2013 ONSC 7058
DIVISIONAL COURT FILE NO.: DC-13-1909
DATE: 2013/11/15
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
J. Mackinnon J
BETWEEN:
The Corporation of the Municipality of Greenstone
Plaintiff / Respondent
– and –
Marshall Macklin Monaghan Limited
Defendant / Appellant
Heather Williams, for the Plaintiff / Respondent
Peter J. Mitchell, for the Defendant / Appellant
HEARD: October 11, 2013
REASONS FOR JUDGMENT
[1] This is an appeal to a single judge of the Divisional Court from a Master’s Order made on March 12, 2013. The Master set aside an administrative dismissal Order and granted leave to the plaintiff to amend the Statement of Claim subject to a term that the defendant may raise a limitation defence with respect to certain of the amendments. The defendant appeals that part of the Order allowing the amendments.
[2] The action is for negligence and breach of contract arising from a sewage collection and treatment system upgrade project. The Corporation of the Municipality of Greenstone (“Greenstone”) retained the defendant, Marshall Macklin Monaghan Limited (“MMM Limited”) for design and management services on the project. Greenstone commenced this action in June 2007. The defendant continued to work on the project until the plaintiff terminated the contract in July 2008.
[3] At that time, the plaintiff retained another engineering firm, C.C. Tatham & Associates (“Tatham”), to complete the project and to conduct a peer review of MMM Limited’s work. The peer review took almost two years to complete. The peer review report was delivered on May 27, 2010. In it, Tatham provides its opinion as to technical design and construction deficiencies by the defendant on the project and recommends remedial work.
[4] In May 2011, the plaintiff’s previous lawyer forwarded a draft Amended Statement of Claim to the defendant’s lawyer. The defendant took the position that the proposed amendments were out of time and requested particulars. A second draft was provided on July 4, 2011. On March 26, 2012, the plaintiff served a motion to amend its Claim. Greenstone says the proposed amendments were to include greater particularization of the claims for negligence and breach of contract found in the original Statement of Claim. MMM Limited says that the proposed amendments sought damages for a series of fresh claims; namely, alleged design errors which were discovered or discoverable in or about 2008 and, as such, are time barred.
The Master’s Reasons
[5] The Master considered paragraphs 1, 4, 6 to 8, 10 to 19 of the original Statement of Claim. These paragraphs sought damages for breach of contract and negligence, for required remedial and additional work and related engineering, investigative, testing and re-design costs, consequent upon the breach by the defendant of its engineering design obligations, and for the loss of available government funding suffered as a result of the failure of the defendant to accurately estimate the construction and related costs of the sewer system upgrades.
[6] The contract between the parties dated May 12, 2003 was pleaded. It was alleged that the total cost of construction of the project estimated by MMM Limited and its estimation of the completion schedule were inaccurately low and short respectively. The plaintiff claimed that it had sought government funding which had been approved for two-thirds of cost based on the defendant’s estimate of a total eligible project amount of $9.38 million, which included construction, engineering and project management costs. However, when the project was put to tender, the lowest bid received was $10.96 million with a completion schedule of 24 months. By this time, the window to apply for further government funding of the project had closed.
[7] The original Statement of Claim went on to plead that, after work started, the contractor identified large quantities of rock requiring excavation in the order of 785 cubic meters. The MMM Limited estimate had provided for an allowance of 40 cubic metres of rock to be excavated and removed. Greenstone claimed that the additional rock quantities added over $600,000.00 to the cost of the project.
[8] Additionally, in its original Claim, the plaintiff pleaded that in December 2005, MMM Limited advised it that the re-design, re-tendering and additional field time for construction supervision for the two year construction period would increase the engineering services budget by an estimated sum of $146,000.00 over and above the increase in fee already agreed to by Greenstone. But, as of March 2007, the latest fee estimate provided by MMM Limited for engineering services exceeded $1.4 million.
[9] The final paragraph of the original Claim stated that MMM Limited was negligent and in breach of its contractual obligations to Greenstone under the Engineering Services Agreement.
[10] The Master found that the proposed amendments fell into two separate categories. He held that the first category of amendments did not raise a new cause of action rather were particularizations of the existing claims, extended the claim for relief already made, or related to the remedy sought. He held that these proposed amendments were not affected by any limitation period. His reasoning in relation to these proposed amendments is set out at paragraphs 58 and 61:
The factual situation remains the project and the Defendant’s contractual performance and negligence/breach of contract under the May 2003 engineer services agreement (pled at para. 19 of the original statement of claim). The factual matrix is unchanged and continues to relate to damages allegedly suffered as a result of the Defendant’s negligent work and breach of contract on the project ...
Again, as indicated in Bazkur v. Coore et al., “A new cause of action is not asserted if the amendments simply plead an alternative claim for relief arising out of the same facts previously pleaded…or amount simply to a different legal conclusion…or simply provide particulars of an allegation already pled or additional facts upon which the original right of action is based”.
[11] The Master concluded that this reasoning applied to paragraphs 1(a), 6, 7, 11, 12, 13, 14(a) to (j), and (l), 16 and 17 of the proposed Amended Statement of Claim. The defendant did not take issue with the ruling as to paragraphs 1(a), 6 or 7.
[12] Proposed paragraph 11 alleged delays encountered by the general contractor including delays associated with the rock excavation, which resulted in Greenstone being confronted with a substantial delay claim which cost $340,000.00. Greenstone states that but for the failure of MMM Limited to properly design and administer the contract, including the failure to identify substantial quantities of rock at the site, the general contractor would not have experienced the project delays for which it sought compensation from Greenstone.
[13] Proposed paragraph 12 stated that the 116 contract change orders issued was an inordinately high number and well beyond the typical contingency of 5% of contract value. The plaintiff sought recovery from MMM Limited of $175,000.00 calculated as the difference between a 5% contingency and a 7% contingency.
[14] Proposed paragraph 13 claimed for additional engineering fees related to contract administration and remedial works specifications and tender documents, and for the cost of the formal Peer Review of MMM Limited’s work.
[15] Proposed paragraph 14 stated that there were a number of deficiencies that had been identified in the Peer Review Report that arose from the defendant’s negligent design and management of the project. Thirteen specific deficiencies are then set out in individual sub paragraphs. The next two proposed paragraphs plead the costs incurred to the date of pleading to rectify the enumerated deficiencies, and the estimated cost for remedial work yet to have been undertaken. Greenstone alleged that but for the negligent design and management of the Project by MMM Limited, the above referenced remedial works would not have been required.
[16] The Master concluded that none of the above proposed amendments raised a new cause of action and accordingly, that the defendant was not prejudiced by them.
[17] The Master held that a second category of proposed amendments related to an Environmental Study Report for which the defendant had been retained in May 2000. He held that these amendments did raise a new cause of action because they raised new facts and were not particulars of the alleged breach of contract or negligence under the May 2003 Agreement. Specific references to the May 2000 Environmental Study Report were found at paragraphs 8, 9, and 10 of the proposed Amended Claim. Indirect references were found at proposed paragraphs 14(k), 14(m), and 15. The Master held that reliance on breach of contract or negligence related to the May 2000 Environmental Study Report would constitute pleading new facts and did raise a new cause of action.
[18] Regarding the proposed amendments that raised a new cause of action, the Master found the evidence as to discoverability to be very much in dispute. He stated at paragraph 68:
- From my review of the evidence, I conclude that this case is a prime example of a case where the resolution of an issue of discoverability would require the court to weigh evidence and make findings of credibility. The Plaintiff has put forth evidence that could arguably put them over their onus of showing that such new cause of action could not be discovered before their receipt of the Tatham report. On the other hand the Defendant has delivered evidence that arguably shows that the Plaintiff could have discovered this new cause of action as early as two years before the Tatham report was received. The resolution of this issue would require the court to weigh the evidence and make findings of credibility. This motion is not the appropriate forum for such an exercise.
[19] Accordingly, the Master allowed those amendments subject to a term that the defendant could raise a limitation defence for any of them.
Positions of the Parties
[20] The appellant states that the original Statement of Claim only sought damages allegedly arising from project cost, project duration and rock removal estimates prepared by MMM Limited. It submits that all of the amendments sought by the plaintiff represented fresh claims and all are time barred. The appellant says the plaintiff received notice of the delay claim in January 2008 and settled it in December 2009. All change Orders were issued by July 2008. The appellant further states that the other alleged design deficiencies were known to the plaintiff at a time outside the limitation period. The appellant also submits that, in any event, the plaintiff only stated that it did not know, and did not depose whether it could have known, of the other alleged deficiencies within the limitation period. In the appellant’s submission, the Master ought to have determined the discoverability issue in the context of the pleadings motion because there was no evidentiary issue of due diligence, credibility or similar issue to resolve that could require a trial.
[21] The respondent submits that the Master’s decision was correct, is supported by the evidence before him, and contains no palpable and overriding error. Its submission is that the amendments are greater particularization of the original allegations of negligence and breach of contract. Alternatively, if they are new facts or claims, the respondent says they were not discoverable prior to the release of the Peer Review Report in May 2010 and, as such, are not out of time.
Standard of Review
[22] It is common ground that the Master’s decision can only be interfered with if he made an error of law, exercised his discretion on wrong principles or misapprehended the evidence such that there is a palpable and overriding error. As stated in Wellwood v. Ontario (Ontario Police), 2010 ONCA 386; 102 O.R. (3d) 555, at para. 28:
- ...it is now settled law in Ontario that an appeal from a master's decision is not a rehearing. Rather, on questions of fact and mixed fact and law, deference applies and the role of the reviewing court is limited. An appellate court cannot substitute its interpretation of the facts or reweigh the evidence simply because it takes a different view of the evidence from that of the master. ...
[23] For an error in law, the standard of review is correctness.
Analysis
(a) Same Cause of Action (paragraphs 1(a), 6, 7, 11, 12, 13, 14(a) to (j), and (l), and 16 to 23 of the proposed Amended Statement of Claim)
[24] A cause of action is the factual situation that entitles a party to seek a civil remedy from another party. In Ascent Inc. v. Fox 40 International Inc., 2009 CarswellOnt 4118, the Court stated at para. 3:
- A "cause of action" has been defined as a "factual situation the existence of which entitles one person to obtain from the court a remedy against another person."1 The key is whether substantially all of the material facts giving rise to the "new cause of action" have previously been pleaded2 or whether new facts are sought to be added that are relied upon to support a new cause of action.3 A new cause of action is not asserted if the amendments simply plead an alternative claim for relief arising out of the same facts previously pleaded and no new facts are relied upon,4 or amount simply to different legal conclusions drawn from the same set of facts,5 or simply provide particulars of an allegation already pled6 or additional facts upon which the original right of action is based.7(footnotes omitted).
[25] The Court of Appeal for Ontario provides an example of the distinction between pleading a new cause of action and pleading new or alternative remedies based on the same facts in Dee Ferraro Ltd. v. Pellizzari, 2012 ONCA 55, 346 D.L.R. (4th) 624 at para. 6:
- Counsel for the respondents relies on Frohlick to resist the proposed amendments. That case illustrates the difference between an amendment that pleads a new cause of action and one that simply pleads a different remedy. The plaintiff's amendment to plead constructive dismissal set up a new cause of action relating to events more than a year before the events put at issue in the original pleading. This court found that the amendments were out of time and, the limitation period having expired, there was a presumption of prejudice that had not been rebutted.
[26] In Dee Ferraro, the Court of Appeal held that the original pleading contained all the facts necessary to support the amendments sought. Specifically, Pellizzari’s entitlement to particular shares was found to have been put into play in the original Statement of Claim. The proposed amendment seeking a mandatory order requiring him to transfer those shares to the plaintiff was an additional remedy, but was based on the same facts as originally pleaded.
[27] In 1309489 Ontario Inc. v. BMO Bank of Montreal, 2011 ONSC 5505, 107 O.R. (3d) 384, the Court distinguished between factual cause of action and technical cause of action at paras. 20, 24, and 26 :
The contrast between a "cause of action" seen as a factual matrix, on the one hand, and a "cause of action" seen as the legal basis for relief, on the other hand, often arises in motions under Rule 26 of the Rules of Civil Procedure to amend a Statement of Claim after the limitation period has expired. In these cases, the plaintiff's effort is typically to characterize the amendment as pleading an alternative claim for relief arising out of the same facts, or as stating different legal conclusions arising from the same facts, or as providing better particulars of the claims already made, or as correcting errors in the original pleading, or as asserting a new head of damage arising out of the same facts: R.D. Gordon J. in Timbers Estate v. Bank of Nova Scotia, 2011 ONSC 3639, [2011] O.J. No. 2696 (S.C.) at para. 14. By contrast, the defendant's position is typically to argue that, seen properly, the amendments amount to a new cause of action: Frohlick v. Pinkerton Canada Ltd., supra; Joseph v. Paramount Canada's Wonderland (2008), 2008 ONCA 469, 90 O.R. (3d) 401 (C.A.). These contrary positions were taken by the plaintiff and BMO before the court.
When the defendant's claim is that the amendment raises a new cause of action after the limitation period has expired, then the court's usual analytical approach is to consider the constituent elements of the alleged new cause of action to see if the facts as originally pleaded, or as better particularized in the proposed new pleading, could technically sustain that cause of action: Morden and Perell, The Law of Civil Procedure in Ontario (Markham, Ont.: LexisNexis, 2010) at 307-308.
If one accepts, as I do, that the broader, factually-oriented approach to the meaning of "cause of action" in interpreting and applying rule 26.01 is the correct approach, and one also assumes that a similar definition must be used when applying rule 21.01(1) (b), then the defendant's basic entitlement is to have notice of the factual matrix out of which the claim for relief arises. The plaintiff's core assertion in the current Statement of Claim is: "Something bad happened here; BMO is in a position to know about it and might have participated in it, but that is not yet known."
[28] In my view, this is the exact approach taken by the Master in this case. I do not accept the appellant’s submission that the Master erred in confusing the technical causes of action of breach of contract and negligence pleaded in the original Statement of Claim with the factual cause of the plaintiff’s complaint. To the contrary, he found with respect to this category of amendments, that they arose from core facts already pleaded and were in relation to the Engineering Services Agreement entered into between the parties in 2003. He stated at para. 56: “This agreement and its obligations are an integral part of the factual matrix pled in the original statement of claim.”
[29] The appellant’s specific complaints with respect to the Master’s ruling in relation to proposed paragraphs 11 (delay claim), 12 (change orders), and 13 (additional costs for engineering fees for remedial work and for the Peer Review Report) were held by the Master to provide greater particulars or more details surrounding the existing Claim. In light of the content of paragraphs 13, 14, 16 and 19 in the original Statement of Claim, there is no error here.
[30] The appellant also submitted the Master erred in failing to recognize that each alleged deficiency was actually an individual cause of action despite occurring in a single construction project. I disagree for two reasons. First, I find no error in the Master’s conclusion that this category of amendments constituted particulars or additional facts upon which the original right of action is based. Second, the line of cases relied upon by the appellant in support of multiple causes of action arising from one single act of negligence is not authority for the proposition that each deficiency in a construction project is necessarily a separate cause of action.
[31] This was the conclusion in Timminco Ltd. v. ABB Industrial Systems Inc., 2010 ONSC 6971, where the Court stated at para. 56:
- As the Defendants have correctly pointed out, there is no case law in Ontario or in Canada that stands for the first argument put forward by the Plaintiff, that each injury or loss suffered as a result of negligent design gives rise to a separate cause of action. In Ontario, time begins to run against a plaintiff once he or she knows of a defect or could, with reasonable diligence, have discovered the defect. If the defect is a latent defect and there is more than one defect, each defect can give rise to a separate cause of action if the defects are different such that the discovery of one would not reasonably give rise to the discovery of the other.
[32] Moreover, this is a separate issue from the one the appellant argued before the Master; namely, that the proposed amendments were fresh claims because they asserted a cause or causes of action beyond the scope of the factual cause of the complaint articulated in the original Statement of Claim.
(b) New cause of action (paragraphs 8, 9, 10, 14(k), (m) and 15 of the proposed Amended Statement of Claim)
[33] These proposed amendments relate to an Environmental Study Report completed by the defendant for the plaintiff in May 2000. The plaintiff wants to plead that the preferred design recommended by the defendant did not result in the elimination of treatment by-pass and discharge of raw sanitary sewage, and that the design, costing, contract administration and post construction services were inadequately and negligently performed by MMM Limited. The Master found that the evidence before him with respect to discovery of these claims was very much in dispute between the parties. If the Master is correct in this observation, then there is no error in his conclusion to allow the amendments subject to a limitation defence: see 863880 Ontario Ltd. v. Canadian Pacific Railway Co., 2012 ONSC 644; Andersen Consulting Ltd. v. Canada (Attorney General) (2001), 13 C.P.C. (5th) 251, 2001 CarswellOnt 3139 (Ont. C.A.).
[34] The Master reviewed the evidence before him on this issue in three paragraphs of his Reasons:
Regarding the proposed amendments that raise a new cause of action, the Plaintiff argues that those new causes of action were only discovered by the Plaintiff less than two years before May 18, 2012 (date when this motion was served) as it argues it only discovered such claims upon receipt and review of the Tatham peer review report in late May 2010. This is supported by the affidavit of a representative of the Plaintiff.
However, on this topic the evidence is very much in dispute between the parties. The Defendant insists that the Plaintiff knew before and much earlier than when the Tatham report was delivered. The Defendant’s affidavit sworn October 11, 2012, provides some evidence that design issues became evident as early as May 2007, June 2007, October 2007 and March 2008.
On the other hand, the Plaintiff in an affidavit from its chief administrative officer indicates that the Plaintiff received the Tatham report on May 26, 2010, and that it was not until its review of this report that it realized the extent of the problems and damage. This was expanded upon during his cross-examination (for example at pages 20, 25 and 28 of the transcript).
[35] There was evidence before the Master to support his conclusion that the issue of discoverability should be resolved at trial. In particular, Mr. Sinclair’s affidavit for the plaintiff deposed the inability to know what the cause was of the myriad of problems and increasing costs, whether responsibility lay with the engineering firm or the contractor, or was simply “life”, and that the Peer Review Report was commissioned and awaited for this purpose. The allegations by the appellant that the design errors could have been discovered between December 2008 and May 2009 based on inferences available from facts known to the plaintiff raises a question of due diligence that is the type of issue suitable for determination at trial. The Master correctly identified the onus on the plaintiff to put forth evidence that could arguably show the new cause of action could not have been discovered prior to the receipt of the Tatham Report.
Conclusion
[36] For the reasons given, the appeal is dismissed. The respondent is entitled to costs of the appeal. If counsel are unable to agree on the amount of costs I will receive written submissions from them no later than December 16, 2013.
J. Mackinnon J
Date of Reasons for Judgement: November 15, 2013
Date of Release: November 15, 2013
2013 ONSC 7058
DIVISIONAL COURT FILE NO.: DC-13-1909
DATE: 2013/11/15
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
J. Mackinnon J.
BETWEEN:
The Corporation of the Municipality of Greenstone
Plaintiff /Respondent
– and –
Marshall Macklin Monaghan Limited
Defendant /Appellant
REASONS FOR JUDGMENT
J. Mackinnon J
Date of Reasons for Judgement: November 15, 2013
Date of Release: November 15, 2013