Divers Claim Against Morrison Knudsen Rejected

The British Columbia Court of Appeal has allowed an appeal by Morrison Knudsen Corporation from a trial judgement which had rectified a subcontract between Morrison Knudsen and Can-Dive Services (Can-Dive), a diving subcontractor that Morrison Knudsen had engaged to do underwater construction work.

The case arose from the construction in 1990-91 of an underwater natural gas transmission pipeline from the British Columbia mainland to Vancouver Island which Morrison Knudsen had been contracted by the owners, Pacific Coast Energy Corporation and the West Coast Energy Corporation, (collectively “the owners”) to complete. Can-Dive had been subcontracted to work on the span support of the pipeline, however it encountered problems arising from the slope conditions at the intended span support sites. Can-Dive claimed that its contractual obligations were limited to working on flat, firm surfaces and that the costs of working with sloping surfaces were extra to its contractual obligations. The owners claimed that they were not extra to the head contract, and Morrison Knudsen became stuck in the middle of the dispute. The trial judge rectified the subcontract to read that the cost of working on sloping soil was extra to the subcontract, and Morrison Knudsen appealed from this decision. At issue were the interacting lines of authority on rectification of a contract on the ground of mistake and contractual protecting clauses.

The trial had taken 60 days and Can-Dive had been claiming in excess of $5 million in extra costs. The Court of Appeal allowed Morrison Knudsen’s appeal primarily on the ground that the trial judge had attempted to rectify the bargain between Can-Dive and Morrison Knudsen rather than the written contract.

Allan P. Seckel of Fasken Martineau DuMoulin LLP’s Vancouver office acted for Morrison Knudsen on the trial and joined William Berardino, Q.C. of Berardino & Harris who appeared as counsel for the appeal. W. Holburn, Q.C. and J.D. Stewart of Alexander, Holburn, Beaudin and Lang represented Can-Dive Services, with J.K. (Ken) McEwan of Farris, Vaughan, Wills & Murphy appearing for Pacific Coast Energy Corporation and West Coast Energy Corporation.