Morguard Real Estate Investment Trust v. ERM Canada Corp., 2012 ONSC 4195
COURT FILE NOS.: CV-10-398007; CV-10-408647; CV-10-408837; CV-10446180
DATE: 20120716
SUPERIOR COURT OF JUSTICE - ONTARIO
Toronto File # CV-10-398007
(1) B E T W E E N:
Morguard Real Estate Investment Trust
Plaintiff
- and -
ERM Canada Corp., ERM Consulting & Engineering Inc. and 1168932 Ontario Limited
Defendants
Toronto File # CV-10-408647
(2) B E T W E E N:
Okarlo Holdings Limited
Plaintiff
- and -
ERM Canada Corp., ERM Consulting & Engineering Inc. and 1168932 Ontario Limited
Defendants
Toronto File # CV-10-408837
(3) B E T W E E N:
1168932 Ontario Limited
Plaintiff
- and -
ERM Canada Corp., ERM Consulting & Engineering Inc.
Defendants
Toronto File # CV-10-446180
(4) B E T W E E N:
ERM Canada Corp., ERM Consulting & Engineering Inc.
Plaintiffs
- and -
1168932 Ontario Limited
Defendant
BEFORE: Justice Moore
COUNSEL: John MacDonald and Mary Paterson, for ERM Canada Corp. and ERM Consulting and Engineering, Inc. Andrew Finkelstein, for Morguard Real Estate Investment Trust Jennifer Danahy, for Okarlo Holdings Limited Cindy Cohen, for 1169832 Ontario Limited
Date Heard: 12 July 2012
endorsement
[1] The motions in this matter involve four actions that ERM Canada Corp. and ERM Consulting and Engineering, Inc. and at least one other of the parties are embroiled in. There are many issues briefed but in essence, the issues involve disagreements over the pleadings delivered to date and the procedures by which these actions should be processed through the remaining pleadings stages of the litigation and beyond.
[2] That sophisticated corporations represented by experienced and capable counsel feel the need to absorb court time in order to iron out their differences over procedural and pleadings issues in this matter is unfortunate but they were directed at the outset of these motions to exchange costs demands; so, they were aware of the legal and financial jeopardy they faced in going forward.
Background
[3] These actions number among many that arise from environmental pollution of certain properties in the City of Toronto; the three properties in question here are adjacent properties and they are located on Leslie Street: 1875 Leslie Street is beneficially owned by Morguard Real Estate Investment Trust (“Morguard”), 1881-1883 Leslie Street is registered to 1168932 Ontario Limited (“116”) and 1885-1969 Leslie Street is registered to Okarlo Holdings Limited (“Okarlo”).
[4] The pleadings assert that contamination originated from the operations of a dry cleaning business at the 116 property, it has been and is present in the soil and groundwater at the 116 property and it continues to be an ongoing source of contamination for the Morguard property and the Okarlo property.
[5] On 15 September 2005, Morguard, 116 and Okarlo entered into a remediation services agreement (“agreement”) with ERM Canada Corp. and ERM Consulting and Engineering, Inc. (collectively, “ERM”) for ERM to remediate the three properties as soon as possible and, in any event, by September 2008.
[6] The agreement called for remediation of contamination to soil and groundwater at the three properties to levels below the specified existing regulatory standards.
[7] The property owners assert that ERM undertook to indemnify them in respect of the remediation and any claims brought against them arising from contamination of the three properties.
[8] Morguard has pleaded that ERM has repudiated the agreement by failing to comply with its obligation to complete the remediation. Okarlo asserts that ERM abandoned the agreement about three weeks before the end of its term. The contamination has therefore not been remediated nor has a Record of Site Condition been submitted to the Ministry of the Environment for each of the property owners.
[9] The property owners have also pleaded that ERM has repudiated the agreement by failing to comply with its obligation to guarantee the remediation work to be completed by ERM and to indemnify the property owners.
[10] Morguard, Okarlo and 116 have each commenced proceedings in this matter against the ERM companies; ERM has since commenced the fourth action in this matter against 116.
[11] ERM has yet to plead into the three owners’ actions. It submits however that completion of the agreement was made impossible because the property owners, the respondents on these motions, withheld information necessary for ERM to continue/complete its work.
[12] ERM proposes to consolidate the three owners’ actions and to have the fourth action proceed by way of a counterclaim. The proposed structure of the consolidated action would see Morguard and Okarlo as co-plaintiffs and 116 and ERM as defendants. ERM proposes that claims between/among the parties could then be pleaded in defenses, cross-claims and counterclaims.
[13] ERM submits that consolidation is appropriate because the actions arise out of one agreement that all of the litigants signed and the actions raise common issues. Without consolidation, ERM asserts that it will be prejudiced by the inefficiency of and potential inconsistency in judicial determinations in the four actions.
[14] ERM also seeks orders:
(a) striking the pleadings of nuisance because they do not disclose a reasonable cause of action; and
(b) striking requests for contribution and indemnity because they do not disclose a reasonable cause of action or, in the alternative, because it is an abuse of process.
[15] The respondents insist that these actions can proceed efficiently and cost-effectively through a joint discovery/case management plan without need of consolidation.
[16] ERM requested consolidation of the actions brought by Morguard, Okarlo and 116 before it delivered a statement of defense in those actions. Upon learning that any consent to consolidation would not be forthcoming, the parties sparred over consolidation and other procedural issues through the course of 2011. On 7 December 2011, this motion was scheduled for 12 July 2012.
[17] On 9 April 2012, the plaintiffs, Morguard, Okarlo and 116, having agreed to have their three actions being tried together with a joint discovery plan, delivered a copy of a proposed joint discovery plan to counsel for ERM but ERM has not agreed to that plan.[^1]
Consolidation
[18] Rule 6.01(1)(d) reads:
6.01 (1) Where two or more proceedings are pending in the court and it appears to the court that,
(a) they have a question of law or fact in common;
(b) the relief claimed in them arises out of the same transaction or occurrence or series of transactions or occurrences; or
(c) for any other reason an order ought to be made under this rule,
the court may order that,
(d) the proceedings be consolidated, or heard at the same time or one immediately after the other…
[19] Rule 6.01(2) reads:
(2) In the order, the court may give such directions as are just to avoid unnecessary costs or delay and, for that purpose, the court may dispense with service of the notice of listing for trial and abridge the time for placing an action on the trial list…
[20] In seeking consolidation, the moving party must show prejudice and not merely inconvenience when seeking to interfere with the plaintiff's right to pursue a lawful cause of action.[^2]
[21] A litigant's right to choose his/her/its own solicitor is not to be interfered with lightly[^3] and consolidation is not appropriate where there are three separate plaintiffs, each of whom is independently represented. [^4]
[22] Where separate plaintiffs have instructed different solicitors, consolidation is not possible unless the plaintiffs agree to instruct a single solicitor.[^5] ERM cites cases to the contrary but they turn on their own particular facts.
[23] Consolidation is not usually appropriate where it is opposed by even one independently represented party.^6 In this case, all three plaintiffs oppose the motion for consolidation.
[24] The respondents to ERM's motion for consolidation assert that consolidation would deprive the plaintiffs of the right to counsel of their choice. They refer to Hall:
There is the problem left in the air as to which solicitor is to prepare the statement of claim in the consolidated action on behalf of all the plaintiffs and, in addition, deal with the other pleadings and with the preparation for trial and the conduct of the trial. No evidence was submitted to show that the plaintiffs in the three several actions had agreed, or were likely to agree, upon a common solicitor to act on behalf of all of them.[^7]
[25] The respondents insist that allowing two solicitors of record is a rare exception to the rule[^8] and courts have recognized that having two solicitors of record could lead to chaos in litigation and frustrate orderly procedure.[^9]
[26] ERM asserts that if this court refuses to consolidate the owners’ actions, then the pleadings in the actions will become unwieldy, parties will need to file motion materials in triplicate and the court will have to address a single agreement in three separate lawsuits, apportioning damages, if any, across those lawsuits. The actions are already proceeding, ERM asserts, at different paces: 116 has delivered a statement of defense and cross-claim in the Morguard action but not in the Okarlo action. This complexity of multiple actions will also infiltrate and may impede settlement discussions, ERM says. In short summary, ERM submits that both the criteria in rule 6.01 and the balance of convenience support consolidation.
[27] ERM insists that whether or not plaintiffs in a consolidated action should be allowed to retain separate counsel should not be a barrier, a roadblock to consolidation because that concern would necessarily defeat the efficiencies and costs savings that consolidation would otherwise produce. ERM states that it has no objection to plaintiffs in the proposed consolidated action retaining counsel of their choice.
[28] There is no evidence on these motions from ERM confirming that the amounts claimed by the owner plaintiffs total amounts within ERM’s ability to pay, either with or without assistance from ERM’s insurers, if any. As such, the owner plaintiffs face the prospect of having to share in some ratio involving less than full compensation for their claimed losses and that sets up a potential for disagreement between and among the owner plaintiffs and a conflict of interest for any one counsel representing two or more of them, another reason favouring three owner actions rather than one consolidated action.
[29] ERM has issued a series of third party actions but those have yet to be formally pleaded to. Unless/until pleadings are exchanged in those actions and the third parties have decided whether to deliver pleadings in the main actions, I cannot know whether the interests of the owner plaintiffs will diverge further than appears evident from the situation as described in the materials before the court on these motions. This argues against the position asserted for ERM that consolidation is the preferable option.
[30] 116 points out that the ERM’s consolidation proposal would see it lose its present status as a plaintiff and relegate it to the status of defendant in the consolidated action. As the owner of the property from which the environmental contamination emanates, 116 argues that it has the most at stake in this litigation overall and that this result would be prejudicial to its position, especially as Morguard and Okarlo only sue in breach of contract.
[31] Further, 116 faces a claim from ERM that includes claims for relief, including claims for contribution and indemnity and declaratory relief, that 116 asserts are claims brought beyond the applicable Limitation period. So, 116 submits that the ERM action should not be consolidated with the 116 action because the ERM action is statute barred and consolidation would circumvent the limitation period defence. 116 insists that any claim ERM had against it crystallized in January of 2009 when ERM alleged that a new release of contamination was present on the 116 property. Nevertheless, ERM did not commence its action against 116 until February of 2012, over three years later. I agree that consolidation cannot be used to circumvent a limitation period and a party cannot be denied the right to rely on an acquired limitation period.[^10]
[32] The parties disagree on whether the law requires ERM to establish that no prejudice will arise for the plaintiffs if consolidation is ordered. It is an academic argument in this case, however, since, in my view, the owner plaintiffs have established that they each will be prejudiced by consolidation rather than trial together for the reasons noted above.
[33] In response to ERM's contention that the plaintiffs in the three actions are engaging in serial litigation, the respondents insist that that is simply incorrect and unfounded. ERM's motion has the effect of delaying the close of pleadings by 19 months at least. The respondents assert that the motion is a delay tactic and that the option of trial together is dramatically superior to consolidation, having regard to timing, cost and prejudice. I do not believe that ERM has intentionally delayed the progress of the litigation but I do agree that trial together is a practical, necessary and cost effective alternative and preferable to consolidation.
[34] The respondents assert and I concur that an order requiring that the actions be heard together with a joint discovery plan and a case management timetable realizes many of the same economies as an order for consolidation might. In this case, a joint discovery plan would address the same economies with respect to affidavits of documents, examinations for discovery, discovery motions, mediation(s), pretrial conference(s), and potentially at trial, in the discretion of the trial judge. Further, Morguard and Okarlo would not be required to prepare a new, consolidated pleading. The statements of claim would remain in place, resulting in a costs savings. Potential prejudice to ERM can be dealt with through the case management powers of the court. Trial together allows for flexibility for the trial judge in exercising his or her discretion to order the actions to proceed as he or she sees fit but, arguably, the same discretion is not retained if the actions are consolidated.
[35] As for the filing of multiple pleadings in the existing actions with the costs associated therewith, the respondents correctly point out that the court can efficiently and cost effectively address that in the case management plan for the actions by ordering that pleadings, motion materials and other documents relevant to more than one action be filed in one only with notices identifying them filed for reference in the others.
[36] Having considered the positions of the parties, the relevant law and the discovery plan proposed by the respondents[^11] I am not prepared to order consolidation of the actions at this time. The claimed cost, complexity and convenience advantages asserted by ERM are not demonstrated upon the evidence before me. In my view, an order for trial of the actions together, or one next following the other, subject to the direction of the presiding trial judge, and directions to the parties through the case management process already underway, together with a comprehensive discovery plan, such as the one proposed by the respondents, as augmented or altered by directions from the Case Management Master from time to time will meet the interests of the parties and the court in moving these cases forward together in an efficient and cost effective manner.
Contribution and Indemnity
[37] ERM moves to strike claims for contribution and indemnity on the basis that these claims are premature and speculative. The owners’ pleadings seek indemnification from ERM specifically against all third-party claims and regulatory orders or directions related to the contamination that were caused by or contributed to by ERM's default. The owners submit that the MOE is currently directing work at the properties. Delineation of the area affected by the contamination is in progress. Once complete, the MOE will require the implementation of an updated remedial action plan. If delineation demonstrates that the contamination has migrated offsite, the MOE will require notification of third parties, which will trigger third-party claims.
[38] The evidence before me establishes that 116 is working in a co-operative fashion with the MOE and respecting its directions. Correspondence confirming this state of affairs appears in the 116 responding materials[^12] and is unchallenged by ERM. The evidence further establishes that 116 believes that if it does not co-operate/comply with MOE, it will be ordered to. 116 is avoiding an order and incurring remediation costs as a result and it asserts that these arise from ERM’s breach of the agreement. Therefore its claim is real, existing now and not unknown, speculative or contingent. I find that claims by 116 for contribution and indemnity relating to MOE co-operation/compliance costs may be maintained as pleaded.
[39] As for future claims from third parties, including the MOE, such claims not having been formally brought against the property owners or pursued to judgment, the proper plea is for a declaration of entitlement to recover such claims from ERM.[^13] For pleadings purposes, whether the granting of declaratory relief upon the evidence at trial is warranted, contrary to the provisions of paragraph 27 of the agreement or premature matters not.
[40] 116 pleaded that its damages include claims of any third party landowners or the Ministry of the Environment relating directly or indirectly to the continued presence of contaminant at the 116 property.[^14]
[41] Morguard pleaded that ERM is liable for any and all claims by and on behalf of any third parties (including the MOE and other regulatory agencies) relating directly or indirectly to the continued presence of contamination at the Morguard property.[^15]
[42] Okarlo claims indemnification against all third party claims and regulatory orders or directions related to the contamination that were caused by or contributed to by ERM’s default.[^16]
[43] The owners claims for indemnification, as pleaded, are criticized by ERM as lacking specificity and for their failure to use the word “declaration” but it is clear to me that ERM is fully aware of the MOE involvement in these properties and the remediation process it is involved in with the property owners and ERM is likewise aware of the potential for future claims from the MOE and/or neighbouring landowners. Given its self proclaimed, actual and considerable expertise in matters of remediation of environmental contamination and its years of involvement with the properties at issue in this litigation, it seems to me to be somewhat disingenuous of ERM to suggest that it could be in any way disadvantaged by having to face future claims for contribution and indemnity based upon the current pleadings.
[44] In my view, the owners’ statements of claim do support claims for a declaration of entitlement to indemnity in respect of future costs. The pleadings have been inelegantly worded but the intent is clear.
[45] Nevertheless, should the owners wish to amend their statements of claim to clarify the nature of their claims for contribution and indemnity and specifically insert a claim for a declaration in their prayers for relief at this point, a time before ERM has even pleaded into their actions, I order that they be at liberty to do so.
ERM’s Delay
[46] Insofar as the motion to strike all or part of the plaintiffs’ pleadings is concerned, Morguard's amended statement of claim was delivered on 23 August 2010 but ERM did not advise of its intention to move to strike any portion of the pleading until 25 February 2011, over six months later.[^17] Further, the motion was not finally scheduled to be heard until 12 July 2012, almost 2 years after service of the statements of claim. On the basis of ERM's delay alone[^18], particularly given that even if successful, the action will continue, this portion of the motion could be dismissed.[^19]
[47] ERM argues that it acted reasonably once all three of the owners’ lawsuits had been served upon it. It suggests that service of the last of the claims marked the moment that it achieved an appreciation of the litigation landscape. The respondents quite rightly point out that Rule 21.02 requires prompt action. ERM allowed several months to expire without explanation and without moving against the statements of claim.
[48] Whether ERM delayed from a point after expressing its intention to bring this motion on is irrelevant. Its perception of any litigation landscape is likewise irrelevant. While I agree that delay should not operate as an absolute bar to the bringing of a motion to strike out a pleading[^20] in the circumstances, I am not inclined to relieve against ERM’s unexplained delay to promptly move to strike the respondents’ pleadings but I will deal with the merits of the motion regardless.
Nuisance Claims
[49] The respondents assert and I agree that the motion to strike falls far short of meeting the test to strike a pleading on the ground that it discloses no reasonable cause of action. The court must accept the facts alleged in the statement of claim as proven unless they are patently ridiculous or incapable of proof and must read the statement of claim generously with allowance for inadequacies due to drafting deficiencies. The applicable test is whether it is plain, obvious and beyond doubt that the cause of action cannot succeed. If there is a chance that the plaintiff might succeed, the plaintiff should not be driven from the judgment seat.[^21]
[50] The respondents further insist that there is no requirement that a defendant own or occupy adjoining lands in order to make a claim in private nuisance. At a minimum, the case law is divided on this issue. What is clear is that:
• the courts have commented extensively on the difficulty in providing an exhaustive definition of the tort of nuisance;
• the categories of nuisance are not closed; and
• the principles of private nuisance are sufficiently elastic to deal with less typical cases of nuisance.
A working definition of private nuisance that is widely cited, including in the case law and relied on by ERM on this motion, is:
a person, then, may be said to have committed the tort of private nuisance when he is held to be responsible for an act indirectly causing physical injury to land or substantially interfering with the use or enjoyment of land or an interest in land, where, in the light of all of the surrounding circumstances, this injury or interferences held to be unreasonable.[^22]
[51] As this working definition does not incorporate any requirement that the defendant owner occupy adjoining lands, the statement in ERM's amended notice of motion that nuisance is used to balance the interests of adjoining property owners or occupiers is only an example of a situation where nuisance can be found but not a complete statement of the scope of the law of private nuisance. Although ERM does reference case law that refers to adjoining land or conduct elsewhere, as expressed by the Alberta Court of Appeal as "the frequent reference in the cases to nuisance emanating from the land of the defendants reflects only the circumstances of the particular facts before the court, not an intentional limitation on the scope of the principle".[^23]
[52] The respondents insist, and I agree, that there is ample support in the case law and in academic commentary for the proposition that there is no requirement that the defendant own or occupy adjoining lands, in order to make out a claim in private nuisance.
[53] Further, upon the facts of this case, the three landowners own adjoining properties. The source of any contamination on the Morguard property is the 116 property. Morguard has pleaded that the continued presence of contamination on the Morguard property has substantially interfered with Morguard's ability to pursue business opportunities and constitutes a nuisance caused by ERM which was retained to remediate all three properties and that does not have the effect of negating the property line between adjacent properties.
[54] The respondents[^24] insist that 116’s and Morguard’s nuisance claims are reasonable causes of action and have been properly brought. It is not plain and obvious, particularly at this early stage of the litigation, that this cause of action cannot succeed. Particularly is this so given that the scope of private nuisance may not be fully settled in the jurisprudence. ERM’s complaint about that claim is that it is argued to be supported by law dating back into the 1970s from the Alberta Court of Appeal that arose from claims about invasion of privacy and harassment and the Ontario Court of Appeal has since recognized the tort of invasion of privacy; as such, the wrongs at issue in Alberta can be addressed in Ontario now without need of torturing the law of private nuisance to accomplish that end.
[55] Whether the ERM view of the limitations on the use of the law of nuisance for claims between adjoining landowners wins the day at trial or not, this is a pleadings motion and I am not persuaded that the 116/Morguard nuisance claims are without merit and bound to fail. I am not prepared to strike those claims on this motion.
Disposition
[56] ERM’s motions to consolidate the four actions in this matter are dismissed; ERM’s motions to strike plaintiffs’ claims for contribution and indemnity are dismissed and ERM’s motions to strike plaintiff’s claims in nuisance are dismissed.
[57] The owner plaintiffs are at liberty to amend their statements of claim to seek declaratory relief and to further particularize their claims for contribution and indemnity.
[58] The four actions at issue in this matter are ordered to be tried together or one next following the other, subject to the directions of the presiding trial judge.
[59] The owner plaintiffs, the respondents on this motion, shall each recover costs from ERM, in amounts to be agreed upon or fixed by me following the delivery of brief submissions on costs by the respondents, of no more than three pages each, within 30 days. ERM shall thereafter have 15 days to deliver brief costs submissions, of no more than 4 pages.
[60] No costs are awarded on this motion in action CV-10-446180.
MOORE J.
Released: 16 July 2012
[^1]: Fortier Affidavit, para. 12 and Tab H, paras. 27-28 and Tab U him
[^2]: Brown v. Matawa Project Management Group Inc., [2005] O.J. No. 2313 at para. 25; citing Muldoon J. in Fruit of the Loom Inc. v. Chateau Lingerie Manufacturing Co. (1984), 1984 CanLII 5876 (FC), 79 C.P.R. (2d) 274 (FCTD) at p. 278.
[^3]: Hall v. Wilson (1951), [1951] OWN 228, [1952] OJ NO 31
[^4]: Hall, Ibid at para 3
[^5]: L.H. Ritenburg & Associates Ltd. v. South Saskatchewan Hospital Centre (1977), 6CPC 122 at para 24; although Then J ruled otherwise in Alvi v. Lal (1990), 13 R.P.R. (2d) 302 .
[^7]: Hall, supra, at para. 3
[^8]: L.(J.) v. Sabourin, [2002] OTC 94, 16 CPC (5th) 235, OJ No 445
[^9]: Fruit of the Loom, supra at p 278
[^10]: 706434 Ontario Ltd. v. Krawec, CarswellOnt 4681 (Ont. Ct. Gen. Div.)
[^11]: See Footnote 1, supra
[^12]: Respondent Affidavit, page 4, paras. 11-15 and Tabs G, H and I.
[^13]: Sassy Investments Ltd. v. Minovitch, [1996] CarswellBC 1685 at para. 93
[^14]: 116 statement of claim, para. 22(e).
[^15]: Morguard statement of claim, at para. 23
[^16]: Okarlo statement of claim, at para. 1(c)
[^17]: 116 served its claim 18 August 2010 and Okarlo served its claim on 2 November 2010 (almost 4 months before ERM chose to strike)
[^18]: A delay of between 4-6 months between service and asserting an intention to move.
[^19]: Rules 2.02 and 21.02 of the Rules of Civil Procedure; Fleet Street Financial Corp v. Levinson, [2003] O.J. No. 441 at paras. 12-18; and McKenzie v. Wood Gundy Inc., [1989] O.J. No. 746
[^20]: Sudbury Downs v. Ontario Harness Horse Association, 2002 CanLII 8796 (ON SC) at para. 11
[^21]: Rule 21.01 (1)(b) of the Rules of Procedure; Nash v. Ontario, 1995 CanLII 2934 (ON CA), [1995] O.J. No. 4043 at p 5 (C.A.); Hanson v. Bank of Nova Scotia et al., 1994 CanLII 573 (ON CA), [1994] O.J. No. 1250 at para. 8 (C.A.); and Sievert & Sawrantchuk LLP v. Hommel, [2008] O.J. No. 5477 at para. 10
[^22]: Smith v. Inco Ltd., 2011 ONCA 628 at paras. 41-42; Gregory S. Pun & Margaret I. Hall, The Law of Nuisance in Canada (Markham: Lexis, 2010) at pp 57 and 63
[^23]: Motherwell v. Motherwell, 1976 ALTASCAD 155, [1976] A.J. No. 555 at para. 20 (C.A.)
[^24]: Okarlo has not pleaded a claim in nuisance and takes no position on the matter.