DATE: 20040419

DOCKET: C38642, C38631 & M30402

COURT OF APPEAL FOR ONTARIO

RE: OLD COLONY PROPERTIES INC. (Plaintiff (Respondent) – and – HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO as represented by the Chair of the Management Board of Cabinet (Defendant (Appellant)

POWER VAC SERVICES, DIVISION OF 708734 ONTARIO LIMITED (Plaintiff (Respondent) – and – OLD COLONY PROPERTIES (Defendant (Appellant))

BEFORE: DOHERTY, MOLDAVER and FELDMAN JJ.A.

COUNSEL: Linda McCaffrey and David Crowe For the Crown

Michael Winward For the Old Colony

Robert Young For Power Vac

HEARD: March 31, and April 1, 2004

On appeal from the judgment of Justice Raymond Harris, of the Superior Court of Justice, dated June 26, 2002 and the award for costs dated March 27, 2003.

E N D O R S E M E N T

The Appeals and Cross-Appeal

[1] The Crown appeals against Old Colony on the issue of liability. Old Colony appeals against Power Vac on the issue of liability. Power Vac cross-appeals against Old Colony on the issue of damages.

[2] In our view, the appeals and cross-appeal are fact driven. The trial judge gave thorough and comprehensive reasons for judgment. His findings of fact are supported by the evidence and we see no basis for interfering with them or the resulting legal conclusions.

Crown Appeal against Old Colony

[3] The trial judge found as a fact that on July 16, 1997, Old Colony and the Crown entered into an agreement whereby Old Colony “would pay for the asbestos cleaning on condition that the [Crown] continued to pay rent” and its own re-location expenses. The trial judge further found that Old Colony lived up to its end of the bargain but that the Crown did not. Specifically, he determined that the Crown’s decision to stop paying rent to Old Colony on October 1, 1997 amounted to a unilateral and unjustifiable breach of the agreement. In that regard, he effectively rejected the Crown’s argument that the clean-up operation performed by Power Vac on behalf of Old Colony was not carried out in a competent or timely fashion. On the contrary, he was satisfied that in all of the circumstances, Power Vac had performed its task with reasonable skill and diligence and that Old Colony had accordingly lived up to its end of the bargain. As will be seen, in the opinion of the trial judge, any further delays from October onward were due to matters beyond Old Colony’s control and for which the Crown bore responsibility.

[4] In our view, the findings of the trial judge are supported by the evidence and they justify his conclusion that the Crown is liable to Old Colony for the rent ($273,053.15) it unjustifiably withheld.

[5] We are also of the view that the trial judge was justified in finding the Crown liable for the $131,000 spent by Old Colony in the final clean-up of the building. Under the terms of the July 16, 1997 Agreement, Old Colony’s commitment to clean the building at its own expense must be interpreted in a commercially reasonable fashion. In our view, such an interpretation excludes, as unrealistic, the notion that Old Colony would bring the building into the “pristine/hospital-like” condition demanded by the Union. Rather, it suggests a cleaning sufficient to bring the building within the lesser standards required by the Ministry of Labour.

[6] That standard was met on September 4, 1997 when Power Vac completed its work. In the opinion of the trial judge, it was the intransigence of the Union that necessitated the extensive re-cleaning that followed. That intransigence, he found, was directly attributable to the Crown because of the Crown’s failure to comply with the regulations in the Occupational Health and Safety Act, as required under the lease, and its failure to educate and train its employees and contractors in accordance with the policy guidelines contained in its ‘Asbestos Manual’.

[7] According to the trial judge, had the Crown complied with its obligations, “the contamination and the crises that followed would have been averted”. Instead, as he observed:

… the total removal costs were exacerbated considerably by the labour dispute between the Tenant [the Crown] and its employees. The labour dispute was caused by the Tenant’s failure to properly educate its employees and contractors. Because the employees and contractors were uneducated with respect to asbestos, they caused the contamination by not following proper containment procedures, and by taking inappropriate actions such as removing ceiling tiles. As such, the Tenant breached the lease. Had the labour disruption not occurred, I have no doubt that the asbestos cleanings/removals would not have been necessary. At most, only one removal would have been necessary.

[8] Having found that the extensive re-cleaning needed to bring the building into pristine condition was attributable to the Crown by virtue of its failure to comply with the terms of the lease, as well as its own policy guidelines, the trial judge concluded that the Crown should bear the cost of the re-cleaning. In our view, he was entitled to come to that conclusion and we see no basis for interfering with it.

[9] Accordingly, the Crown’s appeal against Old Colony is dismissed with costs fixed on a partial indemnity basis at $15,000 inclusive of disbursements and GST.

The Appeal and Cross-Appeal between Old Colony and Power Vac

[10] The trial judge ordered Old Colony to pay the bulk of Power Vac’s invoices for the work Power Vac performed in removing the asbestos and cleaning the building. The full amount claimed was reduced to reflect some expenses paid by Old Colony to a third party for remedial work and certain extra expenses submitted by Power Vac that the trial judge rejected as unauthorized.

[11] Old Colony appeals from that order on the basis that the trial judge ignored and misapprehended evidence that showed that Power Vac was incompetent and that it failed to adequately perform the cleaning contract for which it was hired.

[12] We would not give effect to that submission. In our view, it was open to the trial judge to find that Power Vac “substantially delivered what they had promised” and that the “work done was reasonably within the ‘scope of work’ contracted for”. In support of those findings, the trial judge quite properly took account of the fact that “the Power Vac work was tested and passed by the MOL [Ministry of Labour] for re-entry on the 4^th of September 1997”. In addition, we note that after the Union engaged in its further testing on September 9^th, Power Vac was dismissed by Old Colony and not given an opportunity to rectify the situation.

[13] As for Power Vac’s cross-appeal, we have not been persuaded that the trial judge failed to credit Power Vac for authorized work, nor did he deduct amounts in respect of remedial work for which Power Vac was not responsible.

[14] In the result, Old Colony’s appeal against Power Vac is dismissed with costs fixed on a partial indemnity basis at $7,000 inclusive of GST and disbursements. Power Vac’s cross-appeal against Old Colony is dismissed with costs fixed on a partial indemnity basis at $3,000 inclusive of GST and disbursements.

Motion by Crown for Leave to Appeal Costs awarded against it in Power Vac v. Old Colony Action

[15] The trial judge ordered the Crown “to pay the costs awarded on the Power Vac v. Old Colony claim on a partial indemnity basis” [emphasis in original]. He did so despite the fact that Power Vac’s action for damages was directed solely at Old Colony and did not include the Crown.

[16] Over the Crown’s objections, the trial judge found that he had authority to make the order under s. 131 of the Courts of Justice Act, R.S.O. 1990, C. c. 43. He reasoned as follows:

In the present case, ORC [the Crown] was no stranger to the action and had an interest in its outcome. It further involved itself when it alleged, in its pleadings, that Power Vac was incompetent. ORC was not only connected to the quarrel between Old Colony and Power Vac through Old Colony but, was effectively the causa sine qua non of the litigation.

Both actions were, on consent, ordered to be tried together and proceeded under a consolidated title of proceedings.

During the trial, all counsel were present and involved. The trial of both actions was one proceeding before me with the evidence of any one party binding on the others.

[17] Having concluded that he had the necessary authority, the trial judge made the order for two reasons. First, he was of the view that “but for” the conduct of the Crown, the litigation between Power Vac and Old Colony would have been unnecessary. Second, he found that the Crown’s failure to disclose its “Asbestos Manual” in a timely fashion in its action with Old Colony “impaired the litigation process” and amounted to “an abuse of the disclosure process and the trial process in general”.

[18] For reasons that follow, we need not finally resolve the jurisdiction issue. Assuming that the trial judge had the authority to make the impugned order, we are respectfully of the view that he erred in doing so.

[19] Old Colony chose to withhold payment from Power Vac and it forced Power Vac to commence an action and prove its case. At the same time, in its action against the Crown, Old Colony sought full indemnification for all of the costs it incurred, including those to Power Vac, in removing the asbestos and cleaning the building.

[20] Under the circumstances, it seems to us that the “but for” rationale loses its force. The Crown had nothing to do with Old Colony’s decision to withhold payment from Power Vac and to defend Power Vac’s action against it. That was Old Colony’s decision and in the end, Old Colony was proved wrong. In the circumstances, it stands to reason that Old Colony should bear the costs of its own decision to withhold funds and litigate.

[21] Likewise, we fail to see the link between Old Colony’s decision to defend Power Vac’s action and the Crown’s failure to disclose its ‘Asbestos Manual’. In our view, the two are unrelated.

[22] In the end, we believe that the impugned order constitutes an impermissible attempt to punish the Crown and it cannot stand.

[23] Accordingly, leave to appeal is granted, the appeal is allowed and the order requiring the Crown to pay Power Vac’s costs is set aside. In its place, an order will go requiring Old Colony to pay the costs in the same amount as those awarded against the Crown.

[24] The Crown is entitled to its costs of the motion and the appeal against Old Colony and Power Vac. Those costs, in total, are fixed on a partial indemnity basis at $5,000 inclusive of GST and disbursements.

Signed: “D. Doherty J.A.”

“M.J. Moldaver J.A.”

“K. Feldman J.A.”