ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: C-437-09
DATE: 2013-08-09
BETWEEN:
HugoMark Services Inc.
Plaintiff
– and –
HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO and J. & P. Leveque Bros. Haulage Limited
Defendants
Leighton T. Roslyn, for the Plaintiff
Jeremy A. Forrest, for the Defendant J. & P. Leveque Bros. Haulage Limited
HEARD: July 10, 2013
DECISION ON MOTION
dEL fRATE j.:
[1] The plaintiff, HugoMark Services Inc. (“HugoMark”), seeks partial summary judgment against the defendant, J. & P. Leveque Bros. Haulage Limited (“Leveque”) for $297,710.82 plus prejudgment and post-judgment interest on that amount. HugoMark also seeks an order requiring Leveque to pay into court the sum of $152,289.18 plus accrued interest pending the trial of the action.
Background
[2] This litigation arises from a contract between HugoMark and Leveque for paving work on behalf of the Ministry of Transportation (“the MTO”) on Highway 17 near the town of Spanish, Ontario, in 2008.
[3] The chronology of events leading up to this time is set out clearly in the plaintiff’s materials. I reproduce it here:
i) September 14, 2007: The Defendant, Her Majesty The Queen in Right of Ontario representing the MTO and Leveque enter into MTO Contract No. 2007-5184 (the “MTO Contract”) for the grading and paving of approximately 12.7 km of King’s Highway No. 17, near the Town of Spanish, West of Sudbury, Ontario (“the Project”).
ii) May 14, 2008: Leveque subcontracts most of the paving work to HugoMark.
iii) September 17, 2008: HugoMark gives the MTO a claim for lien (the “First Lien”) for $2,826,351.59 to secure payment for services and materials applied to the Project.
iv) November 13, 2008: HugoMark and Leveque enter into an agreement (the “Lien Agreement”) to procure the release by the MTO of amounts due to Leveque, establish a mechanism to ensure payment of amounts due to HugoMark and its subcontractors, and establish a mechanism for resolving all of their outstanding issues.
v) November 24, 2008: HugoMark releases the First Lien.
vi) February 2, 3 and 4, 2009: HugoMark and Leveque conduct an arbitration before Paul Sandori (“the Arbitrator”) to resolve the Unresolved Issues as that term is defined in the Lien Agreement.
vii) February 23, 2009: The Arbitrator releases his decision.
viii) October 27, 2009: HugoMark gives the MTO a claim for lien (the “Second Lien”) for $336,792.13.
ix) December 29, 2009: HugoMark commences the within action (the “First Action”) to enforce the Second Lien.
x) March 9, 2010: The MTO agreed to make a payment of $450,000.00 (the “MTO Payment”) to Leveque. There is a disagreement between HugoMark and Leveque as to whether this is a settlement of the Re-Profiling Claim or the Re-Filing Claim and the Other MTO Claims as those terms are defined in the Lien Agreement.
xi) March 11, 2010: HugoMark gives the MTO a claim for lien (the “Third Lien”) for $911,000.00.
xii) June 7, 2010: HugoMark commences Action No. C-725-10 (the “Second Action”) at Sudbury to enforce the Third Lien.
xiii) June 29, 2010: Leveque delivers a statement of defence, counterclaim and crossclaim (the “Defence and Counterclaim”) in the First Action.
xiv) December 17, 2010: Justice Hennessy grants Leveque’s motion and makes an order (the “Hennessy Order”) to discharge the Second Lien and the Third Lien and dismiss the First Action and the Second Action.
xv) December 24, 2010: HugoMark appeals the Hennessy Order.
xvi) February 23, 2011: HugoMark commences Action No. 1145/11 at Milton.
xvii) October 9, 2012: The Divisional Court allows HugoMark’s appeal and re-instates the claims in the First Action and the Second Action, other than the claims that are dependent upon the validity of the Second Lien and the Third Lien and grants HugoMark leave to amend the statement of claim in both actions.
[4] In the statement of defence and counterclaim dated June 29, 2010, the defendant states:
The Defendant Pleading states that after crediting payments made by the Defendant Pleading directly to subcontractors of the Plaintiff in accordance with the Lien Agreement, and after making adjustments in accordance with the Subcontract and applying the Decision of the Arbitrator, and unless and until it receives from the Defendant MTO payment of the sum of $450,000.00 on account of the Re-profiling Claim and Other MTO Claims, the Defendant Pleading is not indebted to the Plaintiff in the amount claimed in a Statement of Claim herein or in any other amount, and, in fact, the Plaintiff is indebted to the Defendant Pleading, as hereinafter in the Counterclaim set out.
The Defendant Pleading states that, having regard for the provisions of the Subcontract, the Lien Agreement and the Decision of the Arbitrator, it has paid to or on behalf of the Plaintiff more than the full amount to which the Plaintiff is entitled to receive from the Defendant Pleading to the extent of $107,289.18 and particulars of the calculation of the said amount as set out in an amended and annotated version of its Progress Certificate No. 5 annexed as Schedule "A" to the Counterclaim.
The Defendant Pleading states that out of the sum of $450,000.00 received from the Defendant MTO as a result of the settlement of the Re-profiling Claim and Other MTO Claims, the Defendant Pleading is entitled under the MTO Contract to 10% or $45,000.00, and acknowledges that the Plaintiff is entitled to the balance of $405,000.00.
[5] After the parties were permitted to file fresh pleadings, the defendant did not include the previous paragraphs 25 and 26 in its fresh statement of defence, nor did it seek leave of the court to withdraw those allegations, which the plaintiff deems to be admissions. For the purposes of this motion however, the parties are relying on the original statement of defence.
[6] The defendant received the $450,000 from the MTO on January 6, 2011. The defendant deposited this amount and placed it in a separate account, earning interest at the rate of 1.65%.
[7] The plaintiff then asked for payment in the amount of $297,710.82. This amount was calculated as follows:
The MTO Payment - $450,000.00
Less Leveque’s share
of the MTO Payment
(10% of $450,000) - 45,000.00
Less Leveque’s counterclaim
in paragraph 23(a) - 107,289.18
TOTAL: $297,710.82
[8] The defendant has refused to provide the funds until such time as all matters have been resolved.
Position of the plaintiff
[9] The plaintiff alleges that the defendant was obliged to pay the sum of $297,710.82 pursuant to section 5.5 of the Lien Agreement whereby the defendant had undertaken to pay forthwith its “proportionate share" of any money received from the MTO for the re-profiling claim and other MTO claims.
[10] The plaintiff further alleges that this portion of the agreement was incorporated in the defendant's pleading at paragraphs 20 and 25. These paragraphs constitute admissions which cannot be withdrawn without leave of the court.
[11] With such admissions and with the Lien Agreement, the “full appreciation test” set out in Combined Air Mechanical Services Inc. v. Flesch, 2011 ONCA 764, [2011] O.J. No. 5431 [Combined Air Mechanical Services], has been met, and accordingly, partial summary judgment ought to be granted.
Position of the defendant
[12] The defendant alleges that because of the various actions initiated by the plaintiff involving this defendant and arising from the same project, and because of the various counterclaims, the motion judge cannot fully appreciate the issues raised by this multiplicity of proceedings.
[13] The defendant alleges that paragraphs 20 and 25 in its statement of defence should be viewed with caution since those statements have to be read in the context of the counterclaim, where considerable damages are being sought against the plaintiff.
[14] These damages cannot be determined on a summary judgment application and would best be left to the trial judge who can gain a full appreciation of the issues and the evidence to support the respective allegations.
The Law
[15] The Rules of Civil Procedure state:
20.01(1) To plaintiff – A plaintiff may, after the defendant has delivered a statement of defence or served a notice of motion, move with supporting affidavit material or other evidence for summary judgment on all or part of the claim in the statement of claim.
20.04 (2) The court shall grant summary judgment if,
(a) the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence;
(2.1) Powers – In determining under clause (2)(a) whether there is a genuine issue requiring a trail, the court shall consider the evidence submitted by the parties and, if the determination is being made by a judge, the judge may exercise any of the following powers for the purpose, unless it is in the interest of justice for such powers to be exercised only at a trial:
Weighing the evidence.
Evaluating the credibility of a deponent.
Drawing any reasonable inference from the evidence.
[16] As stated in Combined Air Mechanical Services, at para. 37:
As we shall go on to explain, the amended rule permits the motion judge to decide the action where he or she is satisfied that by exercising the powers that are now available on a motion for summary judgment, there is no factual or legal issue raised by the parties that requires a trial for its fair and just resolution.
[17] The amended rules permit judges to make evidentiary findings from the documentation filed (see Cuthbert v. TD Canada Trust, 2010 ONSC 830, [2010] O.J. No. 630, and Canadian Imperial Bank of Commerce v. Mitchell, 2010 ONSC 2227, [2010] O.J. No. 1502).
[18] In the case of Combined Air Mechanical Services, the Ontario Court of Appeal laid out the “full appreciation test” for motion judges dealing with summary judgments as follows:
[i]n deciding if these powers should be used to weed out a claim as having no chance of success or be used to resolve all or part of an action, the motion judge must ask the following question: can the full appreciation of the evidence and issues that is required to make dispositive findings be achieved by way of summary judgment, or can this full appreciation only be achieved by way of a trial? (at para. 50)
[19] The Court further described the full appreciation test at para. 55:
Thus, in deciding whether to use the powers in rule 20.04(2.1), the motion judge must consider if this is a case where meeting the full appreciation test requires an opportunity to hear and observe witnesses, to have the evidence presented by way of a trial narrative, and to experience the fact-finding process first-hand. Unless full appreciation of the evidence and issues that is required to make dispositive findings is attainable on the motion record – as may be supplemented by the presentation of oral evidence under rule 20.04(2.2) – the judge cannot be “satisfied” that the issues are appropriately resolved on a motion for summary judgment.
[20] Cases amenable to summary judgment include those which are document-driven, have few witnesses, require a discrete number of factual findings, and where credibility assessments are not of central importance.
[21] As well, pursuant to rule 20.02(2), the onus is on the defendant to show that there is a genuine issue for trial.
[22] The amended rule permits the motion judge to decide the action where he or she is satisfied that by exercising the powers that are now available on a motion for summary judgment, there is no factual or legal issue raised by the parties that requires a trial for its fair and just resolution.
Discussion
[23] In applying these principles to the facts before me, I note that the defendant concedes in its statement of defence that up to $450,000 is owed and payable upon receipt of the funds from the MTO. At paragraph 25, the defendant states that certain expenses in schedule "A" attached to the counterclaim and totaling $107,289.18 must be deducted from the funds received.
[24] Paragraph 27 of the statement of defence states that "the net amount that will be due and owing by the Defendant Pleading to the Plaintiff, upon receipt by the Defendant Pleading of the sum of $450,000 due from the Defendant MTO is $297,710.82."
[25] This amount was calculated by the defendant and reflects the alleged deficiencies outlined in paragraph 25 as of June 29, 2010, when the statement of defence was filed.
[26] The defendant submits that upon further review, the deficiencies and other heads of damages would exceed the sum of $297,710.82. Accordingly, those funds should remain in the hands of the defendant.
[27] Basically, the defendant is seeking a set off on potential damages it may receive following a trial, not only in this action but in other proceedings that are outstanding. The defendant has not pled a set off in its statement of defence. It is relying strictly on a counterclaim.
[28] Other than for the specific amount of $107,289.18, the prayer for relief in the counterclaim is generic and no particulars of its losses are provided. The affidavits in defence of this motion do not provide any information as to what its losses might have been as a result of the alleged breaches by the plaintiff. One would think that some five years after the alleged breaches, the damages would have crystallized and particulars would be available.
[29] The defendant submits that in assessing the damages, all outstanding actions should be considered. Although various actions have been instituted and pleadings have been exchanged, no one has seen fit to consolidate these actions by means of a court order. Accordingly, I am dealing strictly with the issues raised in this particular action.
[30] Both parties have the onus of putting their “best foot forward". I find that the defendant has not done so. It has withheld disclosure of when the funds were received and how they were invested until pressed by plaintiff's counsel. Even then, the information is insufficient.
[31] The withdrawal of the admissions in paragraphs 20, 25 and 27 of the statement of defence is further proof of the defendant's uncooperative conduct. It is only in the motion material that the claim for set off is asserted, even though the defendant has had the opportunity to amend its statement of defence.
[32] I conclude that the defendant is withholding the funds for tactical advantage and for no other reason. Permitting the defendant to retain the funds is an unfair advantage in this litigation. Although there is information that the funds have been invested and bearing 1.65% interest, no further particulars are provided. One can speculate that the defendant may have pledged that particular investment for its own purposes.
[33] There is no indication that either party is insolvent or likely to be insolvent. Accordingly, any amount that the defendant can prove in its counterclaim and possible costs orders will be recoverable. If the defendant had concerns about the plaintiff's financial viability, a motion for security for costs could have been brought. No such action was taken.
[34] Pursuant to the agreement and to the admissions in the statement of defence, the plaintiff was entitled to these funds upon the defendant receiving them from the MTO. The defendant has unilaterally withheld these funds due to misconceptions with respect to the agreements and pleadings.
[35] In my view, depriving the plaintiff of these funds would constitute an injustice since the defendant is using the counterclaim as a shield to withhold these funds. A trial would not disclose any further evidence on these discreet issues in view of the admissions in the pleadings. The plaintiff has succeeded in proving that these funds should be payable forthwith.
[36] The plaintiff also seeks an order that the sum of $152,289.18 with accrued interest be paid into court pending a further court order.
[37] I conclude from this request that there is some issue as to whether all or a part of that amount is payable to the plaintiff. I also conclude that the plaintiff is concerned that the defendant may become insolvent. As stated previously, there is no indication of any potential insolvency in the materials filed by both parties. Should this become a real concern, avenues are available to the plaintiff to address that issue. That relief is denied.
[38] Accordingly, the defendant shall forthwith pay to HugoMark the sum of $297,710.82 together with prejudgment interest calculated at the rate of 1.65% per annum from January 6, 2011 to July 10, 2013 in the amount of $12,341.13 for a total of $310,051.95. The award of prejudgment interest is without prejudice to HugoMark’s right to argue at trial that the defendant should be liable to pay additional prejudgment interest on the sum of $297,710.82.
[39] If the parties cannot agree on costs, arrangements can be made through the trial coordinator's office for a hearing date within the next 30 days.
[40] Order to issue as per reasons.
Mr. Justice Robert G.S. Del Frate
Released: August 9, 2013
COURT FILE NO.: C-437-09
DATE: 2013-08-09
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
HugoMark Services Inc.
Plaintiff
– and –
HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO and J. & P. Leveque Bros. Haulage Limited
Defendants
DECISION ON MOTION
Del Frate J.
Released: August 9, 2013