SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: 07-CV-342749PD1
DATE: 15/03/2012

RE: UNIVERSITY PLUMBING & HEATING LTD. v HTS ENGINEERING et al.

BEFORE: MASTER RONNA M. BROTT

COUNSEL:
ROBERT HARASON, for the plaintiff
KEVIN MACDONALD for the defendants

ENDORSEMENT

[ 1 ] The plaintiff, University Plumbing & Heating Ltd. (“University”) is a mechanical contractor. The corporate defendant HTS Engineering Ltd. (“HTS”) is a supplier of heat pumps which were sold to, delivered to and installed by the plaintiff in three condominium projects. The plaintiff initially brought an action in October 2007 against HTS alone claiming that the heat pumps were defective. One month later, University commenced a separate action against all of HTS’ officers and directors for misrepresentation and negligence. The actions were consolidated in December 2007.

[ 2 ] On January 11, 2008 the plaintiff amended the Statement of Claim. The defendants served a Demand for Particulars on February 4, 2008. The motion for particulars, heard May 27, 2008 was dismissed and the Statement of Defence was served June 17, 2008. The plaintiff served an Amended Statement of Claim on June 23, 2008 and on November 17, 2008 the plaintiff served its Affidavit of Documents. HTS served its Affidavit of Documents on December 10, 2008. On January 9, 2009 a Master made an Order on the basis of a consent executed by all parties, that the defendants shall deliver a Further and Better Affidavit of Documents and that HTS shall produce Sean Rubinstein and Mr. Kay for discovery on behalf of HTS.

[ 3 ] The defendants brought a motion for summary judgment which was heard on April 14, 2010. Frank, J. dismissed the motion, releasing Reasons on June 28, 2010. While the decision on the summary judgment motion was under reserve the plaintiff brought a motion to again amend its Statement of Claim. The amendment was granted by Master McAfee on August 18, 2010 and she further ordered:

“2. The Defendants shall have twenty (20) days from the date of service of the Amended Amended Amended Statement of Claim, upon them to deliver an Amended Statement of Defence, but if they do, they shall not withdraw in their Amended Statement of Defence the admissions made in their Statement of Defence, including without limitation, the admission that the personal Defendants were partners in HTS Engineering Ltd. (“HTS”), without a specific order obtained on notice to the plaintiff permitting them to do so.

3. …this Order is without prejudice to any motion that the Defendants may wish to bring to withdraw any admissions in their Statement of Defence, including without limitation, the admission that the personal Defendants were partners in HTS”.

[ 4 ] The plaintiff served its Amended Amended Amended Statement of Claim on August 18, 2010. The Defendants did not deliver an Amended Statement of Defence within the twenty (20) day period set out in Master McAfee’s Order.

[ 5 ] In paragraph 5 of the Statement of Defence the personal Defendants admit that they are partners and that they are partners in HTS.

[ 6 ] On December 14, 2010 the plaintiff brought a motion, inter alia, to implement its Discovery Plan. The defendants responded by bringing a cross-motion returnable on the same date, to withdraw the admission in paragraph 5 of the Statement of Defence and to deliver an Amended Statement of Defence.

THE MOTIONS

(A) Defendants’ motion to withdraw an admission

[ 7 ] In August 2010 Master McAfee ordered the defendants to deliver their Amended Statement of Defence within twenty (20) days but if the defendants intended to bring a motion to withdraw their admission, they were ordered to do so promptly.

[ 8 ] The defendants’ first submission on this motion is that the words in paragraph 5 do not constitute an admission. They assert that in a ‘typical’ admission case, one party makes an allegation and the failure of the other to specifically deny that allegation makes it an admission. Here, the defendants distinguish that scenario stating that the statement in paragraph 5 is simply part of the narrative in the pleading and is without specific reference to the Statement of Claim. In this regard I find:

(i) In the Notice of Motion the defendants seek leave to withdraw an admission. The fact that the defendants themselves characterize the words as an admission is evidence that the paragraph does constitute an admission.

(ii) Justice Frank’s Reasons on the defendants’ motion for summary judgment states at paragraph 12:

“This is all the more so in light of the admission in the Statement of Defence that these individuals are partners. On cross-examination, James Kay and Paul Pilutti, the only personal defendants who were cross-examined, confirmed this. Mr. Pilutti said he was partner with HTS. Mr. Kay said he was a partner in HTS.”

(iii) There is no evidence on this motion from any of the individually named defendants. None of them filed Affidavits on this motion.

[ 9 ] As there is a finding that the Statement of Defence contains an admission, the defendants must then satisfy the test for leave to withdraw the admission. Although in my view the defendants have failed to comply with the timelines set out in the Order of Master McAfee, I am not prepared to end the inquiry on a completely technical basis. It is therefore necessary to examine the test to withdraw an admission which is a three-part test:

1. Does the proposed amendment raise a triable issue?

[ 10 ] The defendants assert that because the issue of the defendants’ involvement in a legal partnership is in issue, there is a triable issue.

[ 11 ] The plaintiff relies on the cross-examinations referred to by Justice Frank which confirm the defendants defining themselves as partners. Furthermore, there was no Affidavit evidence filed on this motion from any of the individuals alleged to be partners.

2. Is there a reasonable explanation for the admission? In other words, does the admission result from wrong instructions?

[ 12 ] Jamie Sanderson swore the Affidavit on behalf of the defendants. He is an associate with defence counsel. He states that the personal defendants are not partners in HTS and that the solicitors for HTS were wrongly instructed. There is absolutely no explanation for the change in position. On the cross-examination of Mr. Sanderson on his Affidavit he admitted that these statements were based on what he was told. He does not have personal knowledge in this regard. The law is clear that such statements are to be ignored where the source of the deponent’s information and belief is not specified in the Affidavit (Rule 39.01(4)), 539618 Ontario Inc. v Olympic Foods (Thunder Bay) Ltd. (1987) 22 C.P.C. (2d) 195 (Ont. S.C.J.) . Further, as the individual defendants chose not to provide evidence on this motion, and further, given that there is no explanation as to why they did not file evidence, the Affidavit of Mr. Sanderson holds little weight. The Court has been deprived of the best evidence. For these reasons I find there has been non-compliance with the second part of the test.

3. Prejudice

[ 13 ] The final step to withdraw an admission is for the moving party to demonstrate that the withdrawal will not result in any prejudice that cannot be compensated for in costs. The defendants rely on the cross-examination of Mario Fattore, the plaintiff’s president, where he refused to answer questions in relation to the “impact”, “harm”, “damage” or “prejudice” the removal of the statement in paragraph 5 of the Statement of Defence would have on the plaintiff’s position in this proceeding. I have found that the defendants have failed to satisfy either of the first two requirements necessary to withdraw the admission. I am further not satisfied that the defendants’ have established their burden of demonstrating that the withdrawal of the admission will not result in prejudice that cannot be compensated for by costs. The defendants’ motion to withdraw the admission at paragraph 5 of the Statement of Defence is hereby dismissed.

(B) Defendants’ Motion to Amend the Statement of Defence

[ 14 ] The defendants seek to amend paragraphs 16, 31, 35, 37, 39 and 41(i)(j). Rule 26.01 states that the court shall grant leave to amend a pleading on terms that are just unless prejudice would result that cannot be compensated for by costs or an adjournment. The burden of showing non-compensable prejudice lies with the party opposing the amendment.

[ 15 ] The plaintiff relies on the timeline set out in Master McAfee’s Order in support of its position that because the defendants failed to amend within twenty (20) days, and because they have failed to bring a motion to extend that timeline, and because their materials are devoid of any explanation for these failures, the amendments should be denied. As indicated above, I am not prepared to deny the defendants their amendments on the mere technicality of the plaintiff’s assertion. The defendants’ failure to comply with timelines will be considered on the issue of costs.

[ 16 ] The plaintiff submits that the proposed amendment in paragraph 16 is evidence – not material fact- and therefore must be struck. The defendants are certainly entitled to plead the terms of the contract and therefore this amendment is allowed.

[ 17 ] In paragraphs 31, 37 and 39 the defendants seek to add allegations relating to unspecified heat pumps, in unspecified buildings, which were damaged as a result of unspecified causes. Rule 25 governs pleadings. It is trite law that pleadings must contain a minimum level of material fact disclosure. These allegations do not meet the minimal level of fact disclosure. As the proposed amendments at paragraphs 31, 37 and 39 lack particularity, the defendants shall provide, within thirty (30) days the particulars of these paragraphs by providing details of the heat pumps that were delivered, stored and damaged, when, where and how they were damaged, where they were ultimately installed and which ones were and were not damaged after installation.

[ 18 ] Paragraph 35 states that each and every heat pump supplied by the defendants to the plaintiff was tested by the manufacturer, Enerzone, in response to an answer to an undertaking given at Question 392 of Mr. Rubinstein’s discovery. HTS advised that it did not receive any test results from Enerzone. Without evidence or material facts in support of this allegation, the pleading is improper.

[ 19 ] The proposed amendments at paragraph 41(i)(j) allege that the plaintiff’s lawyer has made admissions that prevent University from maintaining its claim in contract and its claim for damages against the personal defendants. Counsel for the plaintiff asserts that if allowed, these amendments may require plaintiff’s counsel to give evidence at trial which would therefore require that he withdraw as counsel for the plaintiff. These amendments state “through its counsel”. However, in my view, the intent of these allegations is not to remove plaintiff’s counsel. The risk of plaintiff’s counsel being called as a witness at trial is minimal to none. Any such evidence referred to can be put in through witnesses other than plaintiff’s counsel. The amendments at paragraph 41(i)(j) are therefore permitted.

(C) Plaintiff’s motion to impose a Discovery Plan

[ 20 ] The parties are required by the Rules to agree upon a Discovery Plan. The parties have been unable to agree upon one and accordingly seek the Court’s assistance in this regard.

[ 21 ] The plaintiff examined a representative of HTS on June 2, 4, 5, 10, 2009. The plaintiff now seeks to ‘continue’ those examinations while the defendants request that the Court exercise its discretion under Rule 31.04(3) and order that the defendants now be entitled to examine the plaintiff.

[ 22 ] The Rules provide a basis on which counsel must function with the understanding that there must be cooperation by all counsel. It is disturbing when counsel are unable to do so.

[ 23 ] It is ordered that the examination of Mr.Rubinstein shall be completed in one half day. Thereafter the Defendants shall examine Mr. Fattore for a maximum of one and a half (1.5) days. Mr. Gordon, on behalf of all personal defendants may be examined for a maximum of one day total, if the plaintiff so requests. All examinations shall be completed prior to April 30, 2012.

[ 24 ] Within ten days counsel shall exchange lists naming five mediators. If there is no overlap of mediators, then counsel shall submit a further list within seven days, again naming five mediators – until there is an agreed upon mediator. The plaintiff shall arrange the mediation which shall be conducted prior to August 31, 2012.

[ 25 ] The undertakings of all parties shall be answered by June 30, 2012 . Any motions arising from productions and/or discoveries shall be heard prior to September 30, 2012 . Re-attendance, if any, shall be conducted prior to November 30, 2012 . The within action shall be set down for trial prior to December 31, 2012. (In light of plaintiff’s counsel’s correspondence of March 6, 2012 the set down date may be extended to a later date, if counsel so advise).

[ 26 ] If the parties are unable to agree on the issue of costs within fourteen (14) days, they shall within thirty (30) days from the date of this Order, each exchange and file costs outlines together with brief (maximum two pages) submissions. Reply submissions may only be delivered with leave.

MASTER RONNA M. BROTT