Court File and Parties

COURT FILE NO.: CV-14-509727-00A2 DATE: 20161027 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Peel Standard Condominium Corporation No. 837, Plaintiff AND: Davies Smith Developments Inc. and Solstice One Limited, Defendants AND: D. Zentil Mechanical Inc., Able Engineering Inc., and Quadrangle Architects Limited, Climanetics Inc. and Climetec Industries Ltd., Third Parties

BEFORE: Pollak J.

COUNSEL: Mark H. Arnold, for the Plaintiff K. Andersen, for the Defendants E. Stock, for the Third Party D. Zentil Mechanical Inc. E. Adams, for the Third Party Climetec Industries Inc.

HEARD: July 29, 2016

Endorsement

[1] The Plaintiff, Peel Standard Condominium Corporation No. 837 (“837”), brought an action for negligence and breach of warranty against Solstice One Limited (“Solstice”), the vendor, and Davies Smith Developments Inc. (“Davies Smith”), the developer of a residential condominium building (the “Defendants”). The Plaintiff claimed damages in the amount of $500,000 with respect to deficiencies in the construction and installation of the heating, ventilation, and air conditioning (“HVAC”) riser piping system in the building. The Defendants brought third party claims for contribution and indemnity against suppliers and installers of the HVAC units – Climanetics Inc. and Climetec Industries (“Climanetics” and “Climetec”) and D. Zentil Mechanical (“Zentil”) (the “Third Parties”).

[2] The Defendants and the third parties bring this motion for summary judgment dismissing the Claim on the ground that it is barred by the limitation period. The Statement of Claim was filed August 5, 2014, and an Amended Statement of Claim was filed on October 22, 2014. The Moving Parties submit that the Plaintiff knew of its cause of action alleged in the Statement of Claim prior to August 5, 2012 and as early as November 30, 2011, and that the additional cause of action alleged in the Amended Statement of Claim arose prior to October 22, 2012.

[3] The Plaintiff has not served a Reply alleging that the claim was only reasonably discoverable more than two years after the events that gave rise to the claim had occurred.

Overview

[4] The Moving Parties submit that the issue on this motion is when the Plaintiff knew that it had suffered damage and had prima facie grounds to infer that the acts or omissions were allegedly caused by the Defendants (and Third Parties).

[5] The Plaintiff pled that the defects in the HVAC piping system could not have been discovered by 837 until there was substantial failure of the riser piping system and a confirming expert’s report obtained on November 5, 2013.

[6] The Moving Parties submit that the damages became discoverable when the Plaintiff obtained engineering reports on November 30, 2011 (the “SAFE report”) and March 20, 2012 in response to several riser leaks appearing throughout the building. Both reports identified poor soldering connections as the cause for those leaks.

[7] The Plaintiff argues that the November 30, 2011 and March 29, 2012 reports relied on by the Moving Parties focused only on a small number of specific leaks. At the time of the reports, approximately 98% of soldered joints in the building were still intact. Based on these reports, the Plaintiff could conclude that there were several specific leaks. The Plaintiff claims that this knowledge would not have been sufficient or appropriate to enable a claim for the failure of the entire riser piping system.

[8] The Plaintiff submits that it only received the evidence necessary to start the proceeding when it retained consulting engineers in February 2013 and received a third engineering report, prepared by Building Sciences Inc. (the “Building Sciences”), dated November 5, 2013. The purpose of that engagement was to determine whether the localized prior failures were indicative of a latent construction deficiency throughout the building. According to the Plaintiff, that report concluded for the first time that there was “a systemic building deficiency” with respect to the HVAC riser piping system throughout the condominium as a result of inappropriate installation of the riser piping. The Plaintiff submits that only upon receiving that report did it obtain the knowledge necessary to start this claim.

The evidence

[9] In support of this motion, the Moving Parties rely on the affidavit of a student-at-law employed by Zentil’s counsel. The affidavit is based on information and belief, and no direct evidence. Attached to the affidavit are the documents produced by the Plaintiff in its Affidavit of Documents: the November 30, 2011 and March 29, 2012 engineering reports, and a building services proposal, dated April 26, 2012. The Moving Parties rely on those documents as evidence to support the fact that the Plaintiff had received them on a certain date and therefore had the knowledge required for the limitation period to start running.

[10] The Plaintiff submits that the evidence produced by the Moving Parties is insufficient for this court to grant summary judgment. The Plaintiff argues that in the absence of an affidavit from their authors, the engineering reports relied on by the Moving Parties are inadmissible and amount to hearsay or have little probative value. The Plaintiff submits that under Rule 20.02(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, "the court may, if appropriate, draw an adverse inference from the failure of a party to provide the evidence of any person having personal knowledge of contested facts." In addition, the Plaintiff argues that having failed to provide an Acknowledgement of Experts Duty, the Moving Parties have not complied with the “mandatory” expert provisions of Rule 53.03. The Plaintiff argues that according to the authority in Mitusev v. General Motors Corp., 2014 ONSC 2342, [2014] O.J. No. 4365 (S.C.J.), if expert reports are going to be relied on in a summary judgment motion, they should be sworn by the author of those reports.

[11] The Moving Parties argue that the reports are being relied on not for the truth of their contents, but to show what knowledge the Plaintiff had at specific times with respect to its claim.

The test for summary judgment

[12] The parties agree that the roadmap established by the Supreme Court of Canada in Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87 must be followed by this court on this motion for summary judgment.

[13] In Hryniak, the Supreme Court of Canada gave us a roadmap of the approach to follow on a motion for summary judgment. At paragraph 66 of the decision, the court stated:

On a motion for summary judgment under Rule 20.04, the judge should first determine if there is a genuine issue requiring trial based only on the evidence before her, without using the new fact-finding powers. There will be no genuine issue requiring a trial if the summary judgment process provides her with the evidence required to fairly and justly adjudicate the dispute and is a timely, affordable and proportionate procedure, under Rule 20.04(2)(a).

If there appears to be a genuine issue requiring a trial, she should then determine if the need for a trial can be avoided by using the new powers under Rules 20.04(2.1) and (2.2). She may, at her discretion, use those powers, provided that their use is not against the interest of justice. Their use will not be against the interest of justice if they will lead to a fair and just result and will serve the goals of timeliness…

[14] Further, the court stated in paragraph 60:

The "interest of justice" inquiry goes further, and also considers the consequences of the motion in the context of the litigation as a whole. For example, if some of the claims against some of the parties will proceed to trial in any event, it may not be in the interest of justice to use the new fact-finding powers to grant summary judgment against a single defendant. Such partial summary judgment may run the risk of duplicative proceedings or inconsistent findings of fact and therefore the use of the powers may not be in the interest of justice. On the other hand, the resolution of an important claim against a key party could significantly advance access to justice, and be the most proportionate, timely and cost effective approach.

[15] These principles were applied by the Ontario Court of Appeal in Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450, 120 O.R. (3d) 438 at paragraphs 33-35, where the court held that the motion judge is obliged to assess the advisability of a staged summary judgment process in the context of the “litigation as a whole.” Failure to do so is a material error in principle by the motions judge.

[16] In the case of Shukster v. Young et al., 2012 ONSC 4807 at para. 19, the court held as follows with respect to the burden of proof on summary judgment motions on limitations issues:

In my opinion, these decisions and the authorities cited therein, along with the provisions themselves, indicate the following:

• Subsection 5(1)(a) contains a subjective test that focuses on the plaintiff’s actual knowledge of the types of facts enumerated under that provision. Evidence that the plaintiff had actual knowledge of such matters will trigger operation of the limitation period. However, a lack of such evidence and/or a denial of such actual knowledge will not suffice to prevent a finding that operation of the limitation period was triggered, if other provisions of section 5 indicate that such a finding is appropriate.

• In particular, subsection 5(1)(b) contains a second test that is objective, and requires the plaintiff’s knowledge to be assessed in relation to a standard asking when a reasonable person, with the plaintiff’s abilities and in the plaintiff’s circumstances, ought to have had knowledge of the matters enumerated in subsection 5(1)(b). This in turn usually leads to a consideration of the steps such a person would have taken to acquire such knowledge. In effect, the question becomes one of determining when the plaintiff, in the particular circumstances of the case, ought to have learned of such matters. One must ask why the plaintiff and his/her solicitor were unaware of such matters until some later point. The applicable standard is that of a “reasonably prudent person in pursuing the facts”.

• Moreover, subsection 5(2) goes further, and establishes a rebuttable presumption that the Plaintiff did know of such matters on the day the underlying act or omission took place. The burden is on the Plaintiff to rebut that presumption. In other words, once a defendant has pleaded a limitations defence, the evidentiary burden is on the plaintiff to prove that the claim was issued within the limitation period.

• Pursuant to Rule 20, a party moving for summary judgment retains the overall burden of showing that there is no genuine issue requiring trial. However, where a defendant moves for summary judgment in relation to a statutory limitation period, the evidentiary burden as to the discoverability issue and under Rule 20 effectively shifts to the responding party under section 5(2). In particular, the plaintiff must adduce evidence sufficient to demonstrate that there is a genuine issue, requiring trial, concerning operation of the limitation period pursuant to subsections 5(1) and 5(2). In particular, a plaintiff seeking to defeat operation of the limitation period on such a motion has the onus to rebut the presumption in s.5(2), or at least demonstrate that there is a genuine issue requiring trial as to whether that presumption is rebutted. [Emphasis added.]

• Such determinations are fact driven, and must be decided based on the particular circumstances of each case.

[17] In the case of Sabourin v. Proulx, 2011 ONSC 4099, 17 C.L.R. (4th) 178 at para. 22 the test to determine the limitation issue was summarized as follows:

• What facts did the plaintiffs know and when did they know them?

• What facts existed that the plaintiffs were unaware of and when did they acquire knowledge of them?

• Is this a case where an expert’s report is required to institute a claim?

• Did the plaintiffs act with reasonable diligence?

[18] Applying the principles discussed above, I must ask: just on the basis of the evidentiary record alone, are there genuine issues that require a trial? I must also ask: does the evidentiary record in front of me provide me with the evidence I need to "fairly and justly adjudicate the dispute" in the context of litigation as a whole?

[19] Is there sufficient evidence before me that the Plaintiff could have reasonably discovered the inappropriate joint preparation and installation and deficient solder materials before August 2, 2012 (two years after the original claim was issued) or October 22, 2012 (two years after the claim was amended to include flood damages)?

The Plaintiff’s position

[20] The Plaintiff submits that the evidence of the November 5, 2013 report by Building Sciences is enough to convince this court that there is a genuine issue requiring a trial with respect to when the Plaintiff knew or should have known about the cause of action in this case. It is argued that in the absence of knowledge that the riser piping system (which comprises more than soldered joints) contained latent systemic defects, a proceeding would not have been “an appropriate means to seek to remedy it.” A proceeding only became “appropriate” when the corporation had sufficient evidence of a latent systemic defect throughout the building. The corporation did not have that evidence until the most recent expert report by Building Sciences dated November 5, 2013. The two previous reports, relied on by the Moving Parties, were not sufficient to support a claim that there were latent defects of a systemic nature throughout the entire riser piping system – only that there were several leaks in one riser.

[21] The Plaintiff argues that the November 5, 2013 report concluded for the first time that there was "a systemic building deficiency" because of “inappropriate joint preparation, installation and deficient solder material used”, together with “inadequate/missing/inappropriate application of thermal compensation." Building Sciences recommended that a random sample be taken and that further investigation be conducted.

[22] Thus, the Plaintiff argues that November 5, 2013, the date of the Building Sciences expert report, is the earliest time that the corporation knew or could have known that it was likely that there was a systemic building deficiency in the riser piping system. It is therefore submitted that the Statement of Claim was issued within the two-year statutory limitation period.

[23] In 2016, Building Sciences carried out a further riser pipe assembly assessment. The purpose of that investigation was to estimate the total length of vertical riser pipes within the piping system throughout the building, the number of solder joints in the risers, and the percentage of failed joints. In its May 30, 2016 report, Building Sciences concluded that as of 2015, soldered joint failures throughout the building amounted to 1.35% to 2.02% of the total amount of soldered joints. 97.98% to 98.65% of the soldered joints, contained within the 26 risers having approximately 2,129 to 3,194 soldered joints, had not yet failed at the time of the report. There could be three potential causes for the failures within the four component-riser piping system, with soldered joints being only one of those components. The riser piping system is entirely embedded behind drywall and within the building's common elements, and is only accessible through the removal of drywall in the units and the common areas throughout the building. The latent defects could only be revealed in flooding events.

[24] The Plaintiff relies on this report to further support its position that prior to the November 5, 2013 report it did not have sufficient knowledge of the reasons for the system failure or of the existence of the latent systemic defects that was necessary to initiate a claim. In addition, the Plaintiff argues that with respect to those components of the riser piping system that had not failed prior to the November 5, 2013 report, it had not suffered any injury, loss or damage. Prior to the report, it was not possible to identify those deficiencies because that would require tearing down walls. Therefore, the limitation period did not run for those failures until it was determined that the deficiency was systemic and not limited to specific joint failures. According to the Plaintiff, there is a triable issue of whether these independently discoverable latent construction defects can give rise to separate causes of action because of the complexity of the system and the number of soldered joints within the riser pipes.

[25] The Plaintiff submits that it diligently took every reasonable step to determine why the riser piping system had failed. There is no evidence to support this argument other than the first Building Sciences report. The Plaintiff relies on the case of Sabourin v. Proulx, 2011 ONSC 4099, 17 C.L.R. (4th) 178, where it was held at paragraph 30 that "[p]laintiffs are not obliged to search for deficiencies. They are entitled to rely on the Defendants’ commitment to capable workmanship."

[26] Finally, the Plaintiff argues that because of the complexity of the riser piping system, an expert report is necessary and required to establish the reason for the system failure. The Plaintiff points out that all parties rely on expert reports on this motion. However, the Plaintiff argues that while its expert report complies with the procedural rules, the reports relied on by the Moving Parties do not.

The Moving Parties’ position

[27] The Moving Parties argue that the Ontario Court of Appeal has held in Kowal v. Shyak, 2012 ONCA 512 at para. 18 that certainty of a defendant's responsibility for the act or omission that caused or contributed to the loss is not a requirement for a limitation period commencing. It is enough to have prima facie grounds to infer that the acts or omissions were caused by the party or parties identified, and an expert report is not always necessary to confirm this. A plaintiff must take reasonable steps to investigate whether it has a claim (Cargojet Airways v. Aveiro, 2016 ONSC 2356, at para. 34).

[28] The Moving Parties further submit that knowledge of the extent or quantum of the damages is not a reason to toll a limitation period. A limitation period commences to run as soon as "damage" occurs, and the limitation period is not postponed until the Plaintiff knows the amount or scope of the "damages" ("damages" being monetary in nature; "damage" being the element of the cause of action). The Plaintiff has pled that there were incidents of leaks within two years of October 22, 2012 (when the amended claim was filed). The Moving Parties submit that those damages were a single discoverable deficiency flowing from the same cause of action, which is now statute barred.

[29] The Moving Parties argue that the November 30, 2011 SAFE report put the Plaintiff on notice that an expert considered that there was a "consistent deficiency."

[30] Further, it is submitted that the March 29, 2012 export report identified the same issues as those identified in the November 5, 2013 Building Sciences report, and that it recommended that compensation be sought from the builder. It is therefore submitted that if not upon receipt of the 2011 SAFE report, then certainly as of receipt of the March 29, 2012 expert report, the Plaintiff knew all of the facts on which to base the cause of action that was brought more than two years later, and the limitation period started to run.

Analysis

[31] It should be noted that in this case, there is no conflicting evidence. It is also interesting to note that both parties are relying on the most recent expert evidence that is properly before the Court to argue their case. The difference between the parties is that the Moving Parties rely on the information given to the Plaintiff in the expert report dated March 29, 2012, which they submit informed the Plaintiff that it had incurred a loss due to damage caused by some leakage, and the Plaintiff relies on the report prepared on November, 2013 to show that it was only then that it knew the problem was “systemic” and not only due to soldering failures. Is knowledge that the problem was “systemic” the same as knowledge of a “consistent deficiency”?

[32] It is a usual practice of expert witnesses to “educate” and explain their opinions to the court during trials. This has not been done on this motion.

[33] The only direct evidence provided by the Plaintiff on this summary judgment motion is the November 5, 2013 Building Sciences expert report and a follow up report by the same expert dated May 30, 2016. The November 5, 2013 report refers to and discusses the earlier reports relied on by the Moving Parties. The Building Sciences report is not supported by any further evidence from the Condominium Board of Directors. The Moving Parties have not cross examined the expert on this report. There is no other evidence from the Plaintiff.

[34] The only evidence relied on by the Moving Parties is the affidavit of counsel’s law clerk, which refers to documents taken from the Plaintiff’s Affidavit of Documents.

[35] In short, the parties rely on legal principles without providing this Court with the explanatory evidence necessary to support those legal principles.

[36] As mentioned above, following the direction of the Supreme Court of Canada in Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, I must ask myself: just on the basis of the evidentiary record alone, are there genuine issues that require a trial? I must also ask myself: does the evidentiary record in front of me provide me with the evidence I need to "fairly and justly adjudicate the dispute"?

[37] In my view, the answer to the questions above are as follows: it appears that there is a genuine issue requiring a trial. The evidentiary record in front of me does not provide me with sufficient evidence to fairly and justly adjudicate the dispute, because of the lack of required explanatory expert evidence.

[38] Therefore, I have to determine if I should use my discretion to determine if the need for a trial in this case could be avoided by the use of my fact-finding powers. I have to ask myself: Would it be in the interest of justice to do so? Will the use of these powers lead to a "fair and just result" that will serve the goals of timeliness, affordability and proportionality in light of the litigation as a whole?

[39] In my view, again, the answer is no. In order to resolve this case justly and fairly, it would be necessary to use my additional fact-finding powers to conduct a large portion of the trial, and that certainly would not be in the interests of justice.

[40] It must be emphasized that the roadmap provided by the Supreme Court of Canada in Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87 was intended to give parties not only a procedure that is expeditious and affordable, but also the one that ensures that the dispute is resolved fairly and justly.

[41] In this particular case, it is my opinion that in order to make a fair determination, I would have to hear all of the expert evidence with respect to the cause of the damage. I find that because the evidentiary record on this motion establishes the need for a trial, the Motion for Summary Judgment is therefore dismissed.

[42] There is one further practical issue. The Supreme Court of Canada in Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87 also held, at paragraph 78, that:

Where a motion judge dismisses a motion for summary judgment, in the absence of compelling reasons to the contrary, she should also seize herself of the matter as the trial judge.

[43] In my view, this is an appropriate case for me to follow the Supreme Court’s direction. I must, however, qualify this to be subject to the practical reality of our court's ability to schedule trials in a timely and expeditious manner. I will not be seized of this trial if the effect of my unavailability would be to delay the hearing of the trial between the parties. If it is possible to do so without adverse delay or consequences to the parties, I seize myself of the trial of this matter as directed in Hryniak.

Costs

[44] If the parties are unable to agree on costs, they may make brief written submissions to me no longer than three pages in length. The Plaintiff’ submissions are to be delivered by 12:00 noon on November 7, 2016, and the Defendants’ submissions are to be delivered by 12:00 noon on November 17, 2016. Any reply submissions are to be delivered by 12:00 noon on November 24, 2016.

Pollak J.

Date: October 27, 2016