SUPERIOR COURT OF JUSTICE - ONTARIO

CITATION: Interborough Electric Inc. v. Walsh Construction Company Can. 2015 ONSC 3037

COURT FILE NO.: CV-14-507088

DATE: May 12, 2015

RE: Interborough Electric Incorporated v. Walsh Construction Company Canada

BEFORE: MASTER C. WIEBE

COUNSEL: Wise, H. W., and Halfin, B. for Walsh Construction Company Canada (the moving party); Ivanoff, P. A., and O’Brien, for the Toronto Transit Commission (the responding party);

Biseglia, E., for Interborough Electric Incorporated.

HEARD: February 9, 2015 at Toronto, Ontario.

REASONS FOR DECISION

I. INTRODUCTION

[1] Walsh Construction Company Canada (“Walsh”) is the contractor responsible for the construction of the Steeles West Station (“the Project”), which is a part of the comprehensive expansion of the Toronto subway system known as the “Toronto-York Spadina Subway Extension” (“TYSSE”). Walsh contracted with the Toronto Transit Commission (“TTC”) for this work. Walsh subcontracted the electrical work on the Project to Interborough Electric Incorporated (“IEI”).

[2] On May 15, 2014 IEI purported to preserve a claim for lien in relation to the Project. Walsh posted security for this claim for lien and it was vacated. On June 25, 2014 IEI purported to perfect its lien by commencing an action naming only Walsh as the defendant. Walsh now seeks an order granting it leave under the Construction Lien Act, R.S.O. 1990, c. C.30, as amended (“CLA”), section 56 to add the TTC as a third party to that action. IEI consents to the motion. TTC opposes it.

[3] For the reasons given below, I grant the motion.

II. BACKGROUND

[4] On or about September 22, 2011, Walsh entered into a general contract (“the Contract”) with the TTC to construct the Project for an original contract price of $165,925,000. The Contract contains the following provisions:

• In GC 32.2 the Contract states that, “the Contractor shall complete the Work, in accordance with the written instruction of the Commission’s Representative, notwithstanding any dispute, arbitration or legal action by either or both of the parties.”

• In GC 32.4 the Contract states that, “no action or suit may be brought by [Walsh] until after the final invoice has been processed by the Commission’s Representative and that action or suit shall be only for the amount of any difference between [Walsh’s] account as submitted and the final invoice.”

• In SC 21 the Contract outlines an alternative dispute resolution process for claims by Walsh as against TTC which has the following steps: Walsh may submit a written notice of an intention to make a claim; Walsh submits a statement of claim to TTC; TTC submits its response to Walsh’s statement of claim; Walsh and TTC negotiate the claim; if negotiations fail, both must agree to submit the claim to a jointly appointed dispute resolution board (“DRB”). There is no binding arbitration agreement until the parties agree to submit the dispute to the DRB. It is undisputed that this binding arbitration process has not been triggered.

[5] On or about October 3, 2011, Walsh entered into a subcontract (“the Subcontract”) with IEI whereby IEI was to complete the electrical work on the Project for an original price of $6,350,000. Interestingly, the Subcontract was not made a part of the evidence.

[6] The parties encountered difficulties with the IEI work. On February 25, 2013, IEI commenced an action against Walsh, TTC and Walsh’s bonding company concerning the Subcontract (“the Bond Action”) claiming payment of monies. Walsh stated in its Statement of Defence issued May 6, 2013 that IEI had agreed in section 11.3 of the Subcontract to “toll and stay” its rights under the Subcontract “until such time as the Contractor has exhausted its dispute provisions with the Owner or Third-Party.” Mr. Biseglia in oral argument stated that this tolling provision had been removed from the Subcontract, although there was no evidence of that. There was no dispute that the Subcontract contains no arbitration agreement.

[7] IEI sent correspondence to Walsh wherein it blamed both Walsh and TTC for the difficulties. Examples that were drawn to my attention included a letter IEI sent to Walsh dated April 22, 2013 wherein IEI gave a litany of complaints about both Walsh and TTC. Another example was a letter dated February 21, 2014 from IEI to Walsh wherein IEI blamed both Walsh and TTC for delays, incomplete design, non-payment and improper coordination.

[8] On April 4, 2014 Walsh terminated the Subcontract. On May 15, 2014 IEI served and registered a claim for lien in the amount of $3,611,979.94. On June 11, 2014 Walsh posted security and obtained an order vacating this claim for lien. On June 25, 2014, IEI commenced an action, the within action, purporting to perfect its lien (“the Lien Action”). In the Lien Action, IEI pleaded simply that it had supplied electrical services, labour, material and equipment to Walsh in relation to the Project, and that the sum of $3,611,979.94 remains unpaid.

[9] Walsh asked for a breakdown of the IEI claim. It received one in May, 2014. It showed that $2,359,451.51 of the IEI claim (namely about 66%) concerns “stand-by costs,” which are costs related to the alleged delay of IEI’s work.

[10] Walsh delivered a Statement of Defence and Counterclaim on August 15, 2014. Some aspects of this pleading are of note:

• Walsh pleads that its obligation to pay IEI was expressly or impliedly conditional on payment by TTC to Walsh for IEI’s work, and that the IEI claim includes amounts that have not been paid by TTC, thereby absolving Walsh of liability to IEI. Walsh expressly pleaded that the IEI claims for holdback, extras and standby costs fell into this category. Based on the previous correspondence from IEI to Walsh, these items of claim would amount to the bulk, if not the entirety, of the IEI lien claim.

• Walsh blames IEI for numerous Subcontract breaches such as non-performance of contract obligations, deficiencies and delay. Walsh asserts a set-off and counterclaim in the amount of $10,000,000.

[11] There were many issues with the overall work under the Contract as well. As of December, 2014, Walsh had submitted 126 separate notices of intention to make a claim to TTC. These included notices concerning IEI’s work.

[12] In September, 2014, Walsh delivered to TTC a 7-volume statement of claim which sought an increase in the Contract Price of $136,959,126.34 due to TTC’s alleged fault for delays, design defects, changes in the work and unforeseen events (“the Walsh Contract Claim”). Included in this document were numerous claims against Walsh by its subcontractors, including the $3,611,979.94 claim IEI has asserted against Walsh in the Lien Action. Walsh claimed in this document that, “to the extent it is established that there is merit to the [IEI] claim, it is Walsh’s position that those amounts claimed are the responsibility of the TTC . . . .” Walsh added additional claims in relation to the IEI scope of work, namely claims for legal costs concerning the termination of the Subcontract and for the costs of hiring a completion electrical subcontractor. As of the time of the motion, TTC had not responded to the Walsh Contract Claim.

[13] On November 5, 2014, Walsh served its motion material for this motion. The motion was made returnable February 9, 2015. Included in the motion material was an affidavit sworn on October 9, 2014 by one, Tom Sims III. Also included in this motion material was the proposed Third Party Claim as against TTC. The relief being sought in the Walsh Third Party Claim is contribution and indemnity for any amount that Walsh may have to pay IEI in the IEI action, plus interest and costs. The proposed allegations against TTC in the Third Party Claim include an alleged failure to authorize changes, provide proper design, and pay stand-by costs, extras, additional costs and amounts owing to Walsh.

[14] TTC delivered its Responding Motion Record in early December, 2014. It contained an affidavit sworn on December 1, 2014 by one, Andrew G. Bertolo. Walsh delivered a Supplementary Motion Record that contained a second affidavit sworn by Mr. Sims on December 16, 2014, and a Second Supplementary Motion Record that contained several documents. IEI delivered no material.

[15] On January 22, 2015, IEI commenced a second bond action against TTC, Walsh and Walsh’s bonding company (“the Second Bond Action”) for the same amount as its lien claim. In its Statement of Claim in this action IEI provided detailed and lengthy allegations of what it described as TTC’s negligence in providing a proper design and site coordination, all of which IEI alleged caused IEI damage.

[16] Cross-examinations on the affidavits in this motion took place. Mr. Sims was cross-examined on January 14, 2015. Mr. Bertolo was cross-examined on January 15, 2015. Mr. Bertolo refused to answer several of Mr. Wise’s questions on the ground that they were not relevant. At the request of Mr. Wise, I convened a telephone conference call on January 26, 2015. Mr. Wise wanted to adjourn the hearing of this motion in order to allow him to bring a motion for an order requiring Mr. Bertolo to answer these questions. I refused to make the requested order on the grounds that I did not have enough information to determine whether the refused questions were vital to the motion.

[17] TTC delivered a Supplementary Motion Record on or about February 3, 2015. It contained the transcripts and exhibits from the cross-examinations.

[18] The motion was argued on February 9, 2015. The argument was between Walsh and TTC. IEI counsel was present and made some submissions. IEI consents to the motion. There was no issue as to inadequate service on all necessary parties to the motion.

III. ISSUES

[19] The issues in this motion are the following:

a) Is the proposed Walsh Third Party Claim only for contribution and indemnity?

b) Would it unduly prejudice TTC in conducting a defence by depriving it of the dispute resolution provisions of the Contract?

c) Would it unduly prejudice TTC in conducting a defence by having the issues in the Walsh Contract Claim determined in the IEI Lien Action?

d) Would it unduly delay or complicate the resolution of the IEI claim?

e) Would granting the motion be inconsistent with Master Short’s ruling in Advanced Construction Techniques Ltd. v. OHL Construction, Canada, 2013 ONSC 7505 (“Advanced Construction”)?

f) Would Walsh and IEI be prejudiced if the motion is not granted?

g) What is the effect of Mr. Bertolo’s refusal to answer questions?

IV. ANALYSIS

(a) Is the proposed Walsh Third Party Claim only for contribution and indemnity?

[20] CLA section 56 sets out the requirements concerning third party claims in construction lien actions. Leave of the court is required for third party claims. Furthermore, I agree with Mr. Ivanoff that the onus is on the moving party to establish the grounds for leave; see Stensa/Procon Ltd. v. York University [1993] O.J. No. 4370 (Ont. Master) at paragraph 8.

[21] As it pertains to this motion, the first requirement for leave is that the proposed third party claim be for contribution and indemnity in respect of the claim of the plaintiff. Mr. Ivanoff in oral argument contended that the proposed Third Party Claim is broader than just a claim for contribution and indemnity. He pointed to paragraph 12 of the Third Party Claim wherein he argued that Walsh makes a general pleading that TTC has improperly withheld payments to Walsh. He argued that in paragraph 10 of the Third Party Claim Walsh raises claims against TTC that it has asserted in the Walsh Contract Claim.

[22] I do not agree. The wording of paragraph 12 is somewhat ambiguous and can be viewed as pertaining only to TTC funds that would have been used by Walsh to pay Walsh’s subtrades, such as IEI. This corresponds with the Walsh’s pay-when-paid defence against IEI in the main action. The allegations in paragraph 10 are all expressly related to whatever Walsh may be obligated to pay IEI. Furthermore, and in any event, the pleading is subject to the prayer for relief in paragraph 1, which is only for contribution and indemnity, interest and costs.

[23] I find that Walsh has met this first requirement for leave, namely proving that the Third Party Claim is only for contribution and indemnity.

(b) Would the Third Party Claim unduly prejudice TTC in conducting a defence by depriving it of the dispute resolution provisions of the Contract?

[24] As it pertains to this motion, the second requirement for leave under CLA section 56 is a court finding under subsection 56 (2) i. that the prospective third party, TTC, is not “unduly prejudiced” in the “conduct [of] a defence” by the Third Party Claim.

[25] Mr. Ivanoff’s first argument on this point was that GC 32.4 of the Contract operates to prevent Walsh from bringing actions against TTC until the end of the Contract work when all of its claims are known and capable of being determined together in an efficient manner. In the meantime, the dispute resolution provisions of the Contract allow Walsh to start claims and negotiate them without triggering a binding arbitration that does not have the consent of TTC. He argued that the Walsh Third Party Claim would undermine this protection for TTC, and that it would do so not only in this case, but in future lien actions brought by other Walsh subtrades before the completion of Walsh’s work.

[26] Mr. Wise argued that the Contract cannot be interpreted to prevent the Walsh Third Party Claim. First, he argued that there is an ambiguity in the Contract GC 32.4 in this regard. He argued that GC 32.2 contemplated the existence of actions involving Walsh and TTC prior to the completion of Walsh’s work. Invoking the doctrine of contra proferentem, as the relevant Contract terms are standard form TTC terms, he argued that the ambiguity should be resolved against the interest of TTC; see Eli Lilly & Co. v. Novopharm Ltd. 1998 791 (SCC), [1998] 2 S.C.R. 129 (S.C.C.) at paragraph 53. He also referred me to the Supreme Court of Canada decision in Consolidated Bathurst Export Ltd. c. Mutual Boiler & Machinery Insurance Co., 1979 10 (SCC), [1980] 1 S.C.R. 888 (S.C.C.) at paragraph 25 for the proposition that any ambiguity in a contract term that purports to limit a party’s general rights, such as the right to commence legal proceedings, must be resolved against the party who inserted it and is now relying on it.

[27] Second, Mr. Wise argued that the meaning of the words, “action and suit,” in GC 32.4 should be correlated to the meaning of the word, “action,” in the CLA and not to the meaning of the word, “action,” in the Rules of Civil Procedure, as Mr. Ivanoff urged. Under the Rules, “action” is expressly defined to include third party claims. Mr. Wise maintained in his factum that a “plain reading” of the use of the word, “action,” in the CLA leads to the conclusion that that statute does not extend the meaning of the word, “action,” to include third party claims as described in section 56. He pointed out that third party claims described in section 56 are stated to be confined to claims for contribution and indemnity in respect of “that claim,” which is the plaintiff’s “action;” see BMR Golf International Ltd. v. Forgehill Equities Inc. [1999] O.J. No. 2279 (Ont. S.C.J.) at paragraph 9. Hence, so the argument went, third party claims mandated by the CLA do not have the meaning of an “action.” Mr. Wise, therefore, argued that the use of the words, “action and suit,” in GC 32.4 should similarly also not be extended to include third party claims for contribution and indemnity. He presented no case authority to substantiate this point.

[28] I agree with Mr. Wise’s point about ambiguity. GC 32.2 does contemplate the existence of “disputes” and “legal actions” by Walsh and TTC prior to the completion of Walsh’s work. This ambiguity is exacerbated by others aspects of the Contract. I was not made aware of any requirement in the Contract that Walsh obtain contractual stays of actions by its subtrades and suppliers until Contract work is done. Therefore, it would appear that the Contract contemplates at minimum the existence and litigation of subtrade actions (such as the Lien Action) and “legal actions” by Walsh and TTC arising from such actions.

[29] Placed in this context, there is an added ambiguity, in my view, in the word “brought” in GC 32.4. Claims over for contribution and indemnity are derivative in nature. They are the products of actions “brought” by others and are ways in which defendants try to protect themselves from shouldering all the responsibility for such claims. The prohibition in GC 32.4 could, therefore, just as well be no more than a prohibition against Walsh from pursuing, namely “bringing,” its own independent claim for damages against TTC until Walsh’s work is done. Invoking the doctrine of contra proferentum as raised by Mr. Wise, I find, for the purposes of this motion, that such an interpretation of GC 32. 4 can be applied.

[30] Concerning Mr. Wise’s argument about the meaning of the word, “action,” in the CLA as it relates to third party claims, I do not make a finding. I do not have to, given my interpretation about the ambiguities in the Contract, as described above. Following the route of the ambiguities described above, I have reached the same conclusion about the meaning of the GC 32.4. I am also mindful of the lack of authority for Mr. Wise’s point.

[31] Mr. Ivanoff argued that the meaning of the word “action” in GC 32.4 is self-evidently the same as the meaning of the word “action” in the Rules. I do not agree that such a meaning is self-evident as it relates to third party claims for contribution and indemnity. I was not made aware of any definition in the Contract for the words, “action or suits.” The statutes that were raised in argument also do not provide clear guidance. As stated earlier, the Rules do indeed define “action” to include third party claims. But under the Rules third party claims are defined expansively to include not only claims over for contribution and indemnity, but independent claims for damages (as long as such independent claims are “related to” the transactions or occurences in the main action). The CLA, on the other hand, confines third party claims mandated by that statute to claims over for contribution and indemnity and, as Mr. Wise pointed out, does not attach the word “action” to such limited third party claims. The meaning of the words, “action and suit” as used in GC 32.4 in relation to third party claims for contribution and indemnity is not, in my view, self-evident.

[32] This means that, for the purposes of this motion, I find that TTC will not be deprived of the dispute resolution provisions of the Contract, as the Contract contemplated and did not prohibit actions such as the Lien Action and the proposed Walsh Third Party Claim.

[33] Mr. Ivanoff raised the specter of multiple lien proceedings with similar third party claims against TTC prior to the completion of the work. My response is that, as I see it, such a consequence would not be inconsistent with the Contract.

(c) Would the Third Party Claim unduly prejudice TTC in conducting a defence by having the issues in the Walsh Contract Claim determined in the IEI Lien Action?

[34] Mr. Ivanoff’s second argument was that the Walsh Third Party Claim introduces the risk that the court, in a summary lien proceeding “and in the absence of a full factual record,” would make findings that materially impact the broader Walsh Contract Claim. The gist of this argument is that the Walsh Contract Claim will be resolved in another forum that does not have a summary procedure such as the one that exists in lien actions, that the issues raised in the Walsh Third Party Claim overlap with the issues in the Walsh Contract Claim, and that by allowing the Walsh Third Party Claim the court will be determining issues in the Walsh Contract Claim in a summary way that deprives TTC of a non-summary process.

[35] For the purpose of this argument, I grant that there are issues in the Walsh Third Party Claim that overlap with the issues in the Walsh Contract Claim. In cross-examination, Mr. Sims admitted as much.

[36] What I do not understand is the implicit, if not explicit, argument that the Walsh Contract Claim will not itself be determined eventually in the construction lien court. There is no binding arbitration agreement under the Contract until both Walsh and TTC agree to submit the Walsh Contract Claim and its other claims to the DRB. This has not happened. Until that happens, the mandated steps for advancing the Walsh claims lead only to a negotiation. Another agreement between TTC and Walsh is needed to submit the claim to binding resolution by the DRB. What this means in the end is that once Walsh’s work is done, it will be in a position to preserve and perfect its claim for lien in the usual way, and, if it so chooses, to have the lien court determine the claim without an arbitration.

[37] What I also do not understand is the argument that the lien proceeding necessarily deprives TTC of procedural rights and the opportunity for a “full factual record.” Mr. Ivanoff made reference to CLA sections 67(1) and (2). CLA section 67(1) specifies that a lien action shall be “as far as possible” of a summary character, “having regard to the amount and the nature of the liens in question.” This subsection allows the procedure to be adjusted to suit the needs of the action. CLA section 67(2) specifies that parties in a lien action do not have an automatic right to interlocutory proceedings such as production and discovery. They do, however, have a right under that subsection to get leave of the court to such interlocutory proceedings where they can prove to the court that such proceedings are necessary or would expedite the resolution of the issues. What they are in the end deprived of is the right to interlocutory proceedings that a court finds to be unnecessary or not capable of expediting the resolution of the issues. In an era of proportionality that now exists in the courts, I do not see the limitations in these two subsections as being such as to deny a party such as TTC a full and proper hearing of its defence.

[38] Should TTC and Walsh agree eventually to a binding DRB resolution of the Walsh claims, including the Walsh Contract Claim, TTC would at that time be in a position to move for a stay of the Walsh Third Party Claim under the Arbitration Act, S.O. 1991, c. 17, section 7(1) in order to have the issues in the Walsh Third Party Claim dealt with by the DRB. If by that point there has been a determination in the Walsh Third Party Claim that affects the DRB process, this would, in my view, streamline the DRB process. The resolved issues would not have to be re-litigated before the DRB. For the issues that were not determined the adduced evidence could be brought before the DRB. In my view, this eventuality would not prejudice TTC in conducting its defence of any of the issues.

[39] As to process, I was given no evidence as to what such a DRB process would entail. Therefore, I am left wondering whether the DRB process would be just as summary in nature as a lien proceeding. If so, TTC will be deprived of no process that it has not already agreed to.

[40] Mr. Ivanoff in his factum stated also that the Walsh Contract Claim contains claims in tort and fraud, claims that could not be advanced in a lien action by virtue of the pleadings limitations in the CLA. These are concerns for Walsh, not TTC. At most, these allegations may lead to parallel Walsh proceedings in the Ontario Superior Court or before the DRB. They do not prejudice TTC’s ability to defend the issues.

[41] Mr. Ivanoff argued that adding TTC as a third party to the IEI action would not resolve all of the issues raised by Walsh in relation to IEI in the Walsh Contract Claim. This again, at most, will introduce complexity. If the Walsh Contract Claim proceeds through a lien proceeding, such collateral issues will be dealt with through a Judge-directed reference process before a Lien Master that will involve all lien claimants and all issues. If the Walsh Contract Claim proceeds through a DRB process, these collateral issues will be resolved in this parallel proceeding. I fail to see how TTC’s ability to defend these issues is prejudiced as a result.

[42] In his factum, Mr. Ivanof referred me to two cases on this point, Hobbs Miller Maat Inc. v. UPI Inc. , 2009 ONSC (Ont. S.C.J.), and Wilson Cartage v. Carlisle et al, 2011 ONSC 1154 (Ont. S.C.J). I have reviewed these cases and find them to be distinguishable from this case. In both of those decisions, the court dismissed motions for leave to bring a third party claim on the grounds that the proposed third party claim would transform a contract action (the main action) into one based in tort (the third party claim) against third parties with whom the defendant had no contract. That is not the case here. Walsh’s Third Party Claim is grounded in the cause of action of breach of contract against the owner concerning issues that arise directly from the breach of contract allegations in the IEI main action.

[43] I find that TTC would not be unduly prejudiced in conducting a defence by having issues in the Walsh Contract Claim determined in the IEI Lien Action.

[44] As a general comment, I agree with Mr. Wise that what TTC appears to be objecting to here is the inconvenience it will encounter with the complexities of the legal processes associated with the claims under the Contract. In my view, such complexities may exist, but I have been given no proof that they will undermine TTC’s ability to defend the issues.

(d) Would the Walsh Third Party Claim unduly delay or complicate the resolution of the IEI claim?

[45] Mr. Ivanoff’s next argument was that the Walsh Third Party Claim would unduly delay or complicate the resolution of the IEI claim. He argued that in the proposed Third Party Claim Walsh raises allegations that TTC delayed Walsh’s work, and that this will require the exchange of delay expert reports and extensive further examinations for discovery.

[46] In my view, the IEI claim itself would appear to contain several issues of delay that implicate both TTC and Walsh. The Statement of Claim is spare in its pleading and, at this point, there has not been to my knowledge production and discovery. Hence the earlier IEI correspondence is instructive. The April 22, 2013 IEI letter to both Walsh and TTC is a good example. It raises numerous issues that concern schedule slippage and additional costs, and it clearly blames both Walsh and TTC for this. IEI blames TTC for inadequate design, lack of disclosure about site conditions, and lack of suitable staff. IEI asserts a schedule extension. In the Second Bond Action, IEI pleads that TTC’s actions caused IEI damage. In argument, Mr. Biseglia confirmed that IEI’s claim implicates both Walsh and TTC. In Walsh’s Statement of Defence and Counterclaim there are allegations that IEI is at fault for deficiencies and incomplete work that led to schedule slippage and damages to Walsh. It appears to me that delay issues concerning TTC are an intricate part of the IEI action itself.

[47] As such, I fail to see how the Walsh Third Party would unduly delay or complicate the resolution of the IEI claim. Indeed, in my view, TTC is a necessary party for the resolution of these issues since the allegations as between IEI and Walsh concern TTC. No doubt, this is the reason IEI consented to this motion.

[48] Mr. Ivanoff pointed out that in the April 22, 2013 letter IEI took the position that the Subcontract was a “standalone” agreement that was not governed by the Contract. I do not view this statement in the letter as being inconsistent with the conclusion that the pleadings in the IEI action include delay issues that implicate TTC.

[49] Mr. Ivanoff referred me in his factum to the decision of Master Sandler in Stensa, supra wherein the Master dismissed a proposed third party claim by an owner against two consultants for contribution and indemnity. In their motion material, one of the consultants stated that it would need to hire a delay expert. The plaintiff’s claim was a delay claim. Master Sandler dismissed the motion as he was not satisfied that the proposed third party claim would not unduly delay or complicate the main action.

[50] In reviewing this decision, I find that the delay claim issue was not central to the decision. What was central was the failure of the defendant to bring the motion earlier than it did, as discoveries were done and a preliminary trial date had been set. The proposed third party consultant wanted to defend the main action, introduce a counterclaim against the owner and a cross-claim against the other third party, thereby significantly delaying proceedings. None of this is present in the case before me. Production and discovery have not even taken place.

[51] I find that the Walsh Third Party Claim would not unduly delay or complicate the resolution of the IE claim.

(e) Would granting the motion be inconsistent with Master Short’s ruling in Advanced Construction?

[52] Mr. Ivanoff referred me to the decision of Master Short in the Advanced Construction case and argued that it should guide me in my decision.

[53] This decision concerned another general contractor on a different portion of the TYSSE named OHL Construction Canada (“OHL”). A subcontractor to OHL, Advanced Construction Techniques Ltd. (“ACT”), had registered a claim for lien in excess of $4 million and perfected it. OHL brought a motion concerning many issues, one of which was for leave to third party TTC for contribution and indemnity in relation to the ACT claim. ACT opposed the motion. TTC took no position. It was not disputed in argument before me that the standard form TTC general contract was used with both OHL and Walsh.

[54] Master Short dismissed this motion as he found that the proposed third party claim would “unduly prejudice . . . the lien claimant’s ability to prosecute its claim and would unduly delay or complicate the resolution of the lien action.”

[55] Having reviewed this decision, I find it distinguishable from the one before me for the following reasons:

• Critical to Master Short’s decision was the fact that ACT and OHL had in their agreement agreed to a simplified arbitration process that had been triggered. The proposed third party claim was in effect an attempt to have TTC join an arbitration that was underway and to which it had not agreed. In the case before me, it is undisputed that the Subcontract contains no arbitration agreement.

• Master Short gave weight to ACT’s argument that its entitlement to payment and the propriety of its termination were not dependent on TTC’s obligation to contribute to such payment. In the case before me, Walsh has expressly raised a pay-when-paid defence (namely that Walsh’s obligation to pay IEI was dependent on TTC’s obligation to pay Walsh). I was given no evidence that this defence was groundless. I also note that IEI’s claim appears to directly implicit TTC.

• Master Short gave weight to ACT’s argument that OHL had not pleaded that it had demanded payment from TTC for the ACT claim. The inference was that OHL was just using the motion as a tactic. In the case before me, Walsh pleaded in paragraphs 25 and 26 of its Statement of Defence and Counterclaim in the Lien Action dated August 15, 2014 that IEI was not entitled to payment because TTC had not released, processed and paid IEI’s claims. The inference to be drawn from this pleading is that Walsh had passed the IEI claims along to TTC. Furthermore, it is undisputed that as early as mid-2014 Walsh served TTC with notices of intention to make a claim that included the IEI claim, and that in September, 2014, Walsh served TTC with the Walsh Contract Claim that expressly included the IEI claim. Walsh has shown in its pleadings a consistent intention to pursue TTC for the IEI claim.

• ACT opposed the motion to third party TTC. In the case before me, IEI not only does not oppose the motion, it consents to it. Interestingly, TTC did not oppose the OHL motion, but it does oppose the Walsh motion.

[56] Therefore, I have concluded that Master Short’s decision, while interesting on its own facts, should not guide me in my decision in this case.

(f) Would Walsh and IEI be prejudiced if the motion is not granted?

[57] Mr. Ivanoff argued that Walsh will not be prejudiced if the motion is not granted. He argued that GC 32.4 amounted to a tolling agreement under the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B, section 22(2) that extended the commencement of the running of the two-year limitation period mandated by section 18 of that statute to the processing of Walsh’s final invoice. It was undisputed that Walsh’s work is at least two years away from completion. The argument was that, by virtue of GC 32.4, Walsh has all this time to assert the claim in question through the dispute resolution provisions of the Contract.

[58] Limitations Act, section 18(1) specifies in essence that the limitation period on any claim for contribution and indemnity starts to run on the day on which the claim which gives rise to the claim for contribution and indemnity is served. For Walsh in this case that day could be as early as May 15, 2014 when Walsh was served with the IEI claim for lien. Two years from May 15, 2014 is May 15, 2016, which is one year from this point.

[59] Given my conclusion that GC 32.4 contains an ambiguity about third party claims for contribution and indemnity which could render that clause inapplicable to such claims, I do not agree with Mr. Ivanoff’s point here. GC 32.4 may not have the effect of tolling the limitation period in section 18 of the Limitations Act. If it does not and if Walsh is required to defer this motion, it could find itself without recourse against TTC for the IEI claim in a year’s time by virtue of the Limitations Act. There is, as a result, potential prejudice to Walsh if it does not succeed on this motion.

[60] Mr. Ivanoff argued that Walsh should be estopped from arguing that GC 32.4 has a limited effect since it relied on that clause in its pleading against IEI in the Bond Action. In that action, Walsh pleaded that by virtue of GC 32.4, which it pleaded was incorporated by reference into the Subcontract, the IEI Bond Action was premature. I do not see that pleading as being inconsistent with my view of GC 32.4 as it applies to claims for contribution and indemnity.

[61] There is also potential prejudice to IEI if this motion does not succeed. Should Walsh succeed on its pay-when-paid defence, IEI’s claim could be frustrated if TTC is not joined to deal with the IEI claim as well in a timely way.

[62] I have, therefore, concluded that Walsh and IEI could be prejudiced if the motion does not succeed.

(g) What is the effect of Mr. Bertolo’s refusal to answer questions?

[63] Mr. Wise made several submissions concerning the effect Mr. Bertolo’s refusal to answer questions at his cross-examination. I will not make a finding in this regard, as I do not have to. I have reached my decision on other grounds.

V. CONCLUSION

[64] I, therefore, grant the motion, and grant Walsh leave to commence the proposed third party against TTC.

[65] Concerning the costs of this motion, none of the parties filed Costs Outlines in this regard. Those parties seeking costs of this motion must serve and file a written submission of no more than two pages concerning same (plus a Costs Outline) on or before May 22, 2015. Any responding submissions must be in writing, cannot be longer than two pages and must be served and filed on or before June 3, 2015. Any reply cannot be longer than one page and must be served and filed on or before June 8, 2015.

DATE: May 12, 2015 __________________________

MASTER C. WIEBE