Court of Appeal for Ontario

Date: 2020-03-12 Docket: C67026

Before: Feldman, Huscroft and Harvison Young JJ.A.

Between:

2099082 Ontario Limited Plaintiff (Respondent)

and

Varcon Construction Corporation and Trisura Guarantee Insurance Company Defendant (Appellant)

Counsel: Todd D. Storms and Zach Flemming-Giannotti, for the appellant Kenneth J. M. Coull, for the respondent

Heard: March 3, 2020

On appeal from the judgment of Justice Helen MacLeod-Beliveau of the Superior Court of Justice, dated April 30, 2019, with reasons reported at 2019 ONSC 2497.

Reasons for Decision

[1] Varcon Construction Corporation (“Varcon”) appeals from a decision granting partial summary judgment to 2099082 Ontario Limited, carrying on business as AWD Contractors (“AWD”).

[2] The relevant facts are as follows. Varcon was the general contractor for a project to construct additional buildings in a correctional facility near Joyceville, Ontario. Varcon engaged AWD, a subcontractor, to supply labour and materials related to excavation, installation of granular base, construction of pipe bedding, and installation of exterior sanitary pipe, backfilling, and compaction of the backfill. AWD’s work was completed in the summer of 2013.

[3] A dispute arose between Varcon and AWD when Varcon refused to release the balance of AWD’s contract price to it. AWD commenced an action in August 2015, and Varcon filed a statement of defence in November 2015. In late September 2016, the sewage system for the building failed. Varcon notified AWD that it required a remediation proposal. AWD refused do so unless Varcon established that its work had been deficient.

[4] AWD brought a motion for summary judgment, arguing that Varcon owed it the outstanding monies under the construction subcontract. In May 2017, AWD’s motion was granted, and Varcon was ordered to pay $39,064.87 into court. Varcon did so. Payment into the court allowed Varcon to obtain leave to re-open its pleadings and issue a fresh counterclaim, which it did in June 2017.

[5] Varcon counter-claimed for damages, alleging (amongst other things) that AWD’s work was deficient and that AWD failed to rectify the deficiencies. Varcon also claimed that AWD breached the warranty contained in the subcontract and was liable for the remediation work on that basis. AWD brought another motion for summary judgment to dismiss Varcon’s counterclaim in its entirety.

[6] The motion judge granted partial summary judgment in favour of AWD. She determined that no trial was required to determine that AWD’s work was not deficient, AWD did not fail to warn Varcon regarding the unsuitability of certain excavated material, and AWD did not fail to rectify the deficiencies. Varcon appeals from this decision.

[7] The motion judge also determined that there was a genuine issue requiring a trial with respect to AWD’s liability to Varcon under the subcontract’s warranty provisions. AWD cross-appeals from this decision on the basis that the motion judge erred in finding that this was a genuine issue requiring a trial. It further submits that the motion judge erred in failing to determine that the warranty was inapplicable in the circumstances.

[8] The appeal is dismissed and the cross-appeal allowed for the reasons that follow.

(1) The main appeal: Did the motion judge err in granting partial summary judgment to AWD?

[9] Varcon argues that the motion judge made palpable and overriding errors of fact, which led her to grant AWD’s motion. We disagree.

[10] At the outset, we note that the question of whether summary judgment was appropriate was fully argued before the motion judge.

[11] We accept that the motion judge made some findings of fact that went beyond those necessary to determine the central question, which was: did AWD complete its work in compliance with the contract and in a non-defective way?

[12] To the extent that the motion judge made findings as to the actual cause of the sewage failure, such findings do not undermine her conclusions, which are amply supported by the record.

[13] In particular, it was open to the motion judge to reject Varcon’s expert evidence, which was given by Mr. Wong. She reasoned that his opinion – that the soil compaction had been inadequately performed – was not supportable without reviewing the compaction reports under the area of the sewer pipes done at the time of construction, which he had not seen. Whose onus it was to produce or obtain those records for the litigation was in issue before the motion judge. However, for the purpose of obtaining an expert opinion, there is no issue that it was Varcon’s obligation to obtain those records from the compaction overseer or from the owner of the project, if Varcon no longer had its copies.

[14] Although the motion judge gave other reasons which were unnecessary, these reasons did not undermine the central basis upon which she found Mr. Wong’s evidence to be unreliable and not credible.

(2) The Cross-Appeal: Did the motion judge err in ordering a trial on the warranty issue?

[15] At the outset of oral argument before this court, Varcon submitted that: (i) the motion judge decided that a trial was required to determine the applicability of the warranty and any damages issues arising from it; (ii) as such, her order in this respect was interlocutory and leave to appeal is required; and (iii) AWD had not sought the required leave to appeal. Varcon argued that, while it was content for this court to entertain the leave application, AWD could not meet the applicable test for leave under rule 62.02(4).

[16] We do not agree.

[17] This is a case in which the appeals from the final and interlocutory aspects of the motion judge’s order “are so interrelated, we [are] able to proceed to hear the two appeals together in accordance with s. 6(2) of the Courts of Justice Act, R.S.O. 1990, c. C.43, on the basis that once the first issue was before this court, leave would inevitably have been granted on the second”: Lax v. Lax (2004), 70 O.R. (3d) 520 (C.A.), at para. 9; see also Azzeh v. Legendre, 2017 ONCA 385, 135 O.R. (3d) 721, at para. 26. Accordingly, this is a case where both appeals should be heard together by this court.

[18] In its cross-appeal, AWD argues (i) that the motion judge erred in finding that a trial was required on whether AWD was liable to Varcon pursuant to the subcontract’s warranties, and (ii) that she further erred in failing to find that the warranty was inapplicable in these circumstances.

[19] On its merits, we would allow AWD’s cross-appeal. There was no genuine issue requiring a trial on the warranty issue.

[20] The record before the motion judge included all the evidence necessary to interpret the warranty and consider whether it applied to the circumstances. Specifically, the contractual documents contain a sufficient basis to resolve the dispute about the warranty. There is no indication there would be better evidence or legal arguments on the issues at trial. Summary judgment “must be granted if there is no genuine issue requiring a trial” (emphasis in original): Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, at para. 68; see also Rule 20.04(2), Rules of Civil Procedure, R.R.O. 1990, Reg. 194, r. 20.04(2).

[21] Both parties relied on the contractual documents, and the warranty in particular, to support their position. The warranty provision reads as follows:

The Subcontractor hereby guarantees the work in accordance with the Prime Contract documents. No payment to the Subcontractor and no partial or entire use or occupancy of the Subcontract Work by the Owner shall be construed as an acceptance of any work or material not in accordance with this Subcontract Agreement.

The Subcontractor hereby agrees to repair and make good any damages or fault in the Subcontract Work […] as the result of imperfect or defective work done or material furnished by the Subcontractor […]. The Subcontractor guarantees the Contractor, the Consultant and the Owner, against loss or damage arising from any defects in material or workmanship furnished by the Subcontractor under this Subcontract Agreement for such period as the Contractor is liable under the Common Law or Statue or under the specific terms of the Prime Contract. [Emphasis added]

[22] GC3.11(1) of the “Prime Contract” states:

The Contractor shall promptly remove from the site of the Work and replace or re-execute defective Work… whether or not the defect is the result of poor workmanship, use of defective Material, or damage through carelessness or other act or omission of the Contractor.

[23] Varcon submits that, when reading the warranty and Prime Contract together, AWD remains liable to Varcon even if AWD’s work was not deficient and even if the native soil used was problematic (which Varcon denies).

[24] We do not agree. Varcon’s interpretation of the warranty would effectively make AWD — one of the many subcontractors on the project — a guarantor of any or all defects in the project, whether its own work has been defective or not. A plain reading of the warranty provisions does not support this position and does not accord with sound commercial principles and good business sense: All-Terrain Track Sales and Services Ltd. v. 798839, 2020 ONCA 129, at para. 27. Varcon also suggested that the warranty applies here because AWD “furnished” defective “material”, the native soil. However, the contract specified AWD was to use the native soil for backfilling. AWD cannot be faulted for adhering to these contractual terms.

[25] The appeal is dismissed. The cross-appeal is allowed. Costs of the appeal and cross-appeal in the agreed amount of $6,000, all-inclusive, are payable by Varcon to AWD.

“K. Feldman J.A.”

“Grant Huscroft J.A.”

“A. Harvison Young J.A.”