CITATION: Ottawa Carleton Standard Corporation No. 838 v. Redevelopment Group, 2019 ONSC 7005

DIVISIONAL COURT FILE NO.: DC-19-2471

DATE: 20191211

ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT

Swinton, Favreau and Copeland JJ.

BETWEEN:

OTTAWA CARLETON STANDARD CONDOMINIUM CORPORATION NO. 838

Plaintiff

– and –

REDEVELOPMENT GROUP, SMITH + ANDERSON, WARLYN CONSTRUCTION LTD., LONGHILL ENERGY, LAR-MEX INC., BURCHILL MECHANICAL CONTRACTORS LTD., BRENECK TECHNICAL SERVICES INC., ARBORUS CONSULTING, GENCON CAPITAL RESOURCES INC., VAN-FORT INC., LEO GROULX PLUMBING & HEATING, CITY OF OTTAWA, LE ST DENIS LTD.

Defendants (Respondents on Appeal)

– and –

HBC STUCCO ARTISTIC WORKS LTD., 1258963 ONTARIO INC. O/A CONDOMINIUM MANAGEMENT GROUP, LIFF & TOLOT ARCHITECTS INCORPORATED, J. STUART HALL & ASSOCIATES LTD., GOLDEN WINDOWS LIMITED, EXCELSIOR STEEL PROCESSING LIMITED, ONTARIO COMMERCIAL SEALANTS INC., and ATC ADVANCES TECHNOLOGY COATINGS LIMITED

Third Parties (Appellant)

Copeland J.

COUNSEL:

Brian Isaac Monteiro, for the Appellant (Third Party) 1258963 Ontario Inc. o/a Condominium Management Group

Michael S. Hebert and Cheryl Gerhardt McLuckie, for the Respondent (Defendant) Gencon Capital Resources Inc., and as agents for counsel for Respondents (Defendants) Redevelopment Group and Le St Denis Ltd.

HEARD at Ottawa: November 20, 2019

REASONS FOR JUDGMENT

Introduction

[1] 1258963 Ontario Inc. o/a as Condominium Management Group (“the Appellant”) appeals with leave the interlocutory order of O’Bonsawin J. of the Superior Court of Justice dated November 20, 2018 denying a motion to strike a third party claim made against it by the Defendants Redevelopment Group, Le St Denis Ltd., and Gencon Capital Resources Inc. (“the Respondents”). The third party claim was brought in an action commenced by Ottawa Carleton Standard Condominium Corporation No. 838 (“the Plaintiff”) for damages for alleged deficiencies to the Plaintiff’s condominium building.

[2] In her endorsement dismissing the motion to strike the third party claim, the Motions Judge summarized the law applicable to a motion to strike a claim as disclosing no reasonable cause of action. She acknowledged that the Respondents did not assert an independent cause of action against the Appellant. She held that the issues raised by the Appellant in the motion to strike were more appropriately determined on a full record at trial. And she held that the third party claim arguably fell within the scope of rule 29.01(c), and rule 29.01(a). She concluded that it was not plain and obvious that the Respondents’ third party claim would fail.

[3] Leave to appeal was granted by the Divisional Court only on the following question:

Did the Motions judge err in refusing to strike the Third Party Claim for contribution and indemnity against the Third Party Property Manager, given the failure to assert any independent cause of action against the Third Party?

Standard of review

[4] The parties agree that the correctness standard of review applies to an appeal of a motion to strike under rule 21.01(1)(b) on the basis that a claim discloses no reasonable cause of action: McCreight v. Canada (Attorney General), 2013 ONCA 483 at para. 38.

The Claim at issue

[5] In order to understand the issues in this appeal, it is necessary to consider the facts pleaded in the Plaintiff’s claim and in the Respondents’ third party claim.

[6] The Plaintiff is a condominium corporation. The Respondents are all defendants in the main action. As pleaded by the Plaintiff, the Respondent Redevelopment Group was the developer of the condominium; the Respondent Gencon Capital Resources Inc. was a partner of the developer; and the Respondent Le St. Denis Ltd. was the declarant of the condominium corporation and vendor of the units.

[7] The Plaintiff’s claim alleges construction deficiencies and alleged negligent repair of the deficiencies. Without listing all of the deficiencies at issue, the allegations pleaded include claims for damages regarding alleged deficiencies in the exterior cladding of the building, and the balconies. The alleged deficiencies include, but are not limited to, allegations of damage caused by corrosion, water infiltration, and other post-construction damage.

[8] The Appellant is the property manager of the condominium. The Respondents’ third party claim relates only to the portion of the Plaintiff’s claim about damage to the balconies and exterior cladding. The Respondents’ third party claim is for contribution and indemnity should the Respondents be found liable to the Plaintiff in relation to damages to the balconies and the exterior cladding alleged by the Plaintiff, in the event that it is found that any of the Plaintiff’s damages were caused or contributed to by lack of or improper maintenance by the Appellant.

[9] The Respondents’ third party claim pleads that the Appellant was at all material times contracted to the Plaintiff to manage and maintain the condominium at issue (para. 6 of the Third Party Claim). The claim pleads that the Appellant at all material times was charged with maintaining the premises in a proper state of repair in accordance with the provisions of the Condominium Act, 1998, S.O. 1998, c. 19 (para. 27 of the Third Party Claim).

[10] The third party claim further pleads that the Appellant was negligent in that it: failed to follow proper maintenance procedures with respect to building components; failed to advise the Plaintiff on required maintenance which would have prevented the damage from occurring; failed to maintain the property in accordance with the provisions of the Condominium Act, 1998; and failed to properly inspect the building to ensure timely reporting of any deficiencies observed (para. 28 of Third Party Claim).

[11] In its defence to the third party claim, the Appellant admits that it was charged with maintaining the premises in a proper state of repair under the provisions of the Condominium Act, 1998, and admits that it owes a duty of care to the Plaintiff. The Appellant denies that it owes the Respondents a duty of care. In the alternative, the Appellant denies that its actions caused or contributed to any damages sustained by the Plaintiff. The Appellant also pleads a limitations defence. The Appellant has not pled in its defence that it is an agent of the Plaintiff.

[12] We note that it is clear, and the Respondents concede, that the Respondents are not claiming that they have an independent cause of action against the Appellant (i.e., they do not claim that the Appellant owed them a duty of care).

Merits of the appeal

[13] On a motion to strike out a claim on the basis that it discloses no reasonable cause of action, the moving party must show that it is plain and obvious, assuming the facts pleaded to be true, that the claim discloses no reasonable cause of action, or put differently, has no reasonable prospect of success. The pleadings must be read generously, with allowances for drafting deficiencies: R. v. Imperial Tobacco, [2011] 3 S.C.R. 45, 2011 SCC 42, at paras. 17-22.

[14] Rule 29.01(c) provides that a defendant may commence a third party claim against any party who is not a party to the action, and who should be bound by the determination of an issue arising between the plaintiff and the defendant.

[15] In the context of this appeal, rule 29.01(c) operates in tandem with ss. 1 and 5 of the Negligence Act, R.S.O. 1990, c. N.1. Section 1 provides for joint and several liability where damages to a plaintiff have been caused or contributed to by the fault or neglect of two or more persons, and also provides for apportionment, and claims for contribution and indemnity. Section 5 provides for adding parties, and for third party claims where a person who is not already a party to an action may be wholly or partly responsible for the damages claimed.

[16] The Appellant argues that the criteria in rule 29.01(c) are a necessary, but not a sufficient condition to bring a third party claim. The Appellant argues that a defendant bringing a third party claim must also have an independent cause of action against the third party.

[17] With respect, I disagree with the Appellant that a defendant bringing a third party claim needs an “independent” cause of action against the third party, in the sense of the third party owing the defendant a duty of care, or being in a contractual relationship with the defendant.

[18] There is clear authority from the Supreme Court of Canada and the Ontario Court of Appeal that a defendant does not need to have an independent cause of action against a third party in order to bring a third party claim. Without addressing every situation in which a third party claim may be brought, the situation that is relevant to this appeal is that a defendant may bring a third party claim where it is alleged that the plaintiff has a cause of action against the third party in respect of the damage the plaintiff suffered.

[19] The proposition that a defendant does not need an independent cause of action against a third party to bring a third party claim was recently clearly stated in Hengeveld v. Personal Insurance Co., 2019 ONCA 497 at para. 21:

A third party claim based on the contribution and indemnity provisions of the Negligence Act does not require that the third party owe a duty of care to the defendant. It is sufficient that the third party owe a duty of care to the plaintiff, making the third party someone who, if sued by the plaintiff, would have been liable in respect of the damage the plaintiff suffered [citation omitted].

[20] I note that it does not matter whether a plaintiff has chosen to bring an action against the third party. Indeed, the third party would already be a party to the action had a plaintiff chosen to assert its cause of action against the third party.

[21] The sense in which a defendant bringing a third party claim for contribution and indemnity needs to have a cause of action against the third party is that the defendant must be exposed to the possibility of being jointly and severally liable with the third party for damages caused to the plaintiff: Hengeveld at paras. 19, 22.

[22] In my view, the third party claim in this case pleads material facts which, if proven, would form the basis for the Appellant owing a duty of care to the Plaintiff. It pleads damages caused to the Plaintiff by the Appellant. It also pleads material facts alleging that negligent acts of the Appellant caused or contributed to any damages to the balconies and exterior cladding suffered by the Plaintiff. These damages are (in part) the same damages that form the Plaintiff’s claim against the Respondents. These elements support a third party claim because on the pleadings the Respondents are exposed to joint and several liability with the Appellant for damages allegedly caused to the Plaintiff.

[23] The Appellant further argues that even if a defendant is not required to have an independent cause of action against a third party, in the circumstances of this case, a third party claim against the Appellant is barred because the substance of the claim could be addressed by other means. The Appellant bases the argument that the Respondents may not bring a third party claim if different means are available to limit the Respondents’ liability on the decisions in Hengeveld and Davy v. CIBC World Markets Inc., 2009 ONCA 273.

[24] The Appellant argues that two other means exist in this case to ensure that the Respondents are not potentially liable for damages caused by the Appellant. First, the Appellant argues that the Plaintiff’s claim is limited to damages caused during the construction of the condominium, and thus the Respondents could not be found liable for damages caused by alleged maintenance failures by the Appellant after the condominium was constructed. Second, the Appellant argues that any damages caused by the Appellant would be encompassed by the doctrine of contributory negligence on the part of the Plaintiff, because the Appellant was the Plaintiff’s agent.

[25] I reject these arguments. The situations in Hengeveld and Davy are distinguishable from this case.

[26] Hengeveld and Davy stand for the proposition that a defendant will not have a reasonable cause of action in contribution and indemnity where it is plain and obvious from the pleadings that no provisions of the Negligence Act apply to potentially make the defendant liable for a share of damages caused by the actions of a third party: Hengeveld at paras. 17-29, 37-38; Davy at paras. 16-20.

[27] Where a defendant is not exposed to joint and several liability for a share of damages caused by the proposed third party, a third party claim would not be necessary in order to limit the defendant’s potential liability to its own share. In those circumstances, a third party claim would not be a reasonable cause of action.

[28] However, the decisions in Hengeveld and Davy are clear that if a third party claim involves a claim that a third party was implicated in a plaintiff’s initial loss, and thereby is jointly and severally liable for the same loss that a plaintiff claims from a defendant as a result of the operation of s. 1 of the Negligence Act, a third party claim may proceed: Hengeveld at paras. 17-29, 41-44; Davy at paras. 17 and 22-23.

[29] The facts of Hengeveld and Davy make clear both the scope of those decisions, and that they do not preclude the third party claim in this case.

[30] In Hengeveld, the plaintiffs sued their insurer for failure to preserve the car one of the plaintiffs was driving when he was seriously injured in a motor vehicle collision. The plaintiffs alleged that the failure to preserve the vehicle impaired their ability to prove their case in a separate personal injury action. The defendant brought a third party claim for contribution and indemnity against the plaintiffs’ lawyers alleging that they breached their duty to the plaintiffs to ensure that evidence necessary for the personal injury action was preserved.

[31] The Court of Appeal held that the third party claim did not disclose a reasonable cause of action because any actions by the plaintiffs’ lawyers were attributable to the plaintiffs because the lawyers were the plaintiffs’ agents. For this reason, there was no prospect of the defendant being exposed to more than its share of liability because any fault by the lawyers would be captured by contributory negligence of the plaintiffs under s. 3 of the Negligence Act. The Court of Appeal noted that the agency relationship between the lawyers and the plaintiffs was expressly pleaded, and also that the pleadings alleged that the negligent actions taken by the lawyers were within the scope of the lawyers’ retainer with the plaintiffs: Hengeveld at paras. 17-38.

[32] In Davy, the defendant pleaded that the plaintiff failed to mitigate her damages. The plaintiff then asserted during discovery that she relied on the advice of her solicitor as to the steps that the defendant alleged that she should have taken in mitigation. The defendant then brought a third party claim against the plaintiff’s solicitor alleging that the advice he gave in relation to mitigation was negligent.

[33] The Court of Appeal held that the third party claim did not disclose a reasonable cause of action for two reasons. The first reason was that any fault alleged against the solicitor relating to the plaintiff’s duty to mitigate her loss was wholly attributable to the plaintiff. For this reason, the defendant would not be exposed to paying more than its share of liability, as any fault in the plaintiff’s failure to mitigate would be accounted for by contributory negligence under s. 3 of the Negligence Act. The second reason was that the Court of Appeal held that mitigation was a conceptually separate event from the initial loss that the plaintiff claimed was caused by the defendant. For this reason, to the extent that there was negligence by the solicitor that was not captured by contributory negligence, it was not the same damage the plaintiff was suing the defendant for, and the defendant could not be jointly and severally liable with the solicitor: Davy at paras. 16-20.

[34] Thus, in Hengeveld and in Davy, the Court of Appeal held that the third party claims were not reasonable because, based on a review of the pleadings in both cases, the defendants who asserted the third party claims were not exposed to the possibility of liability for a share of damage to the plaintiffs caused by the third party.

[35] It is also significant that both Hengeveld and Davy involved an attempt by one party to sue another party’s lawyer. In both cases the Court of Appeal noted the “obvious mischief” that could arise from allowing one party to a lawsuit to bring a third party claim against a solicitor for the other party: Hengeveld at para. 46; Davy at para. 28. The third party claim in this case does not present this problem.

[36] A review of the pleadings in this case shows that the Respondents are exposed to the possibility of liability for a share of damage caused to the Plaintiff by the Appellant. The Respondents’ third party claim asserts that, in relation to the balconies and the exterior cladding, the damages that the Plaintiff claims were caused in whole or in part by the Appellant.

[37] I disagree with the Appellant that the Plaintiff’s claim is time limited to the construction phase, such that any actions by the Appellant later causing damage are not within the scope of the claim. I also disagree that it is plain and obvious that agency principles apply such that any actions by the Appellant would be attributable to the Plaintiff as contributory negligence.

[38] In my view a fair reading of the Plaintiff’s claim shows that it is not limited to the time period of the construction of the condominium. Although some aspects of the claim clearly relate to the time of construction, the claim includes allegations of damages to the balconies and the exterior cladding caused by corrosion, water infiltration, and other post-construction damage (paras. 19(f) and 19(g) of the Statement of Claim). The allegations also include negligent repair of defects identified in the building (para. 23 and 24 of the Statement of Claim). These allegations speak to the post-construction time period. Thus, the Plaintiff’s claim is not limited to the time period of construction of the building. A fair reading of the Plaintiff’s claim and the third party claim shows that the third party claim relates to the same initial loss alleged in the Plaintiff’s statement of claim.

[39] With respect to the Appellant’s argument that any issue of negligence by the Appellant would be covered by the doctrine of contributory negligence because, according to the Appellant, it is the agent of the Plaintiff, again a review of the pleadings leads me to hold that it is not plain and obvious that that if the Appellant caused all or part of the Plaintiff’s damages, that conduct would be covered by the doctrine of contributory negligence on the part of the Plaintiff.

[40] First, no party, including the Appellant in its defence to the third party claim, has pleaded an agency relationship between the Plaintiff and the Third Party (although a contractual relationship is pleaded by all parties). The absence of any pleadings alleging an agency relationship between the Appellant and the plaintiff is a factor that distinguishes this case from Hengeveld, where the Court of Appeal specifically noted that the agency relationship between the plaintiff and the solicitor who was proposed as a third party was pleaded (at para. 37). The law is clear that this motion must be determined on the pleadings.

[41] Second, the third party claim includes an allegation that the Appellants “failed to advise the Plaintiff on required maintenance which would have prevented any damage by the Plaintiff from occurring” (para. 28(a) of the Third Party Claim). If proven, this pleading could reasonably result in a finding that the Appellant was acting outside the scope of any agency relationship with the Plaintiff, and thus contributory negligence by the Plaintiff would not apply. Again, this is a factor that distinguishes this case from Hengeveld, where the Court of Appeal noted that the pleadings alleged that the actions by the lawyers were within the scope of their retainer with the plaintiffs: Hengeveld at para. 37.

[42] For these reasons, I have concluded that the Motions Judge was correct that it is not plain and obvious that the Respondents’ third party claim discloses no reasonable cause of action, and I would dismiss the appeal.

[43] I do not address the Appellant’s arguments in relation to sufficiency of the pleading of the third party claim, or abuse of process. As indicated during the hearing, these issues are outside the scope of the question on which leave to appeal was granted.

Costs

[44] The panel of the Divisional Court that granted leave to appeal fixed costs of the motion for leave to appeal at $1,250.00, reserved to the panel hearing the appeal. The parties agreed at the hearing that costs of the leave application should be awarded to the party that prevailed on appeal. The Appellant shall pay the Respondents’ costs of the motion for leave to appeal in the amount of $1,250.00.

[45] The parties agreed that the party that prevailed on the appeal should be awarded costs, but disagreed as to the scale and quantum.

[46] The Respondents seek costs on a somewhat elevated scale, although not necessarily as high as substantial indemnity. The Respondents argue that a higher award of costs is justified for two reasons. First, the Appellant failed to take out the Order of the Motions Judge, and the Order of the Divisional Court panel granting leave. This caused delay on the date the appeal was heard, and inconvenience to the Court and to the Respondents. Second, in its factum, the Appellant argued numerous issues that were outside the scope of the question on which leave to appeal was granted. The costs sought by the Respondents on a partial indemnity basis are just under $11,000.00, and on a substantial indemnity basis are approximately $16,000.00.

[47] The Appellant argues that neither the failure to obtain the Orders, nor the inclusion of issues outside the scope of the question on which leave was granted warrant a costs award on a substantial indemnity basis.

[48] In my view, a somewhat elevated costs award is justified on the grounds argued by the Respondents. The failure of the Appellant to take out the Order under appeal and the Order granting leave caused inconvenience and delay on the date of the hearing of the appeal. It is well-established that an appeal is from the Order, and not from the reasons. The Respondents raised in their factum the issue of the failure to have an Order issued and entered from the Motions Judge’s decision. Yet the Appellant took no steps to obtain an Order. The Court agreed to hear the appeal after standing the matter down so that the parties could prepare draft orders agreed upon as to form and content, and on counsel for the Appellant’s undertaking to the court to have the Orders issued and entered and filed with the court expeditiously, so that this decision could be released after the Orders were filed.

[49] The Appellant’s failure to limit its factum to the question on which leave was granted also justifies an elevated costs award. Counsel for the Appellant did not advise counsel for the Respondents until the morning that the appeal was argued that he intended to limit his arguments to the question on which leave was granted. The oral argument made by the Appellant was quite different than the arguments in the Appellant’s factum. The Appellant’s pursuit of arguments beyond the scope of the question on which leave was granted created additional preparation and expense for the Respondents.

[50] The quantum of costs sought by the Respondents is reasonable and proportionate. Indeed, the amounts sought in the Respondents’ costs outline are significantly less than what the Appellant included in its costs outline. The issues in the appeal were not particularly complex, although they were made more complex by the Appellant’s approach to the appeal. The time spent by the Respondents as set out in their costs outline is reasonable. In all of the circumstances, I would award costs of the appeal to the Respondents moderately above the partial indemnity scale, in the amount of $12,750.00, all inclusive.

[51] The appeal is dismissed. The Appellant is to pay a total of $14,000.00 in costs to the Respondents within 30 days of the date of this decision.

___________________________ Copeland J.

I agree

Swinton J.

I agree

Favreau J.

Date: December 11, 2019

CITATION: Ottawa Carleton Standard Condominium Corporation No. 838 v. Redevelopment Group, 2019 ONSC 7005

DIVISIONAL COURT FILE NO.: DC-19-2471 DATE: 20191211

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT SWINTON, FAVREAU and COPELAND JJ.

BETWEEN:

OTTAWA CARLETON STANDARD CONDOMINIUM CORPORATION NO. 838

Plaintiff

-and-

Defendants (Respondents on Appeal)

-and-

REASONS FOR JUDGMENT

Copeland J.

Date: December 11, 2019

Ottawa Carleton Standard Condominium Corporation No. 838 v. Redevelopment Group, 2019 ONSC 7005

Case Summary

Introduction

Standard of review

Merits of the appeal

Costs

Judges

Counsel

Parties

Areas of Law

Fact Patterns

Financial Outcomes

Issues

Statutory Provisions 4

Legal Tests 1

Legislation 4