Aecon Buildings v. Stephenson Engineering Limited, 2010 ONCA 898
CITATION: Aecon Buildings v. Stephenson Engineering Limited, 2010 ONCA 898
DATE: 20101224
DOCKET: C51833
COURT OF APPEAL FOR ONTARIO
MacPherson, Juriansz and MacFarland JJ.A.
BETWEEN
Aecon Buildings, A Division of Aecon Construction Group Inc.
Plaintiff (Respondent)
and
The Corporation of the City of Brampton
Defendant (Respondent)
and
Page + Steele Incorporated
Third Party (Respondent)
and
Stephenson Engineering Limited, Swallow Acoustic Consultants Ltd. and Kent Harvey Consultants Ltd.
Fourth Parties (Appellant)
COUNSEL:
Thomas J. Corbett and James A. LeBer, for the appellant Stephenson Engineering Limited
Peter W. G. Carey and Meagan Swan, for the respondent Aecon Buildings
G. Ackerley, for the respondent The Corporation of the City of Brampton
Tom Whitby, for the respondent Page + Steele Incorporated
Heard: November 22, 2010
On appeal from the order of Justice Gloria Klowak of the Superior Court of Justice dated December 11, 2009.
Reasons for Decision
MacFarland J.A.
[1] The appellant appeals from the decision of Klowak J. wherein she dismissed the appellant’s motion for summary judgment that sought to dismiss the third party claim of the respondent City of Brampton against Page + Steele Incorporated, and that sought to dismiss the fourth party claim of Page + Steele Incorporated for contribution and indemnity from the appellant, Stephenson Engineering Limited.
[2] Neither the Third Party nor the other Fourth Parties take any position on the appeal, nor did they take any position on the motion.
[3] The Fourth Party appellant takes the position that an agreement entered into between the Corporation of the City of Brampton (“Brampton”) and Aecon Buildings, A Division of Aecon Construction Group Inc. (“Aecon”) prior to the litigation is champertous and an abuse of process.
[4] This dispute arose in the context of a $46 million construction contract for the building of the Brampton Performing Arts Centre. Aecon has claimed damages for breach of contract arising from delays in the project for which it says it is entitled to be compensated.
[5] In 2006, Aecon and Brampton engaged in discussions which resulted in them reaching an agreement in principle in December, 2006 on how to proceed with their outstanding disputes. Those discussions culminated in a formal written agreement between the two parties dated February 8, 2007, a date that is after the issuance of the Statement of Claim wherein Aecon is plaintiff and Brampton is defendant.
[6] The appellant argues that the agreement is an abuse of process on the following bases:
It is champertous;
The plea of adversity between Aecon and Brampton as set out in the statement of claim is a sham; and
The agreement between Aecon and Brampton was not disclosed as soon as it was completed.
[7] The motion judge characterized the agreement as one which:
[S]imply restricts [the] plaintiff’s recovery from the defendant to what the defendant might recover from the Third Party. In effect, it simply caps the plaintiff’s proceeds and resolves that part of the claim for which the defendant might itself be severally liable.
[8] At its core, the agreement provides that:
Aecon would issue a statement of claim against Brampton and that within five days Brampton would file a cross-claim, Third Party Claim or other appropriate procedural mechanism against Page + Steele to make them a party to the action.
Brampton would prosecute the Third Party Claim against Page + Steele.
Aecon waived its right to collect any damages from Brampton in relation to the claims against Page + Steele – except to the extent that Brampton was awarded damages or otherwise recovered any sum from a party other than Aecon.
[9] Essentially, Brampton agreed to advance claims against Page + Steele on Aecon’s behalf and Aecon agreed to cap its damage claims against Brampton to any amounts Brampton recovered from Page + Steele and its subconsultants (the “consultants”).
[10] In our view, this agreement is not champertous nor does it “smack of trafficking in litigation”. Clearly, Aecon and Brampton both have a financial interest in the litigation – Aecon to recover what it says it is owed as a result of the construction delays and Brampton to ensure that if Aecon is found to be owed any further money that such money comes from the consultants that Brampton alleges are responsible for the delays. Neither Brampton nor Aecon could be described as a stranger to the litigation – both have a very real financial interest in its outcome.
[11] In our view, the crux of the agreement between Brampton and Aecon is merely to cap the damages for which Brampton may be liable to Aecon and nothing more.
[12] The Statement of Claim was issued before the agreement between Aecon and Brampton was reduced to writing. The agreement was, however, disclosed to the appellant before it was required to deliver its pleading. The motion judge found on that basis that there was no prejudice caused to anyone from the delay in disclosing the agreement. We agree that there was no prejudice. However, in our view the matter does not end there.
[13] We do not endorse the practice whereby such agreements are concluded between or among various parties to the litigation and are not immediately disclosed. While it is open to parties to enter into such agreements, the obligation upon entering such an agreement is to immediately inform all other parties to the litigation as well as to the court. As this court said in Laudon v. Roberts (2009), 2009 ONCA 383, 308 D.L.R. (4th) 422, at para. 39:
The existence of a [“Mary Carter” agreement] significantly alters the relationship among the parties to the litigation. Usually the position of the parties will have changed from those set out in their pleadings. It is for this reason that the existence of such an agreement is to be disclosed, as soon as it is concluded, to the court and to the other parties to the litigation.
The reason for this is obvious. Such agreements change entirely the landscape of the litigation.
[14] In this case, the agreement was not voluntarily produced immediately upon its completion. It was only produced several months after its existence was discovered by the appellant and it was specifically requested.
[15] Other parties to the litigation are not required to make inquiries to seek out such agreements. The obligation is that of the parties who enter such agreements to immediately disclose the fact.
[16] Here, the absence of prejudice does not excuse the late disclosure of this agreement. The obligation of immediate disclosure is clear and unequivocal. It is not optional. Any failure of compliance amounts to abuse of process and must result in consequences of the most serious nature for the defaulting party. Where, as here, the failure amounts to abuse of process, the only remedy to redress the wrong is to stay the Third Party proceedings and of course, by necessary implication, the Fourth Party proceedings commenced at the instance of the Third Party. Only by imposing consequences of the most serious nature on the defaulting party is the court able to enforce and control its own process and ensure that justice is done between and among the parties. To permit the litigation to proceed without disclosure of agreements such as the one in issue renders the process a sham and amounts to a failure of justice.
[17] For these reasons, the appeal is allowed. The order of the motion judge is set aside and in its place an order will issue staying the Third Party proceedings and the Fourth Party proceedings against the appellant. The appellant is entitled to its costs of the appeal fixed in the sum of $27,500 inclusive of disbursements and applicable taxes.
[18] The appellant is also entitled to its costs before the motion judge in the agreed sum of $41,000.
[19] In addition, because the Third and Fourth Party proceedings are now stayed, those parties will be entitled to their costs of the action. If the parties are unable to agree on the quantum of costs, that amount should be assessed.
RELEASED: December 24, 2010 “RGJ”
“J. MacFarland J.A.”
“I agree J.C. MacPherson J.A.”
“I agree R.G. Juriansz J.A.”