University Plumbing v. HTS Engineering and others 2014 ONSC 1521
CITATION: University Plumbing v. HTS Engineering and others 2014 ONSC 1521
DIVISIONAL COURT FILE NOs.: 210/12 & 46/14
DATE: 20140310
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
BETWEEN:
UNIVERSITY PLUMBING & HEATING LTD.
Plaintiff
– and –
HTS ENGINEERING LIMITED, WAYNE FREETHY, DEREK GORDON, JAMES KAY, KEVIN LITTLE, PAUL PILUTTI, ANDREW SELIN and ALAN WALCROFT
Defendants
R. C. Harason, for the plaintiff
K. L. MacDonald, for the defendants
HEARD at Toronto: March 4, 2014
NORDHEIMER J.:
[1] There are two appeals from orders of Master Brott. One appeal is by the defendants from Master Brott’s refusal to permit one amendment to be made to the statement of defence and requiring that particulars be provided with respect to certain other amendments. The other appeal is by the plaintiff from Master Brott’s order that the plaintiff examine one personal defendant on behalf of all personal defendants, save one. The plaintiff also seeks leave to appeal the combined costs disposition made by Master Brott on the two motions.
[2] This action was commenced in October 2007. The claim arises out of a dispute between the parties involving three residential condominium projects in the City of Toronto. The plaintiff was the mechanical contractor on these projects and it retained HTS to, among other things, supply heat pumps for these projects. It is alleged that the heat pumps failed and the plaintiff seeks damages as a consequence.
[3] As may be obvious from the fact that the action was commenced more than six years ago, the progress of this proceeding has been lengthy and somewhat tortured. Of relevance to these motions is the fact that, in March 2012, the Master made the rulings that are the subject of these two appeals. The fact that these appeals arrived before me two years after the rulings were made serves as yet another example of the dilatory fashion in which this action is progressing.
[4] I will deal with the appeals in the same order that they were argued, commencing with the defendants’ appeal.
The defendants’ appeal
[5] The defendants sought to amend their statement of defence in two respects. First, they sought to delete a reference in the pleading to the fact that the personal defendants were all “partners in HTS”. Second, they sought to add certain allegations that the plaintiff was responsible for any damage to the heat pumps.
[6] In terms of the first amendment, the Master held that the amendment involved the withdrawal of an admission and applied the three part test applicable to such a withdrawal. The defendants dispute that the allegation concerned is an admission. In my view, the Master correctly held that it was. I note on this point that not only did the defendants refer to the allegation as an admission in their notice of motion seeking the amendment, the allegation was characterized as an admission numerous times in the reasons of Frank J. when she dismissed the defendants’ summary judgment motion that sought to dismiss the claim against the personal defendants. I would add that on its face the assertion appears as an admission.
[7] On this point, the defendants say that the assertion cannot be an admission because there was, at the time, no allegation by the plaintiff of a partnership. The fact that the plaintiff did not make a positive assertion of the existence of a partnership is not determinative of the issue whether the defendants’ factual assertion in the statement of defence constitutes an admission. There is no requirement that a party must be responding to an allegation by the opposing party in order for a factual pleading to constitute an admission.
[8] In terms of the amendment itself, the Master correctly applied the three tests for withdrawing an admission. The tests for the withdrawal of an admission can be found in Antipas v. Coroneos, [1988] O.J. No. 137 (H.C.J.) which was expressly approved by the Court of Appeal in Szelazek Investments Ltd. v. Orzech, [1996] O.J. No. 336 (C.A.). The tests, as stated by Saunders J. in Antipas, are:
A review of the cases indicates that a party requesting leave to withdraw an admission must pass three tests by establishing (1) that the proposed amendment raises a triable issue; (2) that the admission was inadvertent or resulted from wrong instructions; and (3) that the withdrawal will not result in any prejudice that cannot be compensated for in costs.
[9] The Master made no express finding on the first test although I believe it is implicit in her reasons that she found that the proposed amendment did not raise a triable issue. The defendants say that the evidence shows that HTS is a corporation and that the personal defendants were all officers of that corporation. Consequently the defendants say that there is an obvious triable issue with respect to any suggestion that the personal defendants were partners in HTS.
[10] I do not agree. The statement in the pleading is clear. In addition, two of the personal defendants, when cross-examined at earlier stages of this proceeding, both stated that they were partners in HTS. The fact that HTS is a corporation does not mean that the personal defendants could not be partners in the business sense as opposed to being partners in an actual partnership. In this case, the issue is not whether the personal defendants were partners in a formal sense, it is whether they considered themselves partners in terms of the manner in which they operated the business that they formed. There may be legal consequences that arise if the latter state of affairs is proven. As Frank J. held, in dismissing the summary judgment motion, it may give rise to triable issues regarding the liability of the personal defendants for various representations that were allegedly made to the plaintiff.
[11] In any event, the Master expressly found that the second and third tests were not met. I do not find any error in her conclusions in that regard. On the second test, the defendants filed an affidavit from an associate in their counsel’s firm stating that counsel was wrongly instructed on this point. The associate was not the person who received the instructions for the preparation of the statement of defence and, thus, could not give any direct evidence as to whether erroneous instructions were, in fact, given. Further, none of the personal defendants filed an affidavit regarding the instructions given, the reason for any error (if there was an error) or why it was none of the personal defendants noticed this alleged error prior to the statement of defence being filed. Consequently, the Master held that there was no reasonable explanation for the allegedly wrong instructions.
[12] On the third test, the Master held that the defendants had not discharged their onus of establishing that no prejudice would be suffered from the amendment that could not be compensated for by costs. While the Master did not specify what prejudice might be suffered, it is evident that, at the very least, there would be further discoveries required. While in the normal instance that might be prejudice that could be compensated for in costs, there is a point where the prolonged nature of any proceeding may render costs a less effective compensation for even further delay. Given the delay that has already occurred in this action, costs is not a complete answer to the prejudice that arises from further delay including failing memories and possibly lost documents.
[13] In the end result, the Master’s conclusions regarding the application of the three tests is a matter that is entitled to deference. The defendants have failed to establish that she was clearly wrong in the conclusions that she reached or that her conclusions were unreasonable.
[14] The other issue deals with the proposed amendments to assert that the plaintiff was responsible for the damages to the heat pumps. In those amendments, the defendants assert that the plaintiff blocked return air paths, failed to fill condenser pipes and damaged the heat pumps when transporting them. The defendants also assert that most of the heat pumps did not fail shortly after start up, as alleged by the plaintiff, but that only some did.
[15] The Master did not refuse to allow these amendments to be made. Rather, she ordered that the defendants provide particulars of these allegations as part of the amendments and then specified the particulars that were necessary. In particular, the Master ordered that the defendants provide particulars as to which heat pumps fell into which category of the allegations sought to be made. It is important to note on this point that the evidence is that HTS supplied 1,845 heat pumps that were installed in three different condominium buildings.
[16] The defendants object to the requirement to provide particulars on the basis that the merits of the allegations sought to be made are irrelevant to their application to amend, citing Coriale (Litigation guardian of) v. Sisters of St. Joseph of Sault Ste. Marie (c.o.b. St. Joseph's General Hospital) (1998), 41 O.R. (3d) 347 (Gen. Div.) and Atlantic Steel Industries Inc. v. CIGNA Insurance Company of Canada (1997), 33 O.R. (3d) 12 (Gen. Div.). In my view, the defendants misread those cases. It is correct that the merits, that is, whether the party will be able to successfully sustain the proposed allegations, is not relevant to the motion to amend. But that does not mean that a party is relieved of its duty to plead with sufficient particularity: rule 25.06(1).
[17] This is not a situation, as was the case in Coriale, where the facts underlying the allegations were solely within the knowledge of the opposing party. Here, the defendants seek to make specific allegations of actions or inactions of the plaintiff that lead to certain heat pumps being damaged. The defendants must know, or certainly ought to know, at least in general terms, which heat pumps fall into which categories. If they do not, then they should not be seeking to make the allegations since, without any such knowledge, the defendants are simply on a fishing expedition.
[18] Consequently, I see no error in principle in the decision reached by the Master to require some level of particularity as part of the permitting the amendments to be made.
[19] The defendants’ appeal is dismissed.
The plaintiff’s appeal
[20] In terms of the first part of the plaintiff’s appeal, an issue arose regarding the Discovery Plan upon which the parties could not agree. The Master made certain orders regarding the discoveries that were remaining to be held and/or completed. Prior to making those orders, the parties had indicated that they would agree that one of the personal defendants could be examined for discovery on behalf of all of the personal defendants (save one who had already been examined for discovery). The Master asked counsel to advise who that one defendant would be. Counsel for the defendants subsequently advised that they were prepared to produce either Paul Pilutti or Derek Gordon to be examined on behalf of all the personal defendants. The plaintiff in turn advised that, since Paul Pilutti had already been cross-examined on his affidavit filed on the summary judgment motion, and it had been agreed that the cross-examination would be treated as his examination for discovery, the plaintiff was content to treat his examination as the discovery of all of the personal defendants (assuming that it was accepted that his answers bound those defendants).
[21] For reasons that are not apparent on the record, notwithstanding the stated positions of the parties, the Master ordered that Derek Gordon be examined for discovery on behalf of all of the personal defendants. The plaintiff appeals from that order.
[22] There is a preliminary objection raised by the defendants to this appeal and that is that the plaintiff did not bring its appeal within seven days of the Master’s order as required by rule 62.01(2). The plaintiff has explained the delay in bringing the appeal. The plaintiff says that the original order was unclear, regarding the requirement that Derek Gordon be examined for discovery on behalf of all of the personal defendants, and, consequently, time was spent after the order was originally made seeking clarification from the Master. The plaintiff also says that, until that clarification was obtained, it was not clear that the appeal was necessary. I accept that explanation. In any event, given the level of delay that is manifest throughout this entire proceeding, I would not pick on this one item of delay to deny the plaintiff its appeal rights. Consequently, if an extension of time for the appeal is necessary, I would grant it.
[23] In terms of the appeal itself, I begin with the fact that the Master did not have any authority under the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 to order that the plaintiff be restricted to an examination for discovery of only one of the personal defendants on behalf of them all. A party is entitled to examine for discovery each and every other party who is adverse in interest: rule 31.03(1). Nothing prevents the parties from consenting to a restriction, and the Master could then incorporate that consent into her order regarding the Discovery Plan but in doing so, the Master would have the follow the terms of the consent.
[24] In this case, it is clear that the one person who both sides were prepared to accept as the party to be examined for discovery on behalf of all of the personal defendants was Paul Pilutti. The Master had no jurisdiction to order that Derek Gordon fulfill that role. That order, having been made without jurisdiction, cannot stand. The plaintiff’s appeal on that point is allowed and in its place an order will go directing that, on the consent of the parties, Paul Pilutti will be examined for discovery on behalf of all of the personal defendants (save James Kay).
[25] The plaintiff also seeks leave to appeal the combined costs order that was made by the Master on the two motions. The Master ordered that the defendants pay to the plaintiff costs fixed in the amount of $5,500. The plaintiff contends that the quantum of costs should have been much greater. In advancing that contention, the plaintiff points to the fact that the defendants had delivered a costs outline seeking costs in the amount of $37,770.21 and the plaintiff had delivered a costs outline seeking costs in the amount of $36,249.70.
[26] In terms of the test for granting leave to appeal, in Brad-Jay Investments Ltd. v. Szijjarto, [2006] O.J. No. 5078 at para. 21 (C.A.), the court said:
Leave to appeal a costs order will not be granted save in obvious cases where the party seeking leave convinces the court that there are “strong grounds upon which the appellate court could find that the judge erred in exercising his discretion”.
The Court of Appeal has also said that leave to appeal a costs order should be granted sparingly: Inter-Trust Mortgage Investment Corp. v. Robinson, [1999] O.J. No. 1875 (C.A.)
[27] In reaching her conclusions on costs, the Master made certain findings. One is that the motion to withdraw the admission took the bulk of the time. With respect to the amendments to the statement of defence, the Master noted that there were initially approximately twenty amendments sought, the plaintiff objected to six of them, that one amendment was denied and that particulars were ordered regarding three others. The Master found that the defendant was predominantly successful on the amendment motion. That is a characterization that is difficult to accept given that the plaintiff only objected to six amendments, was successful on one and partially successful in having particulars ordered for three more.
[28] The Master also found that the plaintiff had been entirely successful on the motion to withdraw the admission and that there was divided success on the discovery motion. In the course of her reasons, the Master also noted that the defendants had failed to even respond to the plaintiff’s overtures to resolve the costs issue.
[29] I am not able to determine from the reasons of the Master why it is that she choose to depart so significantly from the amount of costs that both parties had sought. There is remarkably little difference in the quantum sought between the two costs outlines. In her conclusion, the Master said:
Taking into account Rule 57 factors, fairness, reasonableness and what the unsuccessful party might reasonable expect to have to pay with respect to all three motions, costs are ordered payable forthwith by the defendants to the plaintiff fixed in the amount of $5500.00, inclusive of disbursements and HST.
[30] With respect, the mere recitation of the relevant factors to consider in fixing costs does not explain how those factors were applied in this particular case. Assuming that some reduction in the costs should be made for the divided success on the discovery motion and the mixed success on the amendment motion, fixing costs at $5500 when the parties suggested a level of costs in excess of $35,000 suggests that a significant penalty has been applied against the plaintiff without any indication of why such a penalty would be warranted. I note in that regard that if some penalty was to be applied, it would appear to have been one that ought to have been assessed against the defendants, not the plaintiff, given the Master’s comment that the defendants had not even attempted to resolve the costs issue.
[31] It may be that the Master considered the quantum of costs sought by both parties to be excessive but, if that was the case, then a statement to that effect would have been expected along with the reasons for that conclusion.
[32] In my view, given the absence of any reasons being given for the amount of costs as fixed, and the large disparity between the amount fixed and the amounts sought by both parties, the conclusion reached by the Master in fixing the costs reflects an error in principle and thus cannot stand.
[33] Consequently, it falls to me to fix the appropriate amount for the costs before the Master. In doing so, I proceed on the basis of the conclusions reached by the Master, as I have set them out above. I am particularly cognizant of the fact that the motion to withdraw the admission took the bulk of the time and that the plaintiff was entirely successful on that motion. Nevertheless, it is appropriate to reduce the amount sought by the plaintiff to reflect the mixed results on the other two aspects of the motions. A reduction of $10,000 would be sufficient for that purpose. I would therefore fix the costs of the motions before the Master at $25,000 inclusive of disbursements and HST.
Remaining matter
[34] There remains the costs of the motion brought by the plaintiff to transfer its appeal to the Divisional Court so that the two appeals could be heard together. The costs of that motion were reserved by Harvison Young J. to the judge hearing the appeals.
[35] I do not understand the basis upon which the defendants opposed that relief. Common sense would dictate that the appeals should be heard at the same time before the same judge. I can only assume that the opposition was yet another example of the conduct of counsel throughout this proceeding that the Master characterized in the following terms:
This action is plagued by acrimony between counsel which elongated the litigation, increased the costs of the litigation and is a continual breach of the policy behind the Rules – to reach a just and expeditious and economic resolution of disputes.
[36] The order joining the appeals ought to have gone on consent with no costs. Instead, the defendants chose to oppose the motion and their opposition was unsuccessful. That said, I do not agree with the plaintiff that that opposition is sufficient to warrant an award of costs on a substantial indemnity basis.
[37] The plaintiff is entitled to its costs of the motion to transfer its appeal. I fix those costs in the amount of $5,000 inclusive of disbursements and HST.
Conclusion
[38] In summary:
(a) The defendants’ appeal is dismissed.
(b) The plaintiff’s appeal is allowed.
(c) The order of the Master directing that Derek Gordon be examined on behalf of all of the personal defendants is set aside. In its place, an order will go, on consent of the parties, directing that Paul Pilutti be examined for discovery on behalf of all of the personal defendants (save James Kay).
(d) The Master’s award of costs on the motions is set aside and in its place an order will go fixing the costs of those motions at $25,000, inclusive of disbursements and HST, payable by the defendants to the plaintiff within thirty days.
(e) The defendants will pay to the plaintiff the costs of the appeals fixed in the agreed upon amount of $21,000, inclusive of disbursements and HST, within thirty days.
(f) The defendants will pay to the plaintiff the costs of the motion to transfer fixed in the amount of $5,000, inclusive of disbursements and HST, within thirty days.
NORDHEIMER J.
Date of Release: March 10, 2014
DIVISIONAL COURT FILE NOs.: 210/12 & 46/14
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
BETWEEN:
UNIVERSITY PLUMBING & HEATING LTD.
Plaintiff
– and –
HTS ENGINEERING LIMITED and others
Defendants
REASONS FOR JUDGMENT
NORDHEIMER J.
Date of Release: