Introduction

[1] This is a motion by the plaintiff seeking the following relief:

(a) For leave to issue the amended Statement of Claim in the form attached to the Notice of Motion as Schedule “A”;

(b) An Order that the defendants deliver a defence to the amended Statement of Claim within 20 days from the date of service of the amended claim;

(c) An Order for production of an affidavit of documents of the defendant, ABB Inc. (“ABB”), including the documents listed in Schedule “C” (of plaintiff’s factum at Tab C), within 14 days from the date of the Order;

(d) An Order requiring a knowledgeable representative of ABB to attend at an examination for discovery prior to April 30, 2015;

(e) An Order to implement the draft discovery plan; and

(f) An Order granting leave to bring this motion pursuant to section 67 of the Construction Lien Act, if necessary.

[2] At the outset of the motion, the defendants consented to the amended Statement of Claim, referred to in [1] (a) above. By inference, the consent of the defendants also settles 2 above. An order shall go in accordance with relief sought in (a) and (b) of the plaintiff’s Notice of Motion.

[3] The issues to be determined by this Court on this motion, therefore, are (c), (d), (e) and (f).

Cross-Motion

[4] The Court also heard a Cross-Motion by the defendant, ABB, against the plaintiff, for an order granting leave to bring a motion for security for costs pursuant to section 67(2) of the Construction Lien Act.

[5] Section 67 of the Construction Lien Act provides as follows:

(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.

Interlocutory steps

(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.

Application of rules of court

(3) Except where inconsistent with this Act, and subject to subsection (2), the Courts of Justice Act and the rules of court apply to pleadings and proceedings under this Act.

Nature of the Plaintiff’s Motion and Overview

[6] The defendant, ABB Inc. (“ABB”) entered into four subcontracts (the “subcontracts”) with the defendant, 1187855 Ontario Inc. cob as Clarida Construction Maintenance (“Clarida”), pursuant to which Clarida was required to construct four “turnkey” large scale solar generating stations.

[7] Two of those projects were known as the “Odessa Project” and the “Hwy 2S Project”. The subcontract price payable by ABB to Clarida for all of the work on the Odessa Project was $7,703,109.50 excluding taxes. The subcontract price payable by ABB to Clarida for all of the work on the Hwy 2S Project was $7,707,467.00 excluding taxes.

[8] Simpson’s Fence subsequently entered into two subcontracts with Clarida to perform part of Clarida’s work on the Odessa and Hwy 2S Projects.

[9] According to the defendant, ABB, Clarida failed to perform its obligations under the subcontracts and, ultimately, abandoned the projects on September 5^th, 2013. It is also clear that Clarida failed to pay substantial monies for work that the subcontractors performed on the four projects.

[10] This motion involves the two said projects hereinafter referred to as “Odessa Project” and “Hwy 2S Project”.

[11] Many of Clarida’s subcontractors, including the plaintiff, filed liens against the projects. There have been a total of 21 liens filed against Hwy 2S Project and 25 against the Odessa project.

[12] ABB has taken steps to vacate all of the liens that were filed by Clarida’s unpaid subtrades. ABB has posted security with the Court in the total amount of $5,022,123.71 in relation to Hwy 2S liens and $7,598,383.56 in relation to the Odessa liens.

[13] These amounts are on top of the $4,574,037.36 paid by ABB to Clarida (or directly to subtrades on the Odessa project) and $4,917,976.76 paid by ABB to Clarida (or directly to subtrades on Highway 2S project).

[14] On January 24, 2014, Lennox Snow Fence Co. (1982) Ltd., one of the subcontractors with liens against both Projects, obtained orders pursuant to Section 60 of the Construction Lien Act, R.S.O. 1990, c.C.30 (the “Act”) directing that settlement meetings under the Act take place for both Projects.

[15] The settlement meetings for both Projects were held together. The first settlement meeting took place on June 5, 2014. An order was made at that time which:

(a) Established a vetting committee; and

(b) Directed all parties to disclose certain documents to the vetting committee to permit the vetting committee to determine the validity and quantum of each lien and to determine the amount of the holdback available for distribution.

[16] Further settlement meetings were held on September 18, 2014, November 19, 2014 and December 11, 2014. The next settlement meeting was scheduled for February 24, 2015.

[17] The plaintiff’s motion is related to an alleged agreement between the defendant, ABB, and the plaintiff that the defendant, ABB, would pay the plaintiff for its ongoing work and all extras. In support of this claim, the plaintiff is relying on an email dated June 3^rd, 2013, from Monique Jobin of the defendant, ABB, to Ted Simpson, of the plaintiff.

[18] The plaintiff is also relying on an email dated June 25^th, 2013 from Devinder Kampoj of the defendant, ABB, to Ted Simpson, of the plaintiff.

[19] The plaintiff is alleging that the June 25^th email correspondence confirms that ABB was undertaking to pay the accounts of the plaintiff and extras.

[20] The plaintiff is further alleging that at that point in time that the defendant, Clarida, was acting only as an agent for ABB confirming that Simpson’s Fence had performed the work and that payment for such work would be paid by ABB.

[21] The plaintiff asserts that in July and August of 2013, that the plaintiff only received partial payment from ABB on its undertaking to cover the projects and in an email from the plaintiff to ABB on August 12^th, 2013, the plaintiff advised ABB that it was in default of the payment agreement and its own payment proposal.

[22] The amended Statement of Claim essentially claims that in addition to the lien rights to which the plaintiff is entitled pursuant to the Construction Lien Act, it is also entitled to monies owing to it by the ABB pursuant to its contractual obligations, directly, with the plaintiff.

[23] The plaintiff states that since April 25^th, 2014, counsel for the plaintiff has been unsuccessful in arranging with counsel for the defendant, ABB, a discovery plan or a response to the plaintiff’s comprehensive affidavit of documents dated October 9, 2014.

[24] By letters dated November 19^th and 24^th, 2014, Mr. MacKeigan asked that Mr. Round produce the following documents:

(a) Copies of the contracts and change orders between ABB and SunEdison Canadian Construction LP;

(b) Copies of the invoices from ABB to SunEdison;

(d) Copies of change orders between ABB and Clarida;

(e) Copies of invoices from Clarida to ABB;

(f) Documents to evidence the quantum and dates of payments to Clarida;

(g) Copies of communications between Clarida and ABB regarding the termination of Clarida’s services;

(h) Copies of communications between ABB and SunEdison regarding the termination of Clarida’s services; and

(i) Documents to evidence the quantum and dates of payments from SunEdison to ABB.

[25] It is alleged by the plaintiff that it has been operating for over sixty years and is owed over three millions with respect to these two solar projects and that it is indebted to its own subcontractors in amounts totalling $1,300,000.00. Nonpayment by ABB and/or Clarida is detrimental to the plaintiff.

[26] There have been no discoveries in this action, no affidavits of documents have been exchanged and no demand for particulars. The plaintiff submits that ABB has refused to produce affidavits of documents or conduct discoveries in this action.

[27] ABB submits that it never assumed the role of Clarida or Clarida’s obligations under the subcontract. It further says that it has limited knowledge of the work performed or materials supplied by the plaintiff to either project and denies that it was unjustly enriched by the work performed by the plaintiff.

Law

[28] Section 79 of the Act specifies that all persons having a lien who have supplied services or materials to the same payer (in this instance Clarida) comprise a “class”. Pursuant to Section 80 of the Act:

(a) No member of a “class” has priority over any other member of that class;

(b) The holdback available to satisfy the liens of a class must be distributed rateably among the members of each class; and

(c) The liens of the members of a class have priority over the lien of the payer of that class – or in other words, the liens of Simpson’s Fence’s subtrades have priority over Simpson Fence’s lien.

[29] Part VII of the Act is designed to ensure that all lien claims related to an improvement proceed together and that all rights among the parties are adjusted equitably in the process.

[30] ABB submits that the appropriate method of dealing with any discovery issues in connection with the two Projects is as follows:

(a) If Simpson’s Fence wishes to take the lead, then the pleadings in its two actions must be finalized, so that the issues in dispute are identified and so that Simpson’s Fence is in a position to apply to fix a trial date under Section 60 of the Act;

(b) A notice of trial can then be served on all parties to ensure that they are all brought before the court at the first lien “pre-trial”;

(c) At that time, an order could be made directing all lien claimants and defendants, to produce Scott Schedules, along with the documents that they intend to rely upon in support of the positions that they intend to assert; and

(d) Once the actual issues in dispute have been properly identified in the Scott Schedules, a meaningful discussion about any required additional documentary or oral discovery can take place and an appropriate order can be structured so as to ensure that the most efficient and least expensive method of addressing any discovery needs is put into place.

[31] In the case Lecompte Electric Inc. v. Doran (Residential) Contractors Ltd. et al, 2010 ONSC 6290, found at Tab 3 of Brief of Authorities of the Plaintiff, Master MacLeod states at paragraphs 3, 4, 5, 6, 7, and 11, as follows:

[3] As I will address momentarily, it is entirely reasonable to seek direction from the court if there is a legitimate disagreement about how to proceed with production and discovery. It is not however reasonable to launch an adversarial attack on a party that has prepared an affidavit of documents that complies with the rules in the absence of either an agreement or an order. I am dismissing the motion on terms. Brief reasons to follow.

Production and Discovery under the Construction Lien Act

[4] The conduct of an action under the Construction Lien Act is intended to be of a summary character having regard to the amount and nature of the liens in question. (See s.67 of the Act.) Proportionality is therefore a governing principle in the Act and it is not automatic that the parties have access to the full panoply of procedure set out in the Rules of Civil Procedure. In fact, s.67(2) specifically states that interlocutory steps other than those provided in the Act itself shall not be taken except with consent of the court obtained on proof that the steps are necessary or would expedite the resolution of the issues in dispute.

[5] Discoveries or even an affidavit of documents are therefore not automatic and the Act intends that the parties will obtain direction from the court before engaging in costly interlocutory procedures. Section 67 has the effect of making all lien actions potentially case managed and the procedure for each lien action is to be adapted to the needs of the action.

[6] In construction projects there are many potentially relevant documents but there may be only a few that are truly probative of the issues in dispute. Listing the entire project file in an affidavit of documents may be an unhelpful step because it results in unfocused over production. Preserving the project file and internal communication such as email and making it available for inspection if necessary would be prudent. Generally speaking, when the court gives direction, it will be aimed at identifying the real issues in dispute and zeroing in on the key documents. For example, the court will frequently order exchange of “Scott Schedules” in which each party is obliged to particularize the elements of its claims and identify the documents it relies upon for each. Sometimes this is done in lieu of an affidavit of documents. When discovery is authorized, it is frequently time limited.

[7] Of course, parties to lien litigation frequently proceed without the consent of the court by simply agreeing to exchange production and to proceed with discoveries. It is a bit late however to then complain to the court about the form of the affidavit of documents. If parties are going to proceed by agreement, then they ought to discuss in advance how the documents are to be organized and produced and they should ensure the agreement is documented. They might usefully consider the hierarchy of documents that exists in a construction project and focus on those that will be of most assistance in resolving the issues that are actually in dispute. They might fruitfully consider how to isolate the real issues at the earliest possible opportunity.

Discovery Planning

[11] Discovery planning is now required in all actions under the Rules of Civil Procedure. This requirement will also apply in lien actions if leave for discovery is granted. Rule 29.1 is a new rule which establishes an obligation to meet, confer and to create a discovery plan before production and discovery get underway. The rule provides that a court may refuse discovery relief to parties that have not developed such a plan. The parties are specifically directed to consider proportionality which is a concept that is referred to in Rule 29.1 but also which now infuses all of the rules by virtue of Rule 1.04(1.1), as noted, it is also a specific requirement of all steps in a lien proceeding.

[32] In the case of Tamarack North Holdings Ltd. v. Hallisey 2007 CanLII 254 (ON SC) found at Tab 4 of Brief of Authorities of the Plaintiff, Wood J states at paragraphs 4, 5 and 6, as follows:

[4] The defendants seek leave to conduct examinations for discovery. The Construction Lien Act is designed to be a summary procedure to reduce costs and simplify proceedings as much as possible. Therefore leave to conduct examinations for discovery is required.

[5] The case is based primarily upon a time and materials contract. The construction was complicated. The design of the buildings and their details developed and changed on an almost daily basis as the work progressed. The success of both the plaintiff and the defendant will depend upon how the evidence of the many meetings between the parties is received.

[6] This will be a time-consuming procedure. It is appropriate that the minutiae of the parties’ dealings be examined at discovery rather than before the judge at trial. Leave to conduct examinations for discovery is granted.

[33] At Tab 2 in the Defendants’s Brief of Authorities, under the title, Ontario Construction Line Act, contains the following Commentary by Duncan W. Glaholt and David Keeshan:

Commentary

Construction lien actions fall within the jurisdiction of the Ontario Court (General Division). This section sets out an over-riding code of procedures, adopting the Rules of Civil Procedure and the Courts of Justce Act only where they are not inconsistent with the provisions of the Act. Lien actions are conducted in some respects as if they were class actions. Part VIII is designed to ensure that all liens related to a given improvement proceed to trial together and that all rights among these parties are adjusted equitably in the process. Long before court administered A.D.R., the process of reference to a Master with expertise in Builders’ Lien Act, R.S.A. 2000, c.B-7, s.50, s 61(1) of The Builders’ Liens Act of Manitoba, R.S.M. 1987, c.B91, s.41 of the New Brunswick Mechanics Lien Act, R.S.N.B. 1973, c. M-6, s. 34(5) of Nova Scotia’s Mechanics’ Lien Act, R.S.N.S. 1989, c.277 and section 42 of the P.E.I. Mechanics’ Lien Act R.S.P.E.I. 1988, c. M-4.

Analysis and Decision

[34] The case law is clear that any action under the construction lien act is intended to be of a summary nature having regard to the amount in nature of the liens in question. As Master MacLeod declared in his Reasons for Decision in Lecompte Electric Inc. v. Doran (Residential) Contractors Ltd. et al, supra, an action under the Construction Lien Act is intended to be of a summary character having regard to the amount and nature of the liens in question. However, in the motion before this court, the plaintiff’s action goes beyond matters that are principally dealt with in a lien action. In effect, the plaintiff is alleging that it only continued working on the projects in this case after relying on the undertakings of the defendant. I find that the plaintiff has produced evidence which would support a need for production and discovery.

[35] As noted by Wood J in the case of Tamarack North Holdings Ltd. V. Hallisey, 2007 CanLII 254 (ON SC) permitted discoveries finding that it was appropriate that the minutia of the parties’ dealings be examined at discovery rather than before the judge at trial. Accordingly, leave to conduct examinations for discovery were ordered in that case.

[36] With respect to the production of documentation requested by the plaintiff, I am satisfied that documents listed in Schedule C” of the plaintiff’s factum are required for the purpose of determining the issues in this case and therefore an order will be made requiring the defendant to produce those documents on or before May 15, 2015.

[37] With respect to the defendants’ cross-motion for security for costs, the principles that a court must consider in determining whether a party should be required to post security for costs have been laid out in a decision by S.E. Lang J.A. in the case of City Commercial Realty Services (Canada) Ltd. v. Bakich, et al, 2005 CarswellOnt 10512 (ON CA), found at Tab 4 of the Responding Brief of Authorities of the Plaintiff. Clearly, as Lang J.A. stated in that decision in para. 8:

...A bald assertion that a party has insufficient assets, on its own, cannot satisfy the first part of the test.

In this case, the Defendants, in my view, are relying on a statement of one of the principles of the plaintiff that non-payment of the $3,300,000 owing by the Defendants to the Plaintiff would be detrimental to the Plaintiff and is insufficient for an order requiring the Plaintiff to post security for costs.

[38] The defendant is relying on the fact that the plaintiff has filed an affidavit in this action stating that it owes subtrades in the $1,300,000 in connection with the projects and that non-payment by the Defendant of the monies owing to the plaintiff would be “detrimental to Simpson’s Fence” is insufficient to require the plaintiff to post security for costs. There must be some evidence of insufficiency of assets of the plaintiff before such an order can be granted. I find that the evidence before me on this motion falls far short of such insufficiency of assets.

[39] Therefore, the defendants’ cross-motion for security for costs is dismissed.

[40] If the parties cannot agree on costs, submissions may be made to me, no longer than two typewritten pages, by May 30^th, 2015.

The Honourable Mr. Justice M.J. Quigley

Released: April 14, 2015

cob as Clarida Construction Maintenance et al, 2015 ONSC 2430

COURT FILE NO.: CV-13-492-0000

DATE: April 14, 2015

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

Simpson’s Fence (Chatham) Inc.

Plaintiff

– and –

1187855 Ontario Inc. cob Clarida Construction Maintenance and ABB Inc.

Defendants

RULING ON MOTION

Quigley, J.

Released: April 14, 2015

Simpson’s Fence (Chatham) Inc. v. 1187855 Ontario Inc. cob as Clarida Construction Maintenance et al, 2015 ONSC 2430

Case Summary

Introduction

Counsel

Parties

Areas of Law

Fact Patterns

Issues

Statutory Provisions 3

Legislation 5