Grant Thornton Limited v. Carillion Construction Inc.
CITATION: Grant Thornton Limited v. Carillion Construction Inc., 2016 ONSC 1354
COURT FILE NO.: CV-14-503784
DATE: 20160225
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
GRANT THORNTON LIMITED in its capacity as court-appointed Receiver of Kappeler Masonry Corporation
Plaintiff
– and –
CARILLION CONSTRUCTION INC. carrying on business as VANBOTS
Defendant
COUNSEL:
Mark St. Cyr, for the Plaintiff
Lena Wang, for the Defendant
HEARD: February 23, 2016
ENDORSEMENT
DIAMOND J.:
Overview
[1] The plaintiff, Grant Thornton Limited (“GTL”) is the court-appointed receiver of Kappeler Masonry Corporation (“Kappeler”).
[2] In early 2009, the defendant Carillion Construction Inc. carrying on as Vanbots (“Vanbots”) was hired as the general contractor for the construction of an expansion to the Royal Victoria Hospital of Barrie (“the expansion project”). As general contractor, Vanbots then retained Kappeler to perform various masonry-related services for the expansion project.
[3] Vanbots and Kappeler formally entered into a written subcontract with a total base contract price of $4,713,000.00 plus applicable taxes (“the subcontract”).
[4] By August 2013, Kappeler had completed all of its subcontract work and the expansion project was certified as substantially performed.
[5] On December 5, 2013, GTL was appointed to act as Kappeler’s receiver and manager over all its assets, undertakings and properties. After performing a review of the files relating to the expansion project, GTL determined that Kappeler was still owed $100,701.83 consisting of eight unpaid invoices and the 10% holdback due under the subcontract.
[6] GTL commenced this proceeding seeking payment of the said $100,701.83. Vanbots has defended on the basis that (a) Kappeler carried out extra work which was not authorized under the subcontract, and (b) Vanbots was entitled to offset back charges and other amounts allegedly owing by Kappeler.
[7] In its capacity as Kappeler’s receiver, GTL now brings this motion for summary judgment on the basis that there are no genuine issues requiring a trial.
Summary Judgment
[8] Rule 20.04(2)(a) of the Rules of Civil Procedure now provides that the Court shall grant summary judgment if the Court is satisfied that “there is no genuine issue requiring a trial with respect to a claim or defence”. As a result of the amendments to Rule 20 introduced in 2010, the powers of the Court to grant summary judgment have been enhanced to include, inter alia, weighing the evidence, evaluating the credibility of a deponent and drawing any reasonable inference from the evidence.
[9] In Hryniak v. Mauldin 2014 SCC 7, the Supreme Court of Canada established a road map outlining how a motions judge should approach a motion for summary judgment. The Court must first determine whether there is a genuine issue requiring a trial based only upon the evidence filed with the Court and without using the new fact finding powers set out in the 2010 amendments. Summary judgment will thus be available if there is sufficient evidence to justly and fairly adjudicate the dispute, with the motion being an affordable, timely and proportionate procedure.
[10] If the Court finds the presence of a genuine issue requiring a trial, the motions judge must then determine if the need for a trial can be avoided by using the new, enhanced powers under Rules 20.04(2.1) and (2.2).
[11] It is important to remember that the applicable evidentiary principles developed under the previous incarnation of Rule 20.04 continue to apply. The motions judge must still take a “hard look” at the evidence to determine whether it raises a genuine issue requiring a trial, and as a result each party must still put its “best foot forward” and submit cogent and compelling evidence to support or oppose the relief sought. A moving party has both a legal and evidentiary onus to satisfy the Court that there is no genuine issue requiring a trial. It is the moving party’s obligation to present a record that can enable the Court to avail itself of the enhanced powers under Rule 20.04 if the record warrants the exercise of such discretion.
[12] At the hearing of GTL’s motion, Vanbots’ conceded that it had no evidence to challenge the legitimacy of Kappeler’s eight outstanding invoices, or to suggest that those eight invoices had been paid. Rather, Vanbots raised the following issues which it argued were both genuine and could not be disposed of in a summary fashion, thereby requiring a trial:
a) Was the extra work set out in the eight unpaid invoices authorized pursuant to the subcontract?
b) Is Vanbots entitled to rely upon the defence of set-off for various back charges allegedly owing under the subcontract?
c) Is Vanbots entitled to rely upon the defence of set-off for alleged deficiencies in Kappeler’s work?
[13] I will now address each issue in turn.
Issue # 1 Was the extra work set out in the eight unpaid invoices authorized pursuant to the subcontract?
[14] To begin, Vanbots tendered a computer generated report entitled “Subcontract Status Report” (the “Report”) through the evidence of Gordon Bailey (“Bailey”), one of its senior project managers on the expansion project. The author(s), or at least the individual(s) responsible for the creation and maintenance of the report, gave no evidence in response to GTL’s motion for summary judgment.
[15] On cross-examination, Bailey confirmed that if any changes to the subcontract price were not manually inputted into Vanbots’ accounting system by its staff (a fact unknown to him), the Report may not reflect the actual accounting state of affairs. As such, I do not find the Report to be a reliable source of evidence, especially in light of Vanbots’ legal and evidentiary obligations to put its best foot forward.
[16] There is no dispute that the terms of the subcontract mandate a specific procedure in the event any extra work is requested by Vanbots. The relevant clause states as follows:
“Project Co shall not perform a Change in the Scope of the Work without a Change Order or Change Directive. This requirement is of the essence and it is the express intention of the parties that any claims by Project Co for a change in the Guaranteed Price and/or Contract Time shall be barred unless there has been strict compliance with the requirements of this Schedule. No course of conduct or dealing between the parties, no express or implied acceptance of alteration or additions to the Work and no claims that Owner has been unjust enriched by any alteration or addition to the Work, whether in fact there is any such unjust enrichment or not, shall be the basis for the claim for additional payment under this Contract or a claim for any extension of the Contract time.”
[17] Accordingly, if any extra work (by way of site instructions or change orders issued by the architect) was to be carried out, under the subcontract Kappeler was required to provide Vanbots with a quotation detailing the scope and price of the requested extra work. Vanbots would then review Kappeler’s proposal, and if acceptable, issue a formal Trade Contract Change Order (“TCCO”).
[18] GTL takes the position that neither Kappeler nor Vanbots adhered to the terms of the subcontract when requesting, carrying out, approving and ultimately paying for such extra work. The jurisprudence is clear that, in certain circumstances, the conduct of the parties to a construction contract may vitiate any contractual provision requiring compliance with a strict procedure for additional work if the pattern of conduct had the effect of varying the terms of the construction contract. As held by the Court of Appeal for Ontario in Colautti Construction Ltd. v. Ottawa (City) (1984) 1984 CanLII 1969 (ON CA), 46 O.R. (2d) 236 (C.A.), parties who, by their conduct, vary the terms of a construction contract requiring extra costs to be authorized in writing cannot subsequently rely upon the construction contract’s strict provisions to escape liability to pay for the additional costs authorized and incurred as a result of such conduct.
[19] In the case before me, I view it rather significant that, having issued 119 separate TCCOs, Vanbots then issued progress draws and paid for virtually all the extra work carried out by Kappeler (save for the eight outstanding invoices located by GTL). However, this does not end the inquiry. In order to be satisfied that the parties intended to vary the terms of the subcontract through their course of conduct, I must still be satisfied that a true pattern of conduct existed.
[20] In his responding affidavit, Bailey tendered a bald statement that any additional work performed by Kappeler (or for that matter any subcontractor) that was outside of the original scope of work set out in the subcontract could not proceed in the absence of Vanbots first formally issuing a TCCO. On cross-examination, it was suggested to Bailey that TCCOs were always issued after extra work had been performed by Kappeler at Vanbots’ request. Bailey disagreed with that suggestion, but was then shown four separate TCCOs which were clearly created, approved and ultimately paid after Kappeler completed the extra work requested by Vanbots. Accordingly, Bailey’s evidence is less than reliable.
[21] For its part, GTL tendered evidence from Kappeler’s president that “rarely, if ever” were TCCOs issued prior to Kappeler being directed to perform the extra work requested by Vanbots, and Kappeler was regularly directed to commence extra work without a TCCO.
[22] Notwithstanding, I find that four examples of TCCOs created after the request and performance of extra work do not necessarily amount to a “pattern of conduct”, especially in light of Kappeler’s evidence that 119 changes to Kappeler’s scope of work were requested by Vanbots during the term of the subcontract. Counsel for GTL was able to locate an additional four TCCOs which apparently post-dated extra work performed by Kappeler at Vanbots’ request, but this still does not satisfy me that the parties engaged in the necessary “pattern of conduct” to evidence an intention to not be bound by the strict provisions of the subcontract.
[23] Given my disposition of the other two issues raised by Vanbots set out below, in my view this case is ripe for disposition by way of summary judgment. The genuine issue to be determined is whether or not the parties, by their conduct, varied the terms of the subcontract requiring the issuance of a TCCO prior to extra work being performed. If such conduct exists, then GTL’s motion for summary judgment succeeds. If there is no such pattern of conduct, then pursuant to Rule 20.04(1)(b), I am at liberty to grant partial or full summary judgment in favour of Vanbots.
[24] As a result, pursuant to Rule 20.04(2.2) I am ordering a mini-trial so that oral evidence can be presented by the parties with respect to the narrow issue of whether Vanbots formally required the issuance of TCCOs on the occasions where Kappeler was requested to perform extra work outside the scope of the subcontract.
Issue #2 Is Vanbots entitled to rely upon the defence of set-off for various back charges allegedly owing under the subcontract?
[25] Vanbots claims various back charges against Kappeler totaling $56,550.53. This sum is comprised of 14 unsigned TCCOs attached collectively as one exhibit to Bailey’s responding affidavit.
[26] The terms of the subcontract provide that Vanbots shall not make any back charges to Kappeler for work, services or material supplied without reasonable prior notice to Kappeler’s on-site representative.
[27] Unlike the other TCCOs produced by Kappeler to support its claims for payment of outstanding extra work, these TCCOs are not signed by either party. Kappeler has tendered (essentially unchallenged) evidence that it had no knowledge of any of the alleged back charges of 14 TCCOs prior to seeing them in Bailey’s responding affidavit.
[28] The unsigned TCCOs do not support or prove Kappeler was provided with notice as per the terms of the subcontract. There is a clear onus upon Vanbots to lead admissible evidence supporting its position that it provided prior notice to Kappeler and/or its on-site representative.
[29] As conceded by counsel for Vanbots, there is no such evidence in the record before me. Accordingly, I do not find Issue #2 to amount to a genuine issue requiring a trial.
Issue #3 Is Vanbots entitled to rely upon the defence of set-off for alleged deficiencies in Kappeler’s work?
[30] In or around 2014, Vanbots retained the services of Peto MaCallum Ltd. (“Peto”, an engineering consulting firm) to investigate the presence of efflorescence upon some of the walls of the newly completed expansion project. Vanbots relies upon Peto’s report dated May 30, 2014 to support Vanbots’ claim for set-off for remedial work totaling $19,121,44 which was carried out pursuant to one of several recommendations of Peto.
[31] Counsel for the parties reviewed the relevant sections for the Peto report during their respective submissions. Both counsel agreed that, according to Peto, efflorescence is in fact not a deficiency. Peto’s report further confirmed that efflorescence is a common occurrence on newly constructed masonry, and its presence and intensity tends to decrease over time.
[32] One of the steps recommended by Peto to potentially address the efflorescence (if it continued, which was not certain) was to install through-wall flashing extending out past the brick face at various locations. Rather than waiting and seeing if the efflorescence would dissipate on its own (a possibility confirmed by Peto), Vanbots unilaterally undertook the said remedial work and now looks to offset the cost of same from GTL.
[33] In my view, there is no evidence proving the necessity of that remedial work, nor is there evidence that the remedial work will even reduce the efflorescence, which as stated may dissipate on its own.
[34] In the absence of evidence that the remedial work has, or on a balance of probabilities will have a positive impact upon reducing efflorescence, I do not find Issue #3 to amount to a genuine issue requiring a trial
Conclusion
[35] In summary, there are no genuine issues requiring a trial with respect to Issues #2 and #3. There shall be a mini trial with respect to Issue #1, and specifically whether the parties engaged in a course of conduct necessary to vary the terms of the subcontract relating to the procedure for approval and payment of extra work.
[36] Counsel for the parties may contact my assistant Michelle Giordano at Michelle.Giordano@ontario.ca to arrange a telephone case conference for the purpose of scheduling the mini-trial and a timetable for the interim steps leading up to that hearing.
[37] The costs of this motion shall be reserved to me as the Judge hearing the mini-trial to be scheduled.
Diamond J.
Released: February 25, 2016
CITATION: Grant Thornton Limited v. Carillion Construction Inc., 2016 ONSC 1354
COURT FILE NO.: CV-14-503784
DATE: 20160225
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
GRANT THORNTON LIMITED in its capacity as court-appointed Receiver of KAPPELER MASONRY CORPORATION
Plaintiff
– and –
CARILLION CONSTRUCTION INC. carrying on business as VANBOTS
Defendant
ENDORSEMENT
Diamond J.
Released: February 25, 2016