SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: 09-46988
DATE: 2012/03/08

RE: 90 GEORGE STREET LTD., Plaintiff

AND:

RELIANCE CONSTRUCTION CANADA INC. et. al., Defendants

BEFORE: Master MacLeod

COUNSEL:
Michael S. Hebert, for the Plaintiff

Nadia Authier, for the Defendants

HEARD: October 30 th , 2011, (written submissions, Jan 24, 2012)

REASONS FOR DECISION

[ 1 ] Motions were brought in two related actions. The motion in this action is a motion by Reliance Construction of Canada Ltd. and Stephen Kaplan to be removed as defendants.

[ 2 ] There is a similar motion in the related action in which Reliance Canada is plaintiff. In that case the motion is to remove Terrence Guilbault as a personal defendant. That motion has not yet been heard. A third motion dealing with documentary production was resolved.

[ 3 ] These reasons deal with the first of the motions. That is whether or not partial summary judgment may be granted dismissing the action against Mr. Kaplan and Reliance Canada.

[ 4 ] The reasons deal firstly with the test for summary judgment in light of the amendments to Rule 20 and recent jurisprudence. In particular I examine the impact of those events on the jurisdiction of the court when the motion is heard by a master rather than a judge.

[ 5 ] I then examine the evidence and conclude that this is not a case in which summary judgment can be granted. I have wrestled with this for some time because this is a case in which the action against these two defendants is devoid of direct evidence and is difficult in law. Ultimately however it is the complexity of the factual matrix and the need to infer intention from facts that have not yet been ascertained that make it inappropriate to grant partial judgment. This conclusion is reinforced by the recent direction from the Court of Appeal in Combined Air Mechanical Services Inc. v. Flesch . [1]

Background

[ 6 ] 90 George St. is a luxury condominium project in Ottawa’s Byward Market. It contains both commercial and residential units. Sadly, it is not uncommon for litigation arising from a construction project to take longer than the construction. This action is well on its way to achieving exactly that. As I will come to momentarily the project has spawned a series of lawsuits. This is only one of them.

[ 7 ] 90 George St. is a project of Canril Corporation which is a well known Ottawa based development company operated by Mr. Guilbault. 90 George St. Ltd., (“90 George”), the plaintiff is a single purpose corporation created as the corporate vehicle for the development. It is the owner of the land and the developer of the condominium project. Mr. Guilbault is president of both 90 George and Canril.

[ 8 ] Stephen Kaplan is President of Reliance Construction Group which encompasses a number of corporate vehicles and is a major Canadian construction company. For purposes of this narrative, we need be concerned with three of those corporations, Reliance Construction of Canada Ltd (“Reliance Canada”); Reliance Construction (Ontario) Ltd. (“Reliance Ontario”); and 160420 Canada Inc. (“160”). Mr. Kaplan is President of each of those corporations.

[ 9 ] Apparently Mr. Kaplan and Mr. Guilbault are well known to each other and had done business together previously. In 2006 the two men reached agreement in principle that their companies would work together on the 90 George St. development. At the time the project had been financed by a $3.6 million first mortgage to Paragon Capital Corporation and a second mortgage for $42.4 million in favour of Caisse Centrale Desjardin and a local caisse populaire (collectively “the Caisse”). It was agreed that one of the Reliance companies would take over the funding provided by Paragon and another would take on the role of general contractor.

[ 10 ] The upshot was a letter of agreement sent to Mr. Kaplan at Reliance Canada that contemplated an agreement between 90 George (“Owner”), Reliance Ontario or nominee (“Contractor”) and 160420 (“lender”). Under that agreement 160 would take over financing for the project, Reliance Ontario would immediately enter into a contract with Bellai Brothers to commence forming and foundation work and 90 George and Reliance Ontario were to negotiate terms for a fixed price “CCDC2” contract.

[ 11 ] There were to be various mortgages, assignments and other obligations to secure the financing. 160 assumed the first mortgage previously held by Paragon. Canril and Guilbault were to provide individual guarantees to 160 for the financing and the obligations of 90 George. The shares of 90 George were to be pledged as security. The letter agreement was executed by Mr. Kaplan and Mr. Guilbault on behalf of Reliance Canada, 90 George, Canril and Mr. Guilbault personally. The signatures are dated August 9 th , 2006 and clearly indicate the capacity in which each person was signing.

[ 12 ] On September 6 th , 2006 there was a supplementary agreement for additional financing necessary to pay penalties to Paragon owing on the first mortgage. That agreement was between 160420, Reliance Ontario, Canril & Guilbault. It was executed by Kaplan and Guilbault on behalf of the specific corporations named in the agreement.

[ 13 ] By contract dated December 18 th , 2006, 90 George as Owner entered into CCDC2 stipulated price contract with Reliance Ontario as Contractor. The contract provided for a fixed price of $44,196,310.00 before taxes. Work was to commence on August 14 th , 2006 and substantial completion was to be achieved by February 28 th , 2008. Though the document was dated December 18 th , 2006 and commenced August 14 th , 2006, it is Mr. Guilbault’s evidence it was not actually executed until early 2007. It was signed by Mr. Guilbault on behalf of 90 George and Daniel Proulx, Vice President of Reliance Ontario on behalf of the latter. Obviously work was already underway by then.

[ 14 ] The project eventually ran into cost overruns and delays which are at the heart of the dispute. The contract price was increased by $50 million and the project was delayed by over a year. The plaintiff alleges that Reliance Ontario charged items as extras that were included in the contract and failed to pursue the work with diligence. Additional funding was required. The Caisse put in a monitor briefly and there was talk of a receiver. In January of 2009, 104 agreed to postpone its first charge to the Caisse and the Caisse provided an additional credit facility of $13.5 million.

[ 15 ] Ultimately substantial completion was certified on October 15, 2009. This was 20 months later than the date specified in the construction contract.

[ 16 ] On November 27, 2009, 90 George terminated the contract of Reliance Ontario and ordered it off the site. A letter from legal counsel stated that “Reliance Ontario, Reliance Canada and Stephen Kaplan are to carry out no further work on the property”.

[ 17 ] Various pieces of litigation were commenced. I will describe some of these briefly. As mentioned above, the action in which the motion is brought is an action in which 90 George is plaintiff and Reliance Ontario, Reliance Canada and Stephen Kaplan are named as defendants. This is in essence an action by 90 George for the amounts it had to pay to complete work or rectify deficiencies in excess of the original fixed price and for damages resulting from delay. Onto this is grafted claims against Reliance Canada and Stephen Kaplan.

[ 18 ] The claim against Reliance Ontario is of course a claim for breach of contract by Reliance Ontario as General Contractor under the CCDC2. In seeking to hold Reliance Canada and Kaplan personally liable for its damages, the plaintiff relies on several allegations and several legal theories.

[ 19 ] It is alleged that the (alleged) failure of Reliance Ontario to meet its contractual obligations was not just failure to perform but was orchestrated by Kaplan who thus induced Reliance Ontario to breach its contract. It is alleged that Kaplan acted in bad faith, acted outside the scope of his authority as an officer and director, that he was the alter ego of Reliance Ontario, that he diverted funds available to Reliance Ontario and that in any event the circumstances are such that the court should pierce the corporate veil. It is also alleged that Mr. Kaplan personally made misrepresentations that he would assign additional forces to the project and that was untrue. It is alleged that Kaplan conspired with the mortgagee to try to take over the project. All of this is highly problematic as I will come to momentarily.

[ 20 ] With respect to Reliance Canada, the plaintiff alleges that Reliance Ontario and Reliance Canada were used interchangeably, that Kaplan diverted Reliance Ontario funds to Reliance Canada, that Reliance Canada guaranteed the performance by Reliance Ontario. The involvement of Reliance Canada in financing the project is said to demonstrate that the companies were used interchangeably and were really one and the same. Accordingly the plaintiff argues that any judgment against Reliance Ontario should also attach to Reliance Canada. Further the plaintiff alleges that Reliance Canada is vicariously liable for acts done by Kaplan in its name.

[ 21 ] For context, it is useful to briefly refer to the other actions. There is the action by Reliance Canada against 90 George and Mr. Guilbault (09-45495). This is the action in which Mr. Guilbault seeks an order dismissing the action against him personally. It is an action for repayment of a loan of $240,000 together with accrued interest. In that action it is alleged that Mr. Guilbault personally guaranteed the debt. Mr. Guilbault denies personal liability. 90 George has counterclaimed and by way of counterclaim advances essentially the same claim as in this action and of course it seeks to set off the damages against any debt to Reliance Canada.

[ 22 ] There is also a defamation action by Reliance Ontario, Reliance Canada and Kaplan against Guilbault. That action is not before me at the moment but it illustrates how personal and nasty the litigation has become between Mr. Guilbault and Mr. Kaplan. It is alleged in that proceeding that Mr. Guilbault has made public and anti-semitic attacks on Mr. Kaplan, has defamed his reputation and that of the Reliance corporations and has injured their reputations. Some of the allegedly false and defamatory statements are the very allegations made in this proceeding concerning bad faith and incompetence on the part of the Reliance companies and Mr. Kaplan. The truth of the allegations made in this action will therefore be an issue in the defamation action.

[ 23 ] There are also various lien actions. Action 10-47404 is a lien action by Reliance Ontario. Not surprisingly 90 George has counterclaimed against Reliance Ontario, Reliance Canada and Mr. Kaplan. 90 George makes the same claims and allegations in that counterclaim as it makes in this action.

[ 24 ] There are at least 7 subtrade lien claims. It is worth noting that none of the subtrades have named Reliance Canada or Mr. Kaplan as defendants. There appears to be no doubt that it was Reliance Ontario which contracted with the subtrades.

[ 25 ] This then is the background. The question for the moment is whether the defendants can satisfy the court that summary judgment should be given to remove Mr. Kaplan and Reliance Canada as defendants to this particular action. I am asked to find that the action against them cannot succeed. On the evidence before me can I make that determination?

[ 26 ] Before analyzing the evidence it is necessary to speak briefly about the test on a motion under Rule 20. This is the Ontario rule providing for summary judgment in civil proceedings. As distinct from other rules permitting summary disposition based only on the pleadings (Rule 25 or Rule 21 for example) this is a rule that permits the court to examine the evidence marshalled by a party to determine if it is sufficient to permit the case to go to trial.

The nature of the motion & the current test for summary judgment

[ 27 ] Rule 20 was amended following the recommendations made by the Honourable Coulter Osborne, former Associate Chief Justice of Ontario. Those amendments came into force in January of 2010. They were designed to make summary judgment more accessible in appropriate cases by overcoming jurisprudence suggesting that summary judgment was never appropriate if there was a genuine issue of credibility. The rules committee did not completely follow the specific recommendation of Mr. Osborne to introduce a rule similar to the summary trial rule that exists in British Columbia but it did amend the rule in ways that were intended to achieve the objectives set out in the Osborne report.

[ 28 ] This was accomplished in part by changing the wording of Rule 20 from no “genuine issue for trial” to no “genuine issue requiring a trial” and in part by introducing language that granted new powers to the court but only if the motion is heard by a judge rather than a master. [2] As a consequence jurisprudence which had developed prior to 2010 must be read with care bearing in mind the change in language and the fact that judges (but not masters) are now given a certain amount of authority to determine evidentiary disputes even if there are genuine issues of credibility. In general it is fair to say that the old rule permitted summary judgment to be granted if a claim or a defence clearly had no merit and of course summary judgment remains available on that basis. The new rule permits judges to decide cases on their merits without a trial if it is just to do so.

[ 29 ] When the motion was heard in October, I indicated to counsel that I would reserve my decision due to an imminently anticipated decision of the Court of Appeal. The Chief Justice had struck a five judge panel to hear a number of summary judgment appeals. In June those appeals had proceeded before that panel and the court had been assisted by submissions from the Attorney General and four legal organizations appointed as amicus curiae . [3] It was anticipated that the court would provide important direction concerning the use and interpretation of the amended summary judgment rule. The decision was released in December 2011 and is Combined Air Mechanical Services Inc. v. Flesch referred to in the introduction to these reasons.

[ 30 ] As anticipated, the Court of Appeal has held that in applying the new rule amendments, a new approach and a new test is necessary. This case will be mandatory reading for all parties seeking summary judgment and particularly for those seeking summary judgment in circumstances where it might not have previously been granted. Following release of the decision, I gave counsel the opportunity to make further submissions in writing.

[ 31 ] In Combined Air the Court of Appeal stated that it was articulating a new approach and test for summary judgment motions. That new test is to ask the question whether or not “full appreciation” of the evidence and the issues is possible without a trial. But this deals primarily with the new powers granted by subrules 20.04 (2.1) & (2.2). As discussed, these are powers which in certain circumstances allow for the merits of a case to be determined by a judge without a trial. This must be distinguished from cases in which it can be demonstrated that there are no merits to be tried. The distinction is important for two reasons. The first has to do with the continued applicability of previous jurisprudence determining how evidence was to be approached under the pre-existing rule (including the negative inference permitted by Rule 20.02 (1)) and the second because as a master I must make my assessment without exercising the new authority conferred only on judges. The Court of Appeal specifically decided to ignore the jurisprudence that had developed since the rule was amended in favour of articulating the new approach. But the court did not overrule those cases. Nor did it specifically deal with summary judgment when the motion is heard by a master.

[ 32 ] A case which does deal with the amended rule as it applies to masters and which articulates the extent to which masters may continue to apply the negative inference provisions of Rule 20.02 (1) is my own decision in Mehdi-Pour v. Minto Developments Inc. [4] That decision was upheld in the Divisional Court. Leave to appeal was refused by the Court of Appeal in October of last year and as such it is also binding authority. Another important decision is the decision of my colleague Master Dash in Chanore Property Inc. v. ING Insurance Company of Canada [5] cited by the moving party. The parties also relied on Maynes v. Med-Eng Systems Inc. [6] , another decision of my own. I will not repeat the detailed analysis nor cite each of the cases examined in each of those decisions. It is possible to read them together with the new dicta of the Court of Appeal in Combined Air, and to summarize the principles that apply when a master is hearing a motion under Rule 20. [7]

[ 33 ] Before turning to that summary however, there is a particular issue raised by Combined Air that requires further discussion. There is another principle of fairness which was argued by Mr. Hebert and which is also discussed by the Court of Appeal in Combined Air . It would be unfair to require a responding party plaintiff to “put its best foot forward” at a stage in the litigation when it would be unreasonable to expect it to have developed that evidence. For example I have recently declined to grant summary judgment in a third party action because there remained a possibility that the plaintiff might succeed against the defendant in the main action (which the third party had not defended). [8]

[ 34 ] In Combined Air the Court of Appeal suggests that premature summary judgment should be refused if it is unfair to expect the necessary evidence to be developed through affidavit and cross examination. In fact the court suggests that such a motion could be stayed to permit more efficient complete and orderly production and development of evidence through the ordinary discovery process. [9] It would be manifestly unjust to grant summary judgment against a plaintiff because the plaintiff lacks evidence of facts if that evidence is in the exclusive control of the defendant. Even more so of course if the plaintiff has been denied access to that evidence by failure of the defendant to make production, answer undertakings or by improper refusals. Thus before making a Rule 20.02 inference and granting summary judgment against a party who has failed to put its best foot forward, the court must consider the status of production and discovery.

[ 35 ] In summary, the master may grant summary judgment in an appropriate case if the claim has no merit, if there is a solid and complete defence, or if the claim can be proven and the defence is without merit. Judges by contrast may now exercise enhanced authority to determine the merits without a trial in appropriate cases. I do not want to rule out the possibility that there may be a narrow category of cases in which a claim or defence has merit but can nevertheless be decided without a trial by a master but if so, the decision on the merits is only open to a master without exercising the powers reserved to judges under Rule 20.04 (2.1) and (2.2). Generally speaking therefore a master giving summary judgment is ruling that there are no merits to be tried. This distinction between deciding there is no merit and deciding “on the merits” is consistent with the three categories of summary judgment outlined in Combined Air and with constitutional limits on the powers of masters. [10]

[ 36 ] Integrating the direction given by the Court of Appeal in Combined Air with the previous jurisprudence discussed in Mehdi Pour, Chanore & Maynes, supra , the approach to be taken by a master hearing a Rule 20 motion can be summarized as follows:

a. The court hearing a summary judgment motion must first determine if there is a genuine issue that could be successful at trial.

b. There is no genuine issue if the law clearly shows that one of the parties cannot succeed. For example if the Supreme Court of Canada has determined that the cause of action does not exist or if a release, contract or statute allows of only one interpretation. [11]

c. There is no genuine question of fact if the party relying on a key fact that is essential to success at trial cannot prove it. In determining that issue, the court may draw a negative inference under Rule 20.02 (1) if it is appropriate to do so. The court may reject evidence that could not persuade a trial judge such as a bald self serving affidavit, an affidavit that is illogical or internally inconsistent, or an affidavit that is demonstrably incorrect because, for example it purports to rely on wording in a document or contract which is misquoted or nonexistent. [12]

d. In assessing the sufficiency of the evidence, the court must consider whether or not it is just to draw a negative inference and the extent to which it is reasonable to require a party to put its best foot forward at this particular point in time, whether the motion is premature, whether the responding party has been denied access to critical evidence.

e. In an appropriate case if a summary judgment motion would impose an unreasonable and disproportionate procedural burden in advance of discovery, the motion should be stayed.

f. Another factor to be considered in assessing whether the responding party has met its responsibility to put its best foot forward will be the complexity of the evidence. The genuine appreciation test should inform this analysis in my view.

g. A plaintiff moving for summary judgment must show firstly that the plaintiff can prove all elements of the case and secondly that there is no merit to the defence. A defendant moving for summary judgment could do so either on the basis that the plaintiff cannot prove its case or that there is an absolute defence or both. In addition summary judgment may be available on evidentiary grounds or on legal grounds or a combination of the two.

h. If summary judgment would have been granted under the previous rule then it is self evident that it also meets the test under the amended rule. If the evidence or the law demonstrates there is no genuine issue to be tried then summary judgment should be granted.

i. In the case of a genuine issue of law, the master may refer the matter to a judge to decide the question of law if the master is of the view that the only genuine issue is a question of law that could be determined without a trial. (Rule 20.04 (4)) Even if the sole genuine issue is a question of law, it is open to the master to dismiss the motion for summary judgment if it appears the question of law is such that it would require a trial for resolution. In making that decision, the court should now apply the full appreciation test.

j. If there is a genuine question of fact or of mixed fact and law then the master must apply the full appreciation test and may grant summary judgment if the question can be determined without a trial. This will seldom be the case for the master because the powers added to the rule in Rule 20.04 (2.1) and 20.04 (2.2) are not accessible to masters. Thus there will be a class of cases in which notwithstanding that there is a genuine issue that could be tried, a judge can decide the merits without a trial whereas a master cannot. [13]

k. If summary judgment is refused or granted only in part then the master may have recourse to the powers of the court set out in Rule 20.05 but must heed the admonishment of the Court of Appeal in Combined Air that Rule 20.05 cannot be used to grant the very summary judgment that the court has just refused. Rule 20.05 may be used to salvage the resources that went into the summary judgment motion but it is not to be used to effectively order a trial that resembles the motion that was dismissed. [14]

[ 37 ] I now turn to analysis of the allegations, the evidence before the court and certain of the alleged causes of action against Kaplan and Reliance Canada.

Analysis

[ 38 ] I said at the outset that as against these additional defendants, the plaintiff has a case that is very difficult in law and in which the evidence of Mr. Guilbault tendered on the motion is extremely feeble. I am in fact extremely skeptical that the claims will succeed and of course they add considerable complexity to what already promises to be a long and complex trial. As I have remarked in other cases, however, I am not entitled to substitute skepticism for analysis. Nevertheless it is important to underscore the challenges the plaintiff must overcome.

[ 39 ] One of the impediments to fixing liability on other corporations or on a director and officer such as Mr. Kaplan is of course that the entire purpose of limited liability corporations is to limit exposure to liability. Though a corporation and its officers and directors therefore have distinct legal personalities and can theoretically conspire with each other, it was decided as long ago as 1920 that this concept could not be used to get around limited liability by holding agents of a corporation liable in tort for breaches of contract by the corporation. [15] The leading Ontario authorities on this point are ADGA Systems International Ltd. v. Valcom [16] and Montreal Trust Co. v. Scotia McLeod Inc. [17]

[ 40 ] A brief summary of the law may be stated thus. Acting on behalf of a corporation will not protect an individual from liability for conduct that is itself tortious (though the corporation may also be vicariously liable if the act was in the course of employment) but an individual acting bona fide in the interests of a corporation will not be held liable for causing the corporation to breach its contract. This is often referred to as “the Said v. Butt exception”. Thus there is both an evidentiary and legal impediment to holding Stephen Kaplan liable for inducing Reliance Ontario to breach its contract. Specifically it will be necessary to show firstly that Reliance Ontario did breach its contract, secondly that Mr. Kaplan caused that breach and thirdly that he was not acting bona fide in the interests of Reliance Ontario when he did so.

[ 41 ] Limited liability is well understood in the construction industry where developers and contractors frequently utilize different corporate vehicles for different purposes. The series of contracts eventually signed between specific corporate entities involving the 90 George St. project was not haphazard. They represent a specific choice between experienced parties to place certain corporate entities in contractual relationship with others.

[ 42 ] In his affidavit, Mr. Guilbault is careful with his use of language. He knows that construction projects are carefully structured to isolate liability into the appropriate corporate bodies. 90 George itself is a perfect example of this. Although the project is marketed by Canril Corporation, it is 90 George that owns the land and 90 George that is the owner under the CCDC2. The documents and the affidavit also reflect the understanding that letters of intent are just that. They may be agreements to take certain preliminary steps in contemplation of contracts to be signed or negotiated but they are not themselves the specific contracts ultimately contemplated by the letter. Thus in his affidavit he does not allege that he had a contract with Mr. Kaplan or even with Reliance Canada. He states that “Stephen Kaplan and Reliance Canada agreed to enter into a working relationship with 90 George, and a complex series of agreements were reached between myself, Stephen Kaplan, Reliance Canada, 90 George and Canril Corporation to allow the project to proceed.”

[ 43 ] It will therefore be a challenge to demonstrate any confusion as to the roles played by each corporation and specifically it will be difficult to show that there was any confusion as to which corporation was acting as the general contractor. In fact the evidence tends to disclose exactly the opposite. These are sophisticated parties and their contractual arrangements were drawn up by experienced law firms. There is nothing in the evidence to suggest any confusion about who the contracting parties were in the various agreements. When the parties defined their contracting parties as “lender”, “owner”, “contractor” or “guarantor” it is clear from the documents that those terms are used with precision. There can be no doubt for example that the contracting parties under the CCDC2 are 90 George and Reliance Ontario. Accordingly claims for damages for breach of that building contract are limited to those parties. Liability of Reliance Canada or Stephen Kaplan cannot flow from the CCDC2 contract itself.

[ 44 ] The key allegations by which the plaintiff seeks to attach liability to Reliance Canada and Stephen Kaplan may be summarized as follows:

a. That Reliance Ontario was really just the alter ego of Reliance Canada and that their affairs were so intermingled that any liability attaching to Reliance Ontario should also attach to Reliance Canada.

b. That Stephen Kaplan and Reliance Canada caused Reliance Ontario to breach its contract with 90 George and therefore are liable for inducing breach of contract.

c. That Stephen Kaplan attempted to surreptitiously take over the project and for that purpose met secretly with the financial institutions who were secured creditors providing the major financing for the project.

d. That Stephen Kaplan and Reliance Canada made specific representations to induce 90 George not to terminate the contract with Reliance Ontario. Specifically those representations were that they would do everything possible to ensure Reliance Ontario had the resources to complete the project on time.

e. That Stephen Kaplan interfered with the project by refusing to allow Reliance Ontario to commit sufficient manpower to the construction and by failing to add additional resources as he had promised to do.

f. That Stephen Kaplan and Reliance Canada interfered in the financing by causing 160420 to refuse to grant partial discharges of the 160420 mortgage so that unit sales could not close.

g. That Stephen Kaplan improperly threatened to call the mortgage in favour of 160420 or Reliance Canada if Reliance Ontario was ordered off the site.

[ 45 ] The allegation that Kaplan met secretly with the Caisse for the purpose of trying to take over the project is problematic for several reasons. Firstly Guilbault’s evidence on this point is not direct evidence. He states as a fact what is really a conclusion and he does not have an affidavit from anyone at the Caisse stating that this is accurate. He alleges that the Caisse now fully supports his allegations but does not state the source of this knowledge. Equally problematic is that however betrayed Mr. Guilbault might have felt by this, there is nothing inherently illicit or illegal in Mr. Kaplan discussing with the Caisse steps to take over the project. Since 104 and the Caisse were the two mortgagees and since the project was in financial difficulty, it would be remarkable if the secured creditors were not meeting to discuss putting in a receiver or realizing on their security as possible options. Unless the parties are discussing the use of illegal means, such discussions only become tortious if the primary objective is to injure the plaintiff economically. [18] In that situation, motive and intent become critical. Mr. Guilbault has no direct evidence of Mr. Kaplan’s motives even if he can prove the secret meetings he alleges.

[ 46 ] Misrepresentation by Mr. Kaplan is also alleged. Specifically Mr. Guilbault deposes that Mr. Kaplan represented to the Caisse and to him that Reliance Ontario would do what was necessary to meet deadlines and failed to do so. He also alleges that Mr. Kaplan represented he would put the forces of Reliance Canada and himself behind the project and did not do so. Promising to do something and then failing to do it is not misrepresentation. If the promise is legally binding then failing to honour it is breach of contract. It would only be misrepresentation if the promise was made knowing it was false or impossible of performance. Mr. Guilbault is not able to give evidence that Mr. Kaplan was lying when he allegedly made these promises nor that they are much more than promising to do what Reliance Ontario was already obliged to do under the CCDC2.

[ 47 ] Here however is the nub of the problem. Central to all of these allegations is the assertion that Reliance Ontario breached its obligations under the CCDC2. That issue is not before me on the motion so I must proceed on the assumption that the plaintiff may be successful in proving that. It is also alleged that the breaches of contract were so egregious that they should be found to be intentional. I am puzzled as to how the plaintiff is going to prove that extras properly submitted and approved by the payment certifier were essentially fraudulent. I might be interested in knowing how the defendant concluded that the contract had been breached such that termination was appropriate only after substantial completion was certified. Because summary judgment is not sought on the main action against Reliance Ontario, these questions going to the merits of the action are simply not within my terms of reference.

[ 48 ] Intention, malice, bad faith, whether Mr. Kaplan made promises knowing they could not and would not be fulfilled, these are largely inferences that would have to be drawn from other evidence. It is rare for example that conspiracy can be proven by direct evidence of an illegitimate objective. To a large degree, the chance of success on these type of claims is dependent on the strength of the evidence in relation to the main claim and the findings of fact that will be made as a consequence. In a sense this is similar to the situation I was faced with in Cuillierier v. Andre’s Furnace Sales & Service Ltd, supra. Since I must presume the plaintiff could succeed in the main action, it is possible that the findings of fact (based on evidence that cannot be assessed by me because it is not before me) could lead to the necessary inferences.

[ 49 ] Though the evidence shows distinct roles for Reliance Ontario, Reliance Canada and 104, it is not as if Reliance Canada had nothing to do with the project. Mr. Kaplan was the directing mind of all three corporations and all three were involved with the project. Accordingly, unless Mr. Kaplan was scrupulously careful, it would not be clear in discussions with Mr. Kaplan which corporate entity he was speaking on behalf of.

[ 50 ] I considered granting judgment on certain aspects of the claim which appear to be unsupported by the evidence but to untangle the separate claims I found I was drawn deeper and deeper into the documentary evidence. Those documents also form part of the evidentiary picture on the motion but they were not analyzed in detail in the factums or in argument. When the court finds itself on a voyage of discovery through documentary evidence after argument unguided by counsel we are on dangerous ground. It is here that I think clarity of thinking assisted by the learning in Combined Air is important and the genuine appreciation test is helpful.

[ 51 ] Even though the plaintiff’s evidence against Reliance Canada and Kaplan personally is extraordinarily weak and would not stand on its own, it is premature to assess the sufficiency of that evidence without knowing the strength of the case against Reliance Ontario. Moreover, given the complexity of the factual matrix, it is really not possible to form a genuine appreciation of that evidence without a trial. Accordingly it would be unjust to draw a negative inference or to conclude that the plaintiff’s case against these defendants must fail. Summary judgment must be refused.

Alternative Relief

[ 52 ] Though summary judgment is refused, I must now determine whether it is appropriate to make an order under Rule 20.05 or to impose other terms under the general authority of Rules 37.13 and 77.04 (1) (e). As mandated by Combined Air, orders should also be made if possible to “salvage the resources” that went into the summary judgment motion.

[ 53 ] It appears to me that there are a number of facts that are not or should not be in dispute. Moreover, given the multiple actions and the overlapping issues, it appears likely that consideration should be given to severing certain issues and consolidating others. A further complication is the parallel litigation under the Construction Lien Act. It is worth noting that as a result of a recent pre-trial in the lien actions arranged by me at the request of the parties, Master Polika has made an order requiring detailed particularization of delay and deficiency claims by way of Scott Schedules. Those schedules relating to the counterclaim in the lien action should presumably have some application to the claim in this action.

[ 54 ] Finally, it will now be necessary to schedule the outstanding summary judgment motion in the related action against Mr. Guilbault.

[ 55 ] Counsel are to confer and discuss these matters and then shall arrange a case conference to obtain further directions. At that time, unless there has been agreement on the question of costs, I will give further direction in that regard.

Master MacLeod

Date: March 9, 2012

[^1]: 2011 ONCA 764 ; [2011] O.J. No. 5431 (Ont. C.A.)
[^2]: Ordinarily pursuant to Rule 37 a master may hear any motion that is not specifically reserved to a judge and in that case has all the jurisdiction of the court to hear and determine the matter. Rule 20 is anomalous because masters may hear motions under the rule but judges are given additional powers under certain subsections.
[^3]: The Attorney General of Ontario, The Advocates Society, the Ontario Bar Association, the Ontario Trial Lawyers Association and the County and District Law Presidents’ Association each had standing.
[^4]: 2010 ONSC 5414 (Master); upheld 2011 ONSC 3571 (Div. Ct.); leave to appeal refused Oct 20,2011 (M40188) (Ont. C.A.)
[^5]: 2010 ONSC 4152 ; 94 C.L.R. (3d) 223 (Master);
[^6]: 2010 ONSC 4704 (Master);
[^7]: Many of these principles of course will also apply to judges.
[^8]: See Cuillierier v. Andre’s Furnace Sales & Service Ltd. 2011 ONSC 5310 (Master)
[^9]: Combined Air, supra @ paras. 56 - 58
[^10]: See Polson Iron Works v. Munns (1915) 1915 340 (AB KB) , 24 D.L.R. 18 (Alta. S.C.) cited in Ontario v. Victoria Medical Building Limited 1959 20 (SCC) , [1960] S.C.R. 32 (S.C.C.) The Court of Appeal in Combined Air also mentions the category of cases in which the parties consent to disposition by summary judgment. The extent of that conferred jurisdiction has yet to be explored.
[^11]: See Mehdi-Pour, supra @ paras. 12 -15 (Master)
[^12]: See Maynes v. Med-Eng , supra @ paras. 11 - 13
[^13]: Combined Air, supra @ paras. 40 - 45
[^14]: Paras 64 – 66, Combined Air, supra
[^15]: Said v. Butt [1920] 3 K.B. 497 (K.B.)
[^16]: (1999) 1999 1527 (ON CA) , 43 O.R. (3d) 101 (C.A.)
[^17]: (1995) 1995 1301 (ON CA) , 129 D.L.R. (4 th ) 711 (Ont. C.A.)
[^18]: See for example G.H.L. Fridman, The Law of Torts in Canada, 3d edition, 2010, Carswell , c. 30, ”Conspiracy” or c. 33, “Wrongful Interference”