COURT FILE AND PARTIES

COURT FILE NO.: 13-2443

DATE: 2014-03-05

ONTARIO

SUPERIOR COURT OF JUSTICE

IN THE MATTER OF the Construction Lien Act, R.S.O. 1990 c. C.30 as amended

BETWEEN:

KIESWETTER DEMOLITION (1992) INC.

Plaintiff

– and –

TRAUGOTT BUILDING CONTRACTORS INC. and 1812501 ONTARIO INC.

Defendants

J. Heimpel, for the Plaintiff

R. Cooper, for the Defendants

HEARD: February 19, 2014 at Stratford

HEENEY R.S.J.:

[1] The plaintiff (“Kieswetter”) seeks partial summary judgment for $109,253.57, which is most of the money it alleges it is owed by the defendant Traugott Building Contractors Inc. (“Traugott”). It acknowledges that a trial will be necessary regarding its claim for the balance remaining of $24,889.43.

[2] Summary judgment is available in a construction lien case: see Michaels Engineering Consultants Canada Inc. v. 961111 Ontario Ltd., 1996 11806 (ON SC), [1996] O.J. No. 2030 (Div. Ct.). However, because this motion is an interlocutory step, leave is required pursuant to s. 67 of the Construction Lien Act, R.S.O. 1990, c. C.30. That section reads as follows:

67. (1) The procedure in an action shall be as far as possible of a summary character, having regard to the amount and nature of the liens in question.

(2) Interlocutory steps, other than those provided for in this Act, shall not be taken without the consent of the court obtained upon proof that the steps are necessary or would expedite the resolution of the issues in dispute.

[3] Traugott opposes the granting of leave, and has brought its own motion for directions as to how the entire matter should proceed to trial.

[4] Summary judgment is, by definition, a step that is “of a summary character”, and is entirely in keeping with s. 67(1). The remaining questions are whether it is necessary or would expedite the resolution of the issues in dispute.

[5] Traugott submits that this motion is an unnecessary step since a trial will be required in any event. However, according to the material filed, the trial of all of the issues will involve an estimated nine witnesses, including two experts. The issues to be determined will include interpretation of the contract; determining whether the crushed concrete met contractual specifications; determining whether soil remediation was an extra to the contract; and determining whether Traugott is liable for the cost of concrete removal in excess of the purchase order it issued, after that work had been commenced on a time and materials basis. I accept the estimate of Mr. Heimpel, for Kieswetter, that the trial of all of the issues will take at least one week and possibly as long as two weeks.

[6] On the other hand, if summary judgment is granted all that will remain will be a claim for $23,504.64, as the balance owing on 9 invoices for concrete removal, and $1,384.79 for 5 invoices for environmental disposal extras. The trial of those issues could involve as few as two witnesses, and could be completed in one or two days.

[7] Ms. Cooper, for Traugott, relies on the decision of Master MacLeod in Exteriors By Design v. Traversy, 2012 ONSC 3164, which was also a construction lien case. There, the Master cast doubt on the efficacy of a summary judgment motion where the matter could be dealt with by a summary trial. He said this, at para. 7:

A quick two day summary trial which will finally determine all matters is preferable to arguing a half day improbable summary judgment motion which may still require a trial for some or all of the issues.

[8] That decision must, however, be read with caution, because a Master does not have the power to weigh evidence, evaluate credibility and draw reasonable inferences from the evidence that is granted to a judge on a summary judgment motion, pursuant to Rule 20.04(2.1). Master MacLeod appears to recognize the limitation on his powers on the motion at par. 6, where he says the following:

There is therefore a real question as to whether or not arguing summary judgment motion meets the needs of the case when a summary trial procedure is available at which the presiding judicial officer is fully empowered to determine all issues of fact and law. [emphasis added]

[9] Furthermore, in the case at bar there is no agreement between counsel to have a summary trial, as opposed to an ordinary trial.

[10] As a practical matter, if there is no genuine issue for trial regarding Kieswetter’s entitlement to $109,253.57, there is no justification for making it wait many months to recover this money merely because the additional claim for $24,880.73 requires a trial. That is particularly the case when the factual issues regarding each claim are different.

[11] I am satisfied that this summary judgment motion could expedite the resolution of the issues in this case considerably, and in the process save the parties a great deal of time and expense. Leave to bring this motion is granted.

The Motion for Summary Judgment:

[12] The approach to be taken by the court on a summary judgment motion has now been clearly articulated by the Supreme Court of Canada in Hyrniak v. Mauldin, 2014 SCC 7, [2014] S.C.J. No. 7. There, the court emphasized that a shift in culture is required that emphasizes the principle of proportionality. Summary judgment rules must be interpreted broadly, favouring proportionality and fair access to the affordable, timely and just adjudication of claims.

[13] A party is entitled to summary judgment whenever there is “no genuine issue requiring a trial”: Rule 20.04(2)(a). Karakatsanis J., speaking for the court, explained at paras. 49 - 50 what these words mean:

There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.

These principles are interconnected and all speak to whether summary judgment will provide a fair and just adjudication. When a summary judgment motion allows the judge to find the necessary facts and resolve the dispute, proceeding to trial would generally not be proportionate, timely or cost effective. Similarly, a process that does not give a judge confidence in her conclusions can never be the proportionate way to resolve a dispute. It bears reiterating that the standard for fairness is not whether the procedure is as exhaustive as a trial, but whether it gives the judge confidence that she can find the necessary facts and apply the relevant legal principles so as to resolve the dispute.

[14] At para. 66, Karakatsanis J. provided a roadmap for the court to follow in addressing this question:

On a motion for summary judgment under Rule 20.04, the judge should first determine if there is a genuine issue requiring trial based only on the evidence before her, without using the new fact-finding powers. There will be no genuine issue requiring a trial if the summary judgment process provides her with the evidence required to fairly and justly adjudicate the dispute and is a timely, affordable and proportionate procedure, under Rule 20.04(2)(a). If there appears to be a genuine issue requiring a trial, she should then determine if the need for a trial can be avoided by using the new powers under Rules 20.04(2.1) and (2.2). She may, at her discretion, use those powers, provided that their use is not against the interest of justice. Their use will not be against the interest of justice if they will lead to a fair and just result and will serve the goals of timeliness, affordability and proportionality in light of the litigation as a whole.

[15] As the reasons that follow will illustrate, I am satisfied that there is no genuine issue for trial because I am able to reach a fair and just determination on the merits of this motion for summary judgment. It will be necessary to find facts, so that I will need to have recourse to the new powers under Rules 20.04(2.1) and (2.2) in order to avoid a trial. However, those facts will be found based almost entirely upon the following: the wording of a written contract which is clear on its face; the uncontradicted evidence of the plaintiff’s representative David Kieswetter; and, admissions made by Traugott, both in its pleadings and in the affidavit and cross-examination of its president Dan Flaminio. Finding facts from such evidence will not be against the interests of justice, will avoid the need for a trial, and will provide for a timely, affordable and proportionate resolution of the key issues in this portion of the case.

The Contract:

[16] Kieswetter is a demolition contractor. It was hired in October 2012 by Traugott, who was the general contractor for an improvement being constructed on a property in Stratford that is owned by the defendant 1812501 Ontario Inc.. The improvement involved demolishing existing government buildings and constructing a supermarket and possibly other buildings on the site.

[17] The terms of the contract were set out in a letter from Traugott to Kieswetter dated October 23, 2012. At pg. 42, questions 189 to 191 of his cross-examination held January 21, 2014, Mr. Flaminio admits that this letter sets out the terms of the demolition contract between the parties.

[18] Kieswetter’s primary duties under the contract are set out in para. 3:

3. Perform site demolition including, but not limited to, permit fees/engineering fees; slab removal; full site fencing; coordinate disconnecting, cutting and capping of all services and utilities; DSS Report.

[19] The contract price is set out in para. 12 of this document:

12. Contract price is $160,000.00 plus HST (cost of crushing all concrete/block/masonry to be paid additional at $6.50 per tonne, plus HST)

[20] To understand the reference to crushing concrete, it is necessary to explain that Kieswetter is in the business of demolishing buildings and then crushing the debris into usable material. The specifications for this crushed material are set out in para. 5:

5. Finished 3" crushed granular B sized material will be left stockpiled on site for owner’s future use.

The Claim:

[21] Kieswetter’s claim for monies owing can be broken down as follows:

a) Invoices for base contract and holdback $62,828.00

b) Invoice for crushed concrete $34,524.94

c) Invoices for additional concrete removal $59,939.55

d) Invoices for additional environmental disposal $1,384.79

Total: $158,677.28

[22] There is no dispute that Kieswetter completed all of the base work required under the contract. Accordingly, in response to the motion for summary judgment, Traugott admitted that item a) was owing. It also admitted that item c) was due and owing, but only to the extent of $36,434.91. In other words, Traugott disputes the balance of item c), amounting to $23,504.64. I will discuss the nature of that dispute later in these reasons.

[23] Traugott disputes the sums claimed in b) and d) completely.

[24] As to the amounts admitted to be owing, Traugott claims set-offs against these amounts in the total amount of $74,728.63. All of this is detailed in the affidavit of Mr. Flaminio sworn Dec. 6, 2013.

[25] Since the amounts admitted to be owing for a) and the undisputed part of c) add up to $99,262.91, and the amount of the set-offs total only $74,728.63, it became clear that Traugott owed Kieswetter $24,534.28 at the very least. Traugott consented to judgment in that amount before Templeton J. on December 17, 2013, and that sum has been paid.

[26] This reduced the total indebtedness claimed to $134,143.

[27] As already noted, the plaintiff concedes that a trial is needed with respect to item d) [environmental disposal $1,384.79] and the disputed portion of item c) [concrete extras $23,504.64]. These two figures total $24,889.43.

[28] Kieswetter’s entitlement to the difference between the total indebtedness claimed, and the amount to be litigated at trial, will depend upon whether there is any merit to the claim for set-off and the dispute to item b), which are interrelated, and to which I now turn.

The Claim for Crushed Concrete:

[29] There is no dispute that Kieswetter crushed and stockpiled on site the quantity of crushed concrete that was invoiced for in item b). Equally, there is no dispute that the amount charged was in accordance with the contract, ie. $6.50 per tonne, plus HST.

[30] When Traugott failed to pay Kieswetter’s invoices, these proceedings were commenced. In response to the claim for the crushed concrete invoices, Traugott pleaded the following in paras. 11 to 13 of its Statement of Defence:

11. The Subcontract scope of work included on site crushing of the existing concrete foundation/slab into granular B material (the “Granular B Material”) to be used in the parking lot of the new development on the Lands.

12. Kieswetter completed the crushing of the concrete but it does not meet the Specification requirements for Granular B Material because it is oversized.

13. The defective Granular B Material is stockpiled at the Project site because it cannot be utilized for its intended use. As a result, Traugott will be required to obtain an alternate source of Granular B Material for use in the parking lot, the cost of which, estimated to be $82,000.00, will be offset against any amount that Traugott may be found to owe to Kieswetter.

[31] Before considering whether the crushed concrete met specifications, I will digress momentarily to consider the claim for set-off, as it relates to the crushed concrete. Essentially, Traugott pleads that since the crushed concrete did not meet specifications, they will be forced to purchase that material elsewhere. It wants Kieswetter to pay for that material. The amount of that set-off was initially claimed to be $82,000 in the Statement of Defence, but that figure was modified considerably in Mr. Flaminio’s affidavit, where he said that the cost of purchasing granular B material from a different supplier will be $36,736.15. That is based on a price of $6.55 per tonne, which is almost exactly the same as the price of $6.50 per tonne charged by Kieswetter under the terms of the contract.

[32] What this means is that Traugott is not only refusing to pay Kieswetter’s invoice of $34,524.94 for crushed concrete, it wants Kieswetter to pay for Traugott to obtain that material from another supplier. In other words, Traugott wants to get the crushed concrete for free. There is no basis in law or in logic for this claim of set-off. It is patently without merit, and is dismissed.

[33] Traugott’s refusal to pay the invoices for the crushed concrete was based on its assertion that the crushed concrete did not meet the “Specification requirements for Granular B Material because it is oversized”. After delivery of its Statement of Defence, but before a Settlement Meeting scheduled for September 17, 2013, Traugott arranged to have the crushed concrete analysed by its own soils engineer, LVM. In its report dated Sept. 13, 2013, LVM confirmed that the material was of proper size, and conformed with the specifications for Type 1 Granular B material. Traugott admitted at the Settlement Meeting that the materials were properly sized, and that admission is reflected in the Statement of Settlement that was drafted following the meeting.

[34] That admission represents a complete answer to the defence that the material was oversized. However, at the Settlement Meeting Traugott raised, for the first time, the allegation that the materials were not suitable for use as structural material because they contained particles of rope and wood. This was based on a comment to that effect in the LVM report, which recommended “that this material not be used as structural fill”.

[35] Following that, Kieswetter arranged for its own soils engineer, CVD, to analyse the crushed concrete. It concluded that the wood particles in the material did not appear to be significant. It also concluded that the material was suitable to support construction traffic around the buildings and as a mud mat to access the site, and could also be used as structural fill to raise grades in the parking areas and the grass areas.

[36] This opinion was considered by Traugott’s engineers, and in its report of Dec. 6, 2013, LVM confirmed CVD’s recommended uses for the stockpiled material. It went on to say that if the material is to be used as structural fill, to be placed under the proposed building, full time monitoring of the fill placement would be required. This would allow for field approving and separating of acceptable material from the stockpiles. It estimated the engineering costs for monitoring to be $9,795.

[37] From reading the Statement of Defence, this additional monitoring cost would not be a concern. Since the “intended use” of the material was for the parking lot, and since it is undisputed that the crushed concrete was suitable for that use without monitoring, there is no prospect of monitoring costs being incurred. However, Traugott chose to move the goalposts once again.

[38] In his affidavit, Mr. Flaminio now takes the position that the materials are deficient because they are not suitable as “structural fill”, which he defines to mean “fill used as a base for buildings”. He insists that this specification forms part of the contract between the parties. He relies in that regard on an email from Kieswetter to Traugott dated October 3, 2012, which stated the following:

Value for the granular B sized product based on a $9.50 per tonne delivered would be $17,100.00 plus H.S.T., which you would now have on site for future remediation, grading or structural filling.

[39] Traugott takes the position that the final two words of that passage apply, and that if the material is not suitable for structural filling, as he defines it, then it is not up to contractual specifications.

[40] I reject that submission. To begin with, that email was not incorporated into the contract, either expressly or impliedly. The only specifications in the contract were that it be “Finished 3" crushed granular B sized material”. There is no dispute that it meets those specifications. I find the terms of the contract to be clear and unambiguous, such that it is unnecessary to consider extrinsic evidence: see Eli Lilly & Co. v. Novopham Ltd., 1998 791 (SCC), [1998] 2 S.C.R. 129 at paras. 54 – 57.

[41] Secondly, according to the Statement of Defence, the intended use for this material was in the parking lot. Traugott’s own engineers confirm that this material is suitable for that purpose. The Statement of Defence does not state that the material was intended to be used as a base for buildings.

[42] When confronted with this apparent contradiction, Mr. Flaminio suggested, at pg. 60 – 61 of the transcript, that they may, in the future, wish to erect buildings on top of the parking lot, so the parking lot fill would have to be suitable as a base for buildings as well. This is an utterly unpersuasive response.

[43] Thirdly, the evidence is clear that Traugott has, in fact, been using the stockpiled material on site. When CVD attended the site to analyse the crushed concrete, it was observed that the new contractor, Wilhelm Excavating Ltd., had removed and used as much as 1/3 of the stockpiled material. Mr. Flaminio admits in his affidavit to having used the stockpiled materials, although not as “structural fill” as he defines it, and in an unspecified amount.

[44] The worst case scenario for Kieswetter, had I found that the contract required that the material be suitable as a base for buildings, is that it would be entitled to recover its invoices for the crushed concrete, less monitoring costs of $9,795. However, that scenario would assume that all of the crushed concrete had to be monitored. Since 1/3 of it has already been used without monitoring, that set-off would be reduced proportionately. It would also be subject to further reduction, since monitoring would only be required for whatever portion of the stockpile had to be used as a base for buildings, as opposed to being used for raising grades in the parking lot and grass areas, and for other uses around the site. However, since I have found as a fact that this requirement does not form part of the contract, it is unnecessary to deal with this issue further.

[45] I find as a fact that the specifications for the crushed concrete are as set out in the contract of October 23, 2012, and that the material supplied met those specifications. Kieswetter is entitled to judgment for $34,524.94, being the invoiced price for that material.

Soil Remediation:

[46] The other part of the claim for set-off is in the amount of $37,992.48. This claim was not raised in the Statement of Defence, nor was it raised at the Settlement Meeting. In fact, it was raised for the first time in Mr. Flaminio’s affidavit in response to the present motion for summary judgment.

[47] The site contained environmental contamination, which required that quantities of soil be removed and disposed of in an environmentally acceptable way. Kieswetter was hired to do this work, and submitted invoices to Traugott. These invoices were all paid by Traugott, with the exception of item d) for $1,384.79, which will be dealt with at trial.

[48] However, Traugott now advances the position that these invoices were paid in error, and claims the amount paid of $37,992.48 as a set-off against the other moneys found to be due to Kieswetter. It claims that soil remediation was included in the main contract, and should not have been invoiced as an extra. Mr. Flaminio states in para. 10 of his affidavit:

At the time of payment, I believed those invoices related to the base contract, and therefore made the payments.

[49] The contract of October 23, 2012 makes no mention of soil remediation. It obligates Kieswetter to perform site demolition and related tasks only. When Mr. Flaminio was asked at pg. 150 of the transcript to identify where in the contract it says that soil remediation is included, he said “either in the DSS report or in the earlier bid documents.”

[50] The DSS Report is referenced in paras. 3 and 4 of the contract. I have already reproduced para. 3 above, and para. 4 reads as follows:

4. All asbestos indicated on the DSS reports provided is included and certificate stating that asbestos has been removed must be issued.

[51] “DSS” is an acronym for “Designated Substances Survey”. The DSS report dated August 28, 2003 is filed at Tab 2 of the Supplementary Motion Record, and another one dated March 12, 2008 is filed at Tab 3. The earlier one sought to identify “the presence and locations in the building (including the building exterior envelope) of specified substances…”. The target substances were asbestos, mercury, lead paint and PCBs. The later report assessed certain specified buildings at the site, and targeted asbestos only.

[52] Nothing in these documents references soil remediation on the site.

[53] The bid documents are found at Tab 4 of the same document. It solicits bids to “supply labour, material and equipment for the complete demolition and removal off site of all Buildings & associated Foundations.” Soil remediation is not listed in the scope of work to be performed under the contract. However, there is a reference to that type of work which is highly relevant. Clause 2.9.11 reads as follows:

This contractor to include unit rates for Environmental Remediation

[54] This requirement was reiterated by Traugott in an email dated August 9, 2012, found at Tab 5 of the same document, which reads, in part, as follows:

Please also note that the scope of work to be incorporated into you (sic) quotation will be to price the demolition of all buildings (as per DSS & Asbestos Report).

We also require unit rates (as mentioned in the bid documents) for soil remediation works – i.e. excavation, removing off site, replacing.

[55] It is abundantly clear that by requesting “unit rates” for soil remediation, such work is understood to be outside the lump sum price in the main contract, and would be billed and paid for at the unit price quoted. Kieswetter provided unit rates to Traugott on February 1, 2013, and met with Traugott and Premier Environmental Services to discuss what work was required. Kieswetter then proceeded to do the work, and rendered invoices that clearly indicate that the work being billed for is environmental remediation work.

[56] When these invoices went unpaid, various email exchanges took place between the parties. This led to a meeting on site in March, 2013, between Kieswetter, Mr. Flaminio, Premier and the owner of the site. Mr. Flaminio was asked about this meeting in his cross-examination, and said this, at q. 482:

The reason for the meeting was the owner wasn’t approving these extras. And we were trying to figure out why so many environmental extras.

[57] Shortly thereafter, Mr. Flaminio asked Premier to review Kieswetter’s unit rates for soil remediation. In an email from David Wade of Premier to Mr. Flaminio dated March 22, 2013, he confirmed that the prices were fair:

As a follow up to yesterday’s meeting I took a look at the unit rates that Kieswetter provided (attached) for transportation and disposal of contaminated soil from the Stratford property and I find them to be fair and reasonable.

[58] Within the following two weeks, Mr. Flaminio approved payment of all of the invoices for environmental soil remediation, save for the disputed invoices I have identified above as item d) for $1,384.79.

[59] Based on all of this evidence, I find as a fact that the environmental soil remediation work was not part of the main contract, but was agreed by both parties to be an extra to the contract, to be billed at the unit price that was quoted by Kieswetter and agreed to by Traugott, and which has been confirmed to be fair and reasonable. I reject the assertion by Traugott that these invoices were paid in error. I find that they were intentionally paid by Mr. Flaminio after having investigated both the scope of the work done and the amount being charged, and having satisfied himself that the invoices were appropriate, save and except for the disputed items identified.

[60] This claim for set-off has no merit and is dismissed. Both claims for set-off having been dismissed, along with the defence to the claim for item b), it follows that Kieswetter is entitled to summary judgment for $109,253.57 as claimed.

The Disputed Portion of the Additional Concrete Removal Invoice, Item c):

[61] I promised to explain the reason why one portion of item c) was agreed to be owing, while the other portion was in dispute. I will do so now for the sake of completeness, although it is not necessary to make any findings on these issues. That will be left to the trial judge.

[62] Additional concrete removal services were requested by Traugott, and Kieswetter provided both a lump sum quote and a time and materials quote for these extras. Kieswetter alleges that their lump sum quote was not accepted, but they were authorized to proceed with the work on a time and materials basis. During the course of the work, it was discovered that the floor slabs were thicker than anticipated, and there was more concrete to be removed than initially anticipated. Kieswetter advised Traugott of this.

[63] Subsequently, Traugott issued a Purchase Order dated February 28, 2013, which purported to retroactively accept Kieswetter’s original lump sum quotation in the amount of $36,434.91. That is the same amount that Traugott concedes to be owing with regard to item c). The invoices for this work on a time and materials basis amount to $59,939.55. It will be for the trial judge to determine whether Kieswetter is entitled to recover the balance over and above the amount of the Purchase Order.

Conclusion:

[64] I conclude that there is no genuine issue for trial regarding Kieswetter’s claim for moneys owed by Traugott in the amount of $109,253.57. As already indicated, the evidence put before the court on this motion has enabled me to fairly and justly adjudicate that portion of the dispute in a timely, affordable and proportionate manner, without the need for a trial.

[65] Kieswetter shall have judgment against Traugott in the amount of $109,253.57, plus prejudgment interest pursuant to the Courts of Justice Act, R.S.O. 1990, c. C.43.

[66] The balance of the claim for $24,889.43 shall be set down for trial within 30 days, and any undertakings that remain outstanding from the examinations of Dan Flaminio and David Kieswetter shall be complied with by that same date. Counsel are at liberty to arrange a pre-trial with the Trial Coordinator.

[67] If the parties cannot agree on costs, I will accept written submissions from Kieswetter within 15 days, with responding submissions from Traugott within 10 days thereafter, and any reply within 5 days thereafter. Failing that, the parties will be deemed to have resolved the issue of costs between themselves.

“T. A. Heeney R.S.J.”

T.A. Heeney R.S.J.

Released: March 5, 2014

COURT FILE NO.: 13-2443

ONTARIO

SUPERIOR COURT OF JUSTICE

IN THE MATTER OF the Construction Lien Act, R.S.O. 1990 c. C.30 as amended

BETWEEN:

KIESWETTER DEMOLITION (1992) INC.

Plaintiff

– and –

TRAUGOTT BUILDING CONTRACTORS INC. and 1812501 ONTARIO INC.

Defendants

REASONS FOR JUDGMENT

Heeney R.S.J.

Released: March 5, 2014