.L.D. 2324, awarding damages for fraudulent misrepresentation. Appeal dismissed and cross-appeal allowed in part, Sopinka and Iacobucci JJ. dissenting in part.
Glenn A. Urquhart, Arthur M. Grant and Gordon D. Phillips, for British Columbia Hydro and Power Authority.
Donald J. Sorochan, Q.C., Meredith A. Quartermain and Mari A. Worfolk, for BG Checo International Ltd.
//La Forest and McLachlin JJ.//
The judgment of La Forest, L'Heureux‑Dubé, Gonthier and McLachlin JJ. was delivered by
La Forest and McLachlin JJ. ‑‑ We have had the advantage of reading the reasons of our colleague Justice Iacobucci. We agree with his conclusion that Hydro is liable to Checo for breach of contract. We disagree, however, with his conclusion that the contract precludes Checo from suing in tort. In our view, our colleague's approach would have the effect of eliminating much of the rationalizing thrust behind the movement towards concurrency in tort and contract. Rather than attempting to establish new barriers to tort liability in contractual contexts, the law should move towards the elimination of unjustified differences between the remedial rules applicable to the two actions, thereby reducing the significance of the existence of the two different forms of action and allowing a person who has suffered a wrong full access to all relevant legal remedies.
The facts have been fully set out by our colleague and need not be repeated. The tender documents (subsequently incorporated in the contract) stated that clearing of the right‑of‑way would be done by others and formed no part of the work to be performed by Checo. The tender documents and contract documents also stated that it was Checo's responsibility to inform itself of all aspects of the work and that should any errors appear in the tender documents, or should Checo note any conditions conflicting with the letter or spirit of the tender documents, it was the responsibility of Checo to obtain clarification before submitting its tender. The tender documents also provided that Checo would satisfy itself of all site conditions and the correctness and sufficiency of the tender for the work and the stipulated prices.
Checo argues that the right‑of‑way was not properly cleared and that the statement in the tender documents and the contract that it had been cleared constituted a breach of contract and negligent misrepresentation.
Hydro argues first that it carried out the clearing required by clause 6.01.03 of the contract, and second, that in any event it was up to Checo to satisfy itself that the site was adequately cleared before tendering. In other words, if there was ambiguity as to what was meant by "cleared" Checo had assumed the risk of clearing which might not meet its expectations.
The trial judge found Hydro liable for the tort of deceit. The Court of Appeal found that the evidence fell short of supporting that finding, there being no evidence of intention to deceive. That conclusion cannot seriously be contested and Checo's cross-appeal on the issue of fraudulent misrepresentation must accordingly be dismissed. The only issues therefore are whether claims lie in contract and tort and if so, what is the measure of damages.
The Claim in Contract
The parties chose to set out their respective rights and obligations in the contract they signed. They chose to incorporate the tender documents into the contract. Thus all rights and obligations flowing from the tender documents onward are set by the parties' own agreement.
It follows that a court, in assessing the rights and obligations of the parties, must commence with the contract. It must look to what the parties themselves had to say about those rights and obligations.
This brings us to construction of the contract. The problem is that of reconciling provisions in the contract which are said to be inconsistent. One, the provision that placed on Hydro the obligation of clearing the right‑of‑way, was specific. Clause 6.01.03 stated that "[c]learing of the right-of-way and foundation installation has been carried out by others and will not form part of this Contract." It went on to state a limited exception for two areas, again drafted in specific terms: "Standing trees and brush have not been removed from the right-of-way in certain valley and gully crossings." The other relevant provisions are the general provisions placing on Checo the responsibility for any misunderstandings as to the conditions of the work or errors in the tender documents (clause 2.03), and for satisfying itself before bidding as to site conditions, quantities of work, etc., and requiring it to "obtain all necessary information as to risks, contingencies, and other circumstances which may influence or affect [its] Tender" (clause 4.04).
It is a cardinal rule of the construction of contracts that the various parts of the contract are to be interpreted in the context of the intentions of the parties as evident from the contract as a whole: K. Lewison, The Interpretation of Contracts (1989), at p. 124; Chitty on Contracts (26th ed. 1989), vol. 1, at p. 520. Where there are apparent inconsistencies between different terms of a contract, the court should attempt to find an interpretation which can reasonably give meaning to each of the terms in question. Only if an interpretation giving reasonable consistency to the terms in question cannot be found will the court rule one clause or the other ineffective: Chitty on Contracts, supra, at p. 526; Lewison, supra, at p. 206; Git v. Forbes (1921), 62 S.C.R. 1, per Duff J. (as he then was), dissenting, at p. 10, rev'd [1922] 1 A.C. 256; Hassard v. Peace River Co-operative Seed Growers Association Ltd., [1954] 2 D.L.R. 50 (S.C.C.), at p. 54. In this process, the terms will, if reasonably possible, be reconciled by construing one term as a qualification of the other term: Forbes v. Git, [1922] 1 A.C. 256; Cotter v. General Petroleums Ltd., [1951] S.C.R. 154. A frequent result of this kind of analysis will be that general terms of a contract will be seen to be qualified by specific terms -- or, to put it another way, where there is apparent conflict between a general term and a specific term, the terms may be reconciled by taking the parties to have intended the scope of the general term to not extend to the subject-matter of the specific term.
Approaching the matter in this way, the provisions referred to above are capable of reconciliation. The parties agreed that Hydro should bear the responsibility of clearing the right-of-way. The only exception was as to the removal of trees and debris in certain valley and gully crossings. The general obligation of Checo for misunderstandings and errors in the tender documents and for satisfying itself as to the site, the work and all contingencies must not have been intended to negate the specific obligation for clearing which the contract placed squarely on the shoulders of Hydro. The failure to discharge that responsibility was not a "misunderstanding" or "error" in the tender documents within clause 2.03. Nor was it relevant to the tenderer's inspection of the site or responsibility for risks and contingencies that might affect the bid within clause 4.04. Given the specific nature of Hydro's obligation to clear the right-of-way, the site inspection and contingencies referred to can reasonably be read as relating to matters other than clearing, which was a clearly assigned obligation and thus not a contingency. The same applies to the provision for preparation of the site (clause 7.01.02). In this way, the clause placing on Hydro the obligation to clear the right-of-way can be reconciled with the clauses placing on Checo the consequences of errors and misunderstandings in the tender documents and the obligation to satisfy itself as to the site, the work and contingencies.
We thus conclude that the contract required Hydro to clear the right-of-way as specified in clause 6.01.03 of the contract and that duty was not negated by the more general clauses relating to errors and misunderstandings in tendering, site conditions and contingencies. This was the view of the trial judge and the majority in the Court of Appeal. The trial judge, based on the evidence he heard, went on to define what "clearing" meant in the contract; it meant that "the right-of-way would be free of logs and debris." The majority of the Court of Appeal accepted this conclusion. So must we. Since it is not seriously contended that Hydro cleared the right-of-way to this standard, Hydro's breach of contract is established.
The plaintiff suing for breach of contract is to be put in the position it would have been in had the contract been performed as agreed. The measure of damages is what is required to put Checo in the position it would have been in had the contract been performed as agreed. If the contract had been performed as agreed, Hydro would have removed the logs and debris from the right-of-way. Checo would not have been required to do the additional work that was necessitated by reason of the work site being improperly cleared. It might also have avoided certain overhead. The contract stipulated 15 percent for overhead and profit on extra work. Checo may be entitled to a portion of this sum for overhead. It would not be entitled to profit on the cost of clearing the right-of-way, since that would put Checo in a better position than it would have been had Hydro performed its contract; Checo never bargained for profit on this work, which was totally outside the parties' expectations. As will be explained in greater detail later in these reasons, we share Iacobucci J.'s view that if damages are to be assessed for breach of contract regarding the improper clearing of the work site, the case should be returned to trial for that to be done.
The Claim in Tort
The Theory of Concurrency
The first question is whether the contract precludes Checo from suing in tort.
Iacobucci J. concludes that a contract between the parties may preclude the possibility of suing in tort for a given wrong where there is an express term in the contract dealing with the matter. We would phrase the applicable principle somewhat more narrowly. As we see it, the right to sue in tort is not taken away by the contract in such a case, although the contract, by limiting the scope of the tort duty or waiving the right to sue in tort, may limit or negate tort liability.
In our view, the general rule emerging from this Court's decision in Central Trust Co. v. Rafuse, [1986] 2 S.C.R. 147, is that where a given wrong prima facie supports an action in contract and in tort, the party may sue in either or both, except where the contract indicates that the parties intended to limit or negative the right to sue in tort. This limitation on the general rule of concurrency arises because it is always open to parties to limit or waive the duties which the common law would impose on them for negligence. This principle is of great importance in preserving a sphere of individual liberty and commercial flexibility. Thus if a person wishes to engage in a dangerous sport, the person may stipulate in advance that he or she waives any right of action against the person who operates the sport facility: Dyck v. Manitoba Snowmobile Association Inc., [1985] 1 S.C.R. 589. Similarly, if two business firms agree that a particular risk should lie on a party who would not ordinarily bear that risk at common law, they may do so. So a plaintiff may sue either in contract or in tort, subject to any limit the parties themselves have placed on that right by their contract. The mere fact that the parties have dealt with a matter expressly in their contract does not mean that they intended to exclude the right to sue in tort. It all depends on how they have dealt with it.
Viewed thus, the only limit on the right to choose one's action is the principle of primacy of private ordering -- the right of individuals to arrange their affairs and assume risks in a different way than would be done by the law of tort. It is only to the extent that this private ordering contradicts the tort duty that the tort duty is diminished. The rule is not that one cannot sue concurrently in contract and tort where the contract limits or contradicts the tort duty. It is rather that the tort duty, a general duty imputed by the law in all the relevant circumstances, must yield to the parties' superior right to arrange their rights and duties in a different way. In so far as the tort duty is not contradicted by the contract, it remains intact and may be sued upon. For example, where the contractual limitation on the tort duty is partial, a tort action founded on the modified duty might lie. The tort duty as modified by the contractual agreement between the parties might be raised in a case where the limitation period for an action for breach of contract has expired but the limitation period for a tort action has not. If one says categorically, as we understand Iacobucci J. to say, that where the contract deals with a matter expressly, the right to sue in tort vanishes altogether, then the latter two possibilities vanish.
This is illustrated by consideration of the three situations that may arise when contract and tort are applied to the same wrong. The first class of case arises where the contract stipulates a more stringent obligation than the general law of tort would impose. In that case, the parties are hardly likely to sue in tort, since they could not recover in tort for the higher contractual duty. The vast majority of commercial transactions fall into this class. The right to sue in tort is not extinguished, however, and may remain important, as where suit in contract is barred by expiry of a limitation period.
The second class of case arises where the contract stipulates a lower duty than that which would be presumed by the law of tort in similar circumstances. This occurs when the parties by their contract indicate their intention that the usual liability imposed by the law of tort is not to bind them. The most common means by which such an intention is indicated is the inclusion of a clause of exemption or exclusion of liability in the contract. Generally, the duty imposed by the law of tort can be nullified only by clear terms. We do not rule out, however, the possibility that cases may arise in which merely inconsistent contract terms could negative or limit a duty in tort, an issue that may be left to a case in which it arises. The issue raises difficult policy considerations, viz. an assessment of the circumstances in which contracting parties should be permitted to agree to contractual duties that would subtract from their general obligations under the law of tort. These important questions are best left to a case in which the proper factual foundation is available, so as to provide an appropriate context for the decision. In the second class of case, as in the first, there is usually little point in suing in tort since the duty in tort and consequently any tort liability is limited by the specific limitation to which the parties have agreed. An exception might arise where the contract does not entirely negate tort liability (e.g., the exemption clause applies only above a certain amount) and the plaintiff wishes to sue in tort to avail itself of a more generous limitation period or some other procedural advantage offered by tort.
The third class of case arises where the duty in contract and the common law duty in tort are co-extensive. In this class of case, like the others, the plaintiff may seek to sue concurrently or alternatively in tort to secure some advantage peculiar to the law of tort, such as a more generous limitation period. The contract may expressly provide for a duty that is the same as that imposed by the common law. Or the contractual duty may be implied. The common calling cases, which have long permitted concurrent actions in contract and tort, generally fall into this class. There is a contract. But the obligation under that contract is typically defined by implied terms, i.e., by the courts. Thus there is no issue of private ordering as opposed to publicly imposed liability. Whether the action is styled in contract or tort, its source is an objective expectation, defined by the courts, of the appropriate obligation and the correlative right.
The case at bar, as we see it, falls into this third category of case. The contract, read as we have proposed, did not negate Hydro's common law duty not to negligently misrepresent that it would have the right-of-way cleared by others. Had Checo known the truth, it would have bid for a higher amount. That duty is not excluded by the contract, which confirmed Hydro's obligation to clear the right-of-way. Accordingly, Checo may sue in tort.
We conclude that actions in contract and tort may be concurrently pursued unless the parties by a valid contractual provision indicate that they intended otherwise. This excludes, of course, cases where the contractual limitation is invalid, as by fraud, mistake or unconscionability. Similarly, a contractual limitation may not apply where the tort is independent of the contract in the sense of falling outside the scope of the contract, as the example given in Elder, Dempster & Co. v. Paterson, Zochonis & Co., [1924] A.C. 522 (H.L.), of the captain of a vessel falling asleep and starting a fire in relation to a claim for cargo damage.
The Express-Implied Distinction
Our colleague asserts that where the parties deal with a matter expressly in their contract, all right to sue in tort is lost. We have suggested, with great respect, that this proposition is unnecessarily draconian. The converse of this proposition is that implied terms of contracts do not oust tort liability.
Although Iacobucci J. states at p. 000 of his reasons that he is leaving open the question of "[w]hether or not an implied term of a contract can define a duty of care in such a way that a plaintiff is confined to a remedy in contract", the distinction between implied and express terms figures in his discussion of the effect of contract terms on tort liability. For example, at p. 000 of his reasons, our colleague states:
The compromise position adopted by Le Dain J. was that any duty arising in tort will be concurrent with duties arising under the contract, unless the duty which the plaintiff seeks to rely on in tort is also a duty defined by an express term of the contract. [The emphasis is Iacobucci J.'s.]
It would seem to follow from this statement that concurrent duties in contract and tort would lie where the contract duty is defined by an implied term of the contract, but not where the term is express. In these circumstances, it is not amiss to consider the utility of the distinction between express and implied terms of the contract as a basis for determining when a contract term may affect tort liability.
In our view, using the express-implied distinction as a basis for determining whether there is a right to sue in tort poses a number of problems. The law has always t