CITATION: 2441472 Ontario Inc. v. Collicutt Energy Services Corp., 2016 ONSC 566

BARRIE COURT FILE NO.: 15-0727

DATE: 20160122

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

2441472 ONTARIO INC. Plaintiff/Defendant by Counterclaim

– and –

COLLICUTT ENERGY SERVICES CORP. Defendant/Plaintiff by Counterclaim

COUNSEL: K.W. McKenzie, for the Plaintiff/Defendant by Counterclaim

H.D. Krupat, for the Defendant/Plaintiff by Counterclaim

HEARD: January 14, 2016

REASONS FOR DECISIONS ON MOTIONS

R. MacKINNON J.:

[1] These motions were brought in this Barrie action for particulars, compelling answers to refusals and undertakings, for security for costs, for transfer to Toronto Region, and for Personal Property Security Act, RSO 1990 c. P. 10 (the “PPSA”) discharge. In addition, the plaintiff/defendant by counterclaim seeks orders staying Toronto actions CV-15-534517and CV-15-534181until the trial of this Barrie action.

[2] The former is a Toronto construction lien action relating to Toronto property. Over $400,000 for claim and costs has been paid into court to the credit of that action, the lien has been discharged and those funds stand as replacement for the land. The latter is a Toronto trust claim action. All three actions relate to a dispute about the same contracts for the supply of equipment, labour and services by Collicutt to a project in Toronto, owned by St. Mary’s Cement Inc. (Canada). The supply included a Heat and Power Package and a Chiller HVAC Package. The plaintiff asserts in this action that some product was defective and some never delivered.

[3] For reasons that are implicit in this ruling, I make no order staying either of the Toronto actions. There is no demonstrated reason to do so.

Transfer to Toronto

[4] At the outset of this motion by the defendant/plaintiff by counterclaim (herein “Collicutt”) to transfer the Barrie action to Toronto, counsel for the plaintiff/defendant by counterclaim (herein “244”) objected, citing the March 5, 2014 Superior Court Practice Direction regarding Motions to Transfer civil proceedings in Central East and Toronto Regions under Rule 13.1.02 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. That objection was correct. The Regional Senior Judge or her designate is the proper party to hear that motion. It was included in this blizzard of five motions before me but was not fully argued in any detail. To assist the Central East Regional Senior Judge to determine it, counsel for Collicutt is directed to bring a new motion in writing and on focused material before Fuerst, RSJ at Newmarket. I have no jurisdiction in these circumstances to grant the relief sought.

PPSA Discharge

[5] Collicutt registered a Financing Statement on the PPSA system on June 15, 2015, recording the agreement between itself, 244, and 2363265 Ontario Inc. (herein “236”). A Financing Change Statement was registered June 29, 2015.

[6] Plaintiff’s counsel argues that, since there was never any produced signed security agreement between his client and Collicutt, both financing statements were improper and both should be vacated. He points to s. 11(2)(a) of the PPSA which in its material parts provides that the debtor must have signed a security agreement. He argues there was none. I disagree.

[7] On April 9, 2014, Mr. Kocken, a principal of both 244 and 236, executed a Credit Application and Terms and Conditions of Sale which provided that title to, property in and ownership of the parts sold remain with Collicutt until all amounts were paid. Mr. Kocken signed on behalf of MCS Energy as that company’s “VP” operations. MCS Energy is a business name of 236 and is a named defendant in Collicutt’s Toronto trust action.

[8] By December 12, 2014, Collicutt was issuing invoices to MCS Energy (“236”) relating to its supply of the Heat and Power Package. Those invoices reserved title to the vendor. On that date Mr. Clydesdale, a principal of both MCS Energy and 244, directed Collicutt to re-issue its invoices to 244, rather than to 236. In addition, on June 5, 2015, Mr. Kocken on behalf of 244, signed an Equipment Purchase Agreement relating to that Heat and Power Package. It provided that title in the collateral at all times remained exclusively with Collicutt until its customer’s payment in full of all amounts due was made. The security interest granted was a purchase money security interest (PMSI).

[9] When considered as a whole these three documents satisfy me both that 236 and 244 intended to grant and did grant in writing to Collicutt a security interest in the Heat and Power Package. Accordingly, the plaintiff’s motion for a discharge of Collicutt’s security interest in that package is dismissed.

Security for Costs

[10] Collicutt argues under ss. 56.01(1)(d) and (e) of the Rules of Civil Procedure that a security for costs order is appropriate against 244. As moving party, it bears the initial onus of demonstrating that 244 falls into either one of the enumerated subsections. If so, it is presumptively entitled to security for its costs and the onus shifts to 244 to demonstrate on evidence either that it has sufficient Ontario assets, or that it is impecunious and an injustice would result if it were not allowed to proceed with its action. In attempting to meet its onus, Collicutt need not prove that 244 has insufficient assets in Ontario to satisfy a costs award. For reasons that follow, I am satisfied that the requirements of neither subsections (d) nor (e) have been met.

[11] 244 swears it purchased the equipment and HVAC to fulfill a long-term contract with St Mary’s Cement, its customer. St. Mary’s confirmed in writing that its contract was with 236, not 244. Mr. Clydesdale for the plaintiff specifically directed that invoices for the Equipment and HVAC be redirected to 244. It is in evidence that 244 is not the registered owner of any real property in southern Ontario. Counsel for the defendant argues that since Mr. Clydesdale was the directing mind of both 236 and 244, an artificial distinction was created by him whereby 236 received the benefit while 244 incurred the liabilities associated with work on the project.

[12] I am not satisfied on this material that there is good reason to believe that 244 has insufficient assets in Ontario to satisfy any costs award that may be made in favour of Collicutt. While Collicutt has raised some suspicion, I am not satisfied that it has met its onus under either subsections (d) or (e) of Rule 56.01(1). It is not presumptively entitled to security for its costs. Its onus does not shift to the plaintiff to adduce evidence on that issue. I am similarly not satisfied under subsection (e) of Rule 56.01 that the Barrie action is frivolous or vexatious. While the claim needs particularizing for reasons which I will detail later in this ruling, Collicutt has not met its test on the security for costs issue and its motion is dismissed.

The Defendant’s Motion for Particulars

[13] 244 issued its Statement of Claim in June 2015. It claims damages and punitive damages of $3.5 million for defects in and late delivery of the Electrical Generator Package and for inadequate design and construction of the HVAC/Chiller such that it was unable to fulfill its intended use. In three lines in para. 10, it asserts without any details that Collicutt initiated a continued campaign of interference with its business and economic relations.

[14] Collicutt argues that the Statement of Claim is deficient on the basis that paras. 7-10 inclusive contain only bare allegations, that there is no reasonable cause of action for unlawful interference with economic relations since the necessary elements of that tort were not pleaded, and that 244 has no basis for its claimed injunction since it pleaded no facts to satisfy all elements of the test in R. MacDonald v. Canada, 1994 CanLII 117 (SCC), [1994] 1 S.C.R. 311. I agree and so find. In addition, it argues that 244’s claim on its face discloses no reasonable basis for the punitive damages that it asserts. I agree and so find. The plaintiff refused to provide particulars on two bases – that the facts are within the defendant’s knowledge and that facts would only be provided to Collicutt after it made documentary production.

[15] I find that 244 has so far failed to provide a concise statement of the material facts on which it relies for its claims. Collicutt cannot properly respond in the abstract to allegations that its work was deficient or that it breached its contract, without knowing what specific aspects of its work were allegedly deficient or what parts of the contract were allegedly breached. It is unable to plead to bald allegations currently found in the Statement of Claim.

[16] Those allegations are so bald and sparse that 244 should be ordered to deliver particulars to enable Collicutt to appropriately plead. 244’s reply to Collicutt’s demand for particulars was insufficiently responsive. Rule 25.11, along with Rules 25.06 and 25.10, and the submissions of counsel in written and oral argument fully persuade me that the plaintiff be compelled to provide the defendant, within fifteen days or such other time as counsel may agree in writing, with full particulars of the following, and I so order:

(i) the damages being claimed by the plaintiff in paragraph 1 of the Statement of Claim;

(ii) the basis on which the plaintiff states it is entitled to injunctive relief, as alleged in paragraph 1 of the Statement of Claim;

(iii) the basis upon which $1,000,000 is being claimed for punitive damages;

(iv) the plaintiff’s allegations of “interference with the plaintiff’s business relations with its customers” set out in paragraphs 1 and 10 of the Statement of Claim;

(v) the specifications being relied upon in paragraph 4 of the Statement of Claim;

(vi) the alleged contract terms referenced in paragraph 5 of the Statement of Claim regarding timing and set up of the equipment;

(vii) the electrical generator package being “late, inadequate and insufficient”, as set out in paragraph 7 of the Statement of Claim;

(viii) the time, money and materials allegedly being expended by the plaintiff as set out in paragraph 7 of the Statement of Claim, and full particulars of the plaintiff’s redesign, reconfiguration and installation work as alleged, including full particulars of the plaintiff’s efforts to mitigate the damages being claimed;

(ix) the “breach of contract” and “negligence” being alleged by the plaintiff in paragraph 7 of the Statement of Claim;

(x) the HVAC/Chiller is “completely inadequate in design and construction”, in reference to the agreement between the parties, as alleged in paragraph 8 of the Statement of Claim;

(xi) the “plaintiff’s intervention”, as alleged in paragraph 8 of the Statement of Claim; and

(xii) the plaintiff’s “ongoing damages for delay and unforeseen costs”, as alleged in paragraph 9 of the Statement of Claim.

The Plaintiff’s Answers to Refusals Motion

[17] Collicutt delivered its demand for particulars and then brought its motion for particulars, supported by the affidavit of Wayne Forrest. Although 244 argues that its Notice of Appointment pursuant to Rule 39.03 was issued to obtain evidence for use on other motions outstanding between the parties, that Notice in fact referenced the present action and did not purport on its face to be an examination in aid of either the lien or trust actions. That said, it clearly referenced by inference this blizzard of five motions in this Barrie action.

[18] 244 now seeks an order for answers to the Forrest refusals and undertakings. Its counsel cross-examined on the affidavit, and purported as well to conduct its Rule 39.03 examination of Mr. Forrest. Its Notice of Examination required him to bring wide-ranging documents and records from all persons who worked on any aspect of the projects that were the subject of this action.

[19] I find that some of the Forrest cross-examination was conducted within its proper restricted scope. He was asked and refused to answer some relevant and necessary questions on issues focused on the proper determination of the motions referenced in these reasons. He was also asked some irrelevant and unnecessary questions on issues clearly beyond the scope of these motions. Some were clearly the subject of an examination for discovery - which this October 14, 2015 examination was not. The Refusals and Undertakings Chart, Form 37C, is found at Tab 1 of the Collicutt January 7, 2016 responding motion record. I find that some of the listed Forrest refusals were proper because:

(a) In his questioning, plaintiff’s counsel attempted to show that because some troubleshooting occurred during the installation of the Heat and Power Package purchased by 244, Collicutt must therefore have knowledge of the alleged claims relating to that equipment. However, the plaintiff has not formally particularized its claims;

(b) Some questions were asked by counsel for 244 that had nothing to do with either Collicutt’s knowledge of the plaintiff’s claim or with the subject matter of any of these motions. These included, without limitation, questions as to how the principals of 244 were personally liable to the defendant in its trust action, whether 244 ever agreed to the terms set out in the defendant’s invoices, and for a list of Collicutt’s payments to its suppliers.

(c) Under the guise of a Rule 39.03 examination and a cross-examination on affidavit, plaintiff’s counsel sought to examine Mr. Forrest for discovery as a representative of the defendant and to have Mr. Forrest give undertakings as if he were being examined for discovery in that capacity. He was not;

(d) Plaintiff’s counsel asked Mr. Forrest to produce designs and specifications for the Heat and Power Package, engineer logs and daily reports relating to the installation of same, to produce reports from the defendant’s staff identifying their successful troubleshooting efforts, to identify which of the defendant’s employees were on site during the installation of the Heat and Power Package, and to provide details as to when it was delivered, including shipping documentation. It also sought from him documents showing what testing of the Package had been conducted. The correct approach is for the plaintiff to first particularize its claim, rather than rely on the defendant’s guesswork. This was not an examination for discovery which has a broader scope.

[20] Some of the Forrest refusals were improper. As Collicutt’s affiant, he refused to produce the very purchase order identified in para. 8 of his own affidavit. Only much later and very recently did he, through Collicutt’s counsel, provide 244 with a copy of that purchase order which was for the very goods in question in this litigation. That refusal and delay on behalf of Collicutt was both inexcusable and improper. His refusals to some, but not all, of the questions detailed at Form 37C related to that unproduced purchase order.

[21] Mr. Forrest swore on one hand that he had personal knowledge of the matters deposed to, or that he relied on information provided to him by others, or learned from documents which he received. On the other hand, the transcript clearly shows that he refused to educate himself by consulting with others at Collicutt whom he believed would or did know more than him.

[22] I order that Collicutt and Wayne Forrest, forthwith within thirty days, or such other time as agreed to by counsel in writing, answer all his undertakings given at his Rule 39.03 examination/cross-examination of October 14, 2015 at Edmonton. I also order that Collicutt and Wayne Forrest, within thirty days or such other time as agreed to by counsel in writing, answer his refusals to questions listed at Form 37C as numbers 2, 2(a), 3, 4, 5, 8, and 16.

[23] I am asked by counsel for 244 to order that Mr. Forrest attend in Toronto at Collicutt’s expense to answer his undertakings and the questions he improperly refused. I make no order in that regard, primarily because of the initial lack of particulars from the plaintiff. His continued examination shall be conducted orally at Edmonton, subject to written agreement otherwise as between counsel. I also order that Mr. Forrest completely answer all questions arising from his answers to undertakings and from the questions which I found he improperly refused, provided that Collicutt shall be entitled to state, on record, that it objects to answering the questions even though they have been answered and shall provide the grounds for all such objections.

[24] After pleadings are complete and answers to undertakings and refusals have been delivered in accordance with these reasons, the parties are strongly directed to reconsider their positions on all matters in all three actions. They should consider mediating the entire dispute, which may focus on resolution. Absent settlement, I strongly urge counsel for both parties to consult with one another to develop a litigation plan to move forward these actions to conclusion in a cost effective manner. These parties can and must do better. I am not seized.

Costs of These Motions

[25] Success has been evenly divided on these five motions. Subject to any costs submissions the parties may wish to make as a result of any offers to settle motions, I make no order as to costs. If there are any settlement offers potentially impacting costs which counsel wish me to consider, they may within 15 days notify me through Ms. Fleet, my assistant at Barrie, that they wish to access me on that issue and I will thereafter issue directions when I am next available.

R. MacKINNON J.

Date: January 22, 2016