CITATION: XCG CONSULTANTS INC. v. ABB INC. 2013 ONSC 7035
COURT FILE NOS.: CV-08-1083-00 and CV-08-0950-00
DATE: 2013-11-15
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: XCG CONSULTANTS INC. v. ABB INC. and CHURCH & TROUGHT INC.
and
HAZCO ENVIRONMENTAL SERVICES, A DIVISION OF CCS INC. and HAZCO ENVIRONMENTAL SERVICES LTD. v. ABB INC. and XCG CONSULTANTS INC.
BEFORE: K. van Rensburg J.
COUNSEL: I. Lavrence, for ABB Inc. R. Hammond, for XCG Consultants Inc. (as plaintiff) C. Reain, for XCG Consultants Inc. (as defendant to the counterclaim) M. van Zandvoort, for Church & Trought Inc. R. McGlashan, for Hazco Environmental Services (as defendant to the counterclaim)
REASONS FOR DECISION
The Actions and the Motions
[1] These related actions involve claims for payment and for damages with respect to the remediation of environmental contamination at a property on Dixie Road in Mississauga, Ontario (the “Property”). The actions are being case managed and will be tried together.
[2] This decision is with respect to two motions to compel answers to undertakings and questions refused during the examinations for discovery of representatives of ABB Inc. (“ABB”), the owner of the Property, and XCG Consultants Inc. (“XCG”), the remediation contractor.
[3] In Action No. CV-08-1083-00, which is a construction lien action, XCG claims $1,685,949.58, the alleged outstanding balance for services and materials supplied to ABB in the remediation of the Property. XCG alleges that, after it commenced work, the parties determined that the distribution of contamination in the soil was considerably different than the distributions estimated in preliminary soil reports, and that it notified ABB that extras would be charged on a time and materials basis. XCG claims the balance of its invoices for services and materials supplied between September 13, 2005 and January 8, 2008. In the alternative, XCG bases its claim on quantum meruit. Church & Trought Inc. (“CTI”) is also a defendant to that action. XCG alleges that CTI, pursuant to an oversight contract, provided services to ABB, which included documenting and verifying certain components of the remedial work, conducting limited sampling work and reviewing XCG’s invoices and supporting documentation for accuracy, on behalf of ABB.
[4] ABB asserts that it contracted with XCG to remediate the Property with the objective of supplying ABB with a Record of Site Condition (“RSC”) within five years, which would include restoring soil and groundwater conditions to meet MOE Table 3 criteria. ABB contends that it was justified in terminating the contract with XCG on January 8, 2008. ABB counterclaims against XCG, alleging breach of contract and negligence in the remediation of the Property and claiming damages of $52.5 million (which the court was advised is now approximately $12 million). ABB contends that XCG’s acts and omissions resulted in cross-contamination and further contamination of the Property. ABB crossclaims against CTI, asserting breaches of the oversight contract.
[5] Hazco Environmental Services (“Hazco”), a subcontractor to XCG, and Sonic Environmental Solutions Inc. (“Sonic”), a subcontractor to Hazco, each have their own construction lien actions, claiming payment under their respective contracts, and asserting claims against the owner and liens against the Property (Action Nos. CV-08-0950-00 and CV-07-0000-3704).
[6] Tom Williams was examined for discovery on behalf of XCG, and André Auger and Geoffrey Keen were examined on behalf of ABB. Some of the questions in dispute were resolved prior to the motion hearing date. On consent, all XCG undertakings were required to be answered by August 12, 2013. With respect to the remaining XCG refusals, any that were not withdrawn or argued on July 11 were to be treated as undertakings and also required to be answered by August 12 (including Q. 268 at p. 62, which XCG agreed to answer).
[7] With respect to the ABB refusals, certain refusals that implicated third party interests were adjourned to be argued at a later date.
[8] I was provided with a refusals chart for each motion. The refusals charts in some instances did not set out accurately the questions that were asked. In each case, I have reviewed the question refused in context as it appears in the relevant transcript.
Relevant Legal Principles
[9] In determining these motions, I have applied the “relevance” test. Rule 31.06 requires a person examined for discovery to answer any proper question relevant to any matter in issue in the action. The relevance of any question depends on the pleadings and is informed by the concept of proportionality articulated in rule 29.2 and the specific considerations listed in rule 29.2.03: Blais v. TTC, 2011 ONSC 1880 (S.C.).
[10] Some additional observations are relevant here. First, in complex proceedings such as the present, what is alleged in the pleadings at the outset of an action may be quite general, and the issues in dispute are often refined and the allegations become more specific and detailed as documents are produced and oral discovery progresses. It is in this respect that ABB’s deficiencies list, while not part of the pleadings, was of assistance in understanding the issues in dispute and was properly included in the motion materials and referred to by counsel for ABB in support of a number of the questions refused. The function of the court is to determine relevance based on the pleadings, but informed by the issues as they have evolved during the discovery process.
[11] I also note that the net is often cast more broadly on discovery than at trial; simply because a question is answered on discovery does not mean that the information obtained will in fact be relevant at trial, and counsel retain the right to object to the admissibility of any evidence at trial, even where a question is ordered to be answered on discovery. As Master MacLeod noted in Monarch Construction Ltd. v. Axidata Inc., [2002] O.J. No. 2659 (S.C.), at para. 13:
…Relevance cannot be known with certainty by the person asking the question at the time of discovery since the answer has not yet been given. Accordingly a question which may lead to a relevant line of inquiry or which builds on another relevant answer must also be answered. It is important to recognize that relevance under our current discovery rules is far broader than at trial and is not synonymous with admissibility. The latter is a matter for the trial judge to determine.
While the Monarch case was decided under the former rule which applied a “semblance of relevance” test, the Master’s observations continue to apply.
Motion re: XCG Refusals
[12] I turn now to the XCG refusals in dispute, which fall into certain categories. Some of the question numbers in the refusals chart do not correspond with the numbers in the transcripts I was given. I refer here to the page and question numbers as they appear in the transcripts.
[13] Questions 402 (p. 532), 404 (p. 532) and 405 (p. 533) relate to the prior experience of XCG and its employees Tom Williams and Thomas Kolodziej, with projects of this size. The questions were refused on the basis that XCG’s other projects are not relevant to the issues at the Property.
[14] While the questions refer to “a project of this size”, the focus is not necessarily on the dollar amount of the contract with ABB, but its complexity. ABB is entitled to explore XCG’s past experience with complex projects, as well as that of its employees who were involved in the work. These questions are relevant to the allegations of negligence against XCG, and in particular the allegation in para. 20(e) of ABB’s statement of defence and counterclaim that XCG employed incompetent and inexperienced employees and supervisors.
[15] A legitimate concern with these questions is that the discovery could become side-tracked into inquiries about the scope and nature of other contracts performed by XCG, and could reveal information that is confidential to third parties. ABB’s counsel, Mr. Lavrence, noted that, while he would have some follow-up questions if XCG confirms that it and the relevant employees had prior experience with large and complex contracts, he would not ask for production or the specifics of other contracts, but only a general description of what was involved. Accordingly, these questions, which are relevant to the experience and expertise of XCG and its employees, shall be answered.
[16] The next set of questions in dispute (Q. 668 at p. 594, Q. 672 at p. 595 and Q. 692 at p. 602) arise out of the fact that XCG did not sample the VOC‑contaminated areas for PCBs. It is alleged by ABB that XCG ought to have done so, and that it was negligent in designing the sampling protocol not to have provided for what ABB refers to as “cross-sampling.”
[17] Mr. Williams acknowledged that there was no cross-sampling of VOC-impacted soils for PCB impacts and explained why at Q. 669 (that the majority of the VOC cells were totally separate from the PCB cells). ABB was entitled to explore this answer, to determine the criteria applied by XCG in deciding not to sample the VOC-impacted areas for PCBs. The witness explained at Q. 681 why cross-sampling of VOC-impacted soil piles for PCBs was not indicated. He stated that “cross-sampling in this area was not necessary because it’s not in an area of potential concern for PCBs and PCBs weren’t identified as a contaminant of concern in that area of the property.” He clarified that “that area” referred to all of the VOC areas. At Questions 686 to 688 Mr. Williams explained that, in the context of obtaining an RSC, cross-sampling for PCBs would not occur in areas where no PCB potential had been identified, and that this would go outside the logical process outlined by the MOE to get an RSC, looking for something in an area that you don’t expect to find it. At Q. 693, the witness agreed that you would need some kind of an indicator that there were PCBs in an area before it was necessary to do sampling for PCBs, if they were following the Reg. process to get an RSC. I am satisfied that the questions, to the extent that they are relevant, have been answered.
[18] The next two questions in dispute, which have to do with XCG’s control or supervision of what its contractors brought on-site, shall be answered. At Q. 3613 the witness confirmed that XCG requires its sub-trades to tell them what they bring on-site. Q. 3620 (p. 801) is a proper follow-up question respecting XCG’s usual practices. ABB is entitled to explore whether XCG followed or departed from its usual practice in this case. I note that Q. 3625 at p. 803 is set out incorrectly in the summary chart. The question is “to find out from Laird or Tom if there was any attempt to control what was brought on-site by subcontractors”. This is relevant to the allegations at paras. 18(i), (j), (k), (l), 19 (i), (j), (m), (n), 20 (j), (k), (m) and (n) of ABB’s statement of defence and counterclaim.
[19] Q. 3670 (p. 814), which asks the witness about the tone the author of a letter wanted to convey need not be answered. The letter in question speaks for itself.
[20] Q. 4028 (p. 904) and Q. 4358 (p. 966) need not be answered. The questions, although calling for a “yes” or “no” answer, would ultimately lead to questions about XCG’s financial condition, which is collateral to the issues in these proceedings. ABB contends that the relevance of these questions can be gleaned from paragraphs 5 to 12 and 18 to 20 of its statement of defence, however the pleading does not touch on XCG’s financial condition or the suggestion made in argument that XCG underbid the contract, or its ability to pay Hazco. In para. 20(r) of the statement of defence, ABB asserts that XCG failed to complete its original scope of work and is seeking extra payment for items which properly fall within its original scope. This pleading does not in my view support a line of questions into XCG’s financial condition as a possible motivation for, as ABB alleges, seeking to change the contract. I agree with XCG’s contention that the questions are in any event hypothetical in the absence of some indication that Hazco was about to abandon the job if they were not paid.
[21] Q. 5436 (p. 1271) is the following: “If during the course of this project at any time ABB raised an issue to XCG about Canadian Soil or Hazco’s performance, and asked that they be replaced, would XCG have complied with that request?” There is no allegation that ABB complained about Hazco’s performance and that XCG refused to replace Hazco. The witness in fact stated that there were no complaints or concerns that he was aware of, raised by ABB. While ABB was entitled to explore the relationship between Hazco and XCG in support of its allegation that XCG did not properly supervise and control its subcontractors, this question was asked and refused during questioning by Mr. McGlashan, counsel for Hazco, who accepted the refusal on the record. To the extent that ABB wishes to pursue the question, it is hypothetical and need not be answered.
Motion re: ABB Refusals
[22] The ABB refusals have to do with information about the Property that was available to ABB at the time of its purchase of the Property and thereafter. The Property was purchased in 1981 and the manufacturing facility was decommissioned with some environmental clean-up in the early 1990s.
[23] For the reasons that follow I direct that all but two of the questions refused as they appear in the transcript (and not as set out in the refusals chart which is inaccurate in its summary of some of the questions) shall be answered. Q. 273-275 (p. 95-96), which relates to the fact that the Property was given a zero book value by ABB in or round 2001 or 2002, has been answered. Q. 3988 (p. 1548) need not be answered. The identity of ABB’s lawyer at the time of the purchase is irrelevant.
[24] Counsel for ABB asserts that his client has produced all known documents relating to environmental issues. ABB has produced environmental reports, including those that were prepared during prior attempts at remediation when the plant was decommissioned in the early 1990s. He has confirmed that there are no documents about the environmental condition of the Property pre-dating that period, and no plant or process documents. An undertaking was given to provide every environmental report in ABB’s possession, including any reports obtained as part of the purchase, and to disclose any further documents that have to do with the environmental condition of the Property, however ABB asserts that no such documents exist.
[25] While acknowledging that ABB would produce all environmental documents irrespective of when they were prepared, ABB’s counsel took the position at discovery and in response to the motion that, whether or not ABB knew of the environmental issues at the Property at the time of its purchase is irrelevant to its claim. ABB claims diminution of value and stigma damages, which it contends are based on the market value of the Property with an RSC compared to its current value with the remaining environmental issues. As such, ABB contends that the original purchase price and the terms of the purchase are irrelevant, as is the history of how the Property may have become contaminated.
[26] I disagree with this position. The entire environmental history of the Property and its condition throughout the time ABB has owned the Property are relevant to the issues in these proceedings. There is an allegation that XCG was negligent in its investigation of the Property (para. 20(l) of the statement of defence and counterclaim). It is also alleged that XCG and its contractors brought contaminants onto the Property (para. 20(a) of the statement of defence and counterclaim). The moving parties accordingly are entitled to examine ABB on any information in its possession or control concerning the environmental condition of the Property, and to determine whether all such information was provided to XCG. While the historical condition of the Property and its value may not be relevant to ABB’s claim for damages as currently framed by ABB, the other parties are not constrained by ABB’s theory of the case. Their allegations that the Property was stigmatized throughout the period of ABB’s ownership, and that ABB failed in its duty to mitigate, invite a consideration of the entire history of the Property.
[27] ABB has recognized the relevance of information about the environmental history of the Property in offering to produce all environmental reports, irrespective of when they were created. ABB’s knowledge and information about the environmental condition of the Property from the time of its acquisition, even if not recorded in a document, is equally discoverable. The other parties are entitled to know whether there were environmental investigations and ABB’s knowledge of the environmental condition of the Property prior to and from the date of its acquisition.
[28] Accordingly, Q. 3956 (p. 1537), to advise if any environmental investigations were undertaken by ABB at its request prior to the purchase of the Property, and Q. 3967 (p. 1540), to advise whether Mr. Keen has any knowledge of whether ABB was aware of any pre-existing environmental condition of the Property when it was purchased in 1981, are relevant questions, and shall be answered.
[29] At Q. 65 (p. 21) of Mr. Keen’s examination, there was a refusal to produce ABB’s documents that relate to the decision-making process of the clean-up of the Property going back to as early as 1990 and 1992, if such documents exist. At Q. 1925 (pp. 787-88), there was a refusal to produce documents relating to the periodic review of the site in connection with its proposed sale. Both questions are incorrectly described in the refusals chart.
[30] ABB contends that ABB’s decision-making process about cleaning up the contamination it discovered is irrelevant to the remediation contract entered into some years later, and that the value of the Property at earlier stages would have no bearing on its claim for damages.
[31] These questions shall be answered. As already noted, ABB recognizes an obligation to produce environmental reports in relation to the prior remediation efforts. The other parties are entitled to explore other sources of information respecting the environmental condition of the Property, including what was known and considered when ABB attempted a clean-up in the early 1990s, as well as during any period when ABB considered selling the Property. Q. 1925 is also relevant to ABB’s “business objectives” respecting the Property, which are put in issue directly through its pleading. See paras. 12 and 18(j) of ABB’s statement of defence and counterclaim, as well as para. 54(a)(iii), in which ABB asserts a counterclaim that includes “the costs and expenses incurred by ABB in retaining the ABB site for longer than anticipated as a result of the failure of XCG to complete its work in a manner permitting ABB to meet its business objectives.” Documents in connection with any prior occasions when the sale of the Property was considered and evaluated are directly relevant to this pleading.
[32] I turn now to questions related to ABB’s purchase of the Property in 1981, and information that would be contained in the agreement of purchase and sale and closing documents.
[33] At Q. 64 (p. 65) of Mr. Auger’s examination, production of the closing documents in relation to the Property was refused. At Q. 1923 (pp. 784-785) of Mr. Keen’s examination, production of all documents in connection with the purchase of the Property was refused. There were also refusals to advise how much ABB paid for the Property (Q. 3954, p. 1536), to advise if there was a discount given to ABB to purchase the Property, because of the expectation of contamination (Q. 3961, p. 1539), to advise whether there was an assumption of environmental liabilities in the agreement of purchase and sale (Q. 3966, p. 1540), and whether ABB waived any claims against the former owner of the Property (Q. 3985, p. 1546).
[34] These questions shall be answered. If one accepts that the environmental condition of the Property at the time ABB acquired it is in fact relevant, then any documents that may shed light on the condition must also be produced. I accept the argument that elements of the purchase, such as price and the structure of the transaction (releases and indemnities) may be a source of information from which inferences could be drawn about the environmental condition of the Property.
[35] With respect to production of the entire purchase and sale agreement affecting the Property, ABB’s counsel contends that there is nothing in the agreement that is relevant to the environmental condition of the Property. The moving parties argue that they should be able to satisfy themselves that there is nothing in the closing documents that is relevant to the environmental condition of the Property.
[36] In the course of the examination for discovery of Mr. Keen there was some discussion about whether about the existence of a spill containment tank that was discovered by XCG would have been disclosed in the purchase and sale agreement. ABB’s counsel undertook to review the purchase documents to see if there was a relevant survey or plan, and he agreed that documents relating to the plant such as old site plans, blueprints and architectural drawings would be relevant and produceable, including if such documents were attached to the agreement. He also agreed to produce any relevant documents that may be forwarded by counsel who acted for ABB at the time of the purchase. As counsel for CTI noted, there may be a statement in one of the schedules to the agreement from which knowledge of an existing environmental problem could be inferred.
[37] While ordinarily it is up to counsel for a party to conduct the necessary review for relevance to satisfy the obligation under rule 30.02 to disclose in an affidavit of documents every document relevant to any matter in issue in the action, and the other side is not entitled to review all documents in existence for relevance, where there is a disagreement about what is relevant it may be necessary to require a document that may or may not contain relevant information to be disclosed so that the other parties can satisfy themselves. This is such a case.
[38] ABB’s position on the transcript, as well as the reasons given for maintaining certain refusals, is inconsistent with its position that it has produced and will continue to produce all documents relevant to ABB’s knowledge of the environmental condition of the Property. As such, the opposing parties are justifiably concerned that information that they consider relevant (because it may indirectly impact on the environmental condition of the Property) may exist in the purchase documents but not be disclosed if it is up to ABB’s counsel to decide what is relevant.
[39] In the circumstances of this case, where there has been a significant disagreement as to what may or may not be relevant, I am directing that the purchase and sale agreement and all documents in connection with the purchase of the Property be disclosed.
Conclusion
[40] Order to go in the terms of this decision. If any party seeks costs of the motions, brief written costs submissions shall be exchanged between the parties. All such submissions shall be collected and provided for my consideration by counsel for ABB within 30 days.
K. van Rensburg J.
CITATION: XCG CONSULTANTS INC. v. ABB INC. 2013 ONSC 7035
COURT FILE NOS.: CV-08-1083-00 and CV-08-0950-00;
DATE: 20131115
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: XCG CONSULTANTS INC. v. ABB INC. and CHURCH & TROUGHT INC.
and
HAZCO ENVIRONMENTAL SERVICES, A DIVISION OF CCS INC. and HAZCO ENVIRONMENTAL SERVICES LTD. v. ABB INC. and XCG CONSULTANTS INC.
BEFORE: K. van Rensburg J.
COUNSEL: I. Lavrence, for ABB Inc. R. Hammond, for XCG Consultants Inc. (as plaintiff) C. Reain, for XCG Consultants Inc. (as defendant to the counterclaim) M. van Zandvoort, for Church & Trought Inc. R. McGlashan, for Hazco Environmental Services (as defendant to counterclaim)
REASONS FOR DECISION
K. van Rensburg J.
DATE: November 15, 2013