Court File and Parties

COURT FILE NO.: CV-13-485512-00A1 DATE: 20170620 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Michael Beckerman and Laurie Beckerman, Plaintiffs AND: Gerwazy Paluszkiewicz and Iwona Paluszkiewicz and Gervais Design Build Ltd., Defendants main action; AND: Gerwazy Paluszkiewicz and Iwona Paluszkiewicz and Gervais Design Build Ltd., plaintiffs counterclaim AND: Michael Beckerman and Michael Beckerman and Laurie Beckerman, Powell Reyes Construction Limited, Timberlea Construction and Roofing Ltd. and MAG Lighting Ltd., Defendants by counterclaim AND: Atlant Services and or Orest Design, Third Parties

BEFORE: Carole J. Brown, J.

COUNSEL: G. Pribytkova for the moving third party, Atlant Services K. Bridel for the responding party, Timberlea

HEARD: May 29, 2017

Endorsement

[1] The third party, Atlant Services (“Atlant “) brings this motion for partial summary judgment as against Timberlea Construction and Roofing Ltd (“Timberlea”) on the grounds that there is no genuine issue requiring a trial, given that Atlant was an employee of Timberlea and, alternatively, that the third party claim is statute-barred as it was commenced outside the limitation period.

[2] At the outset of the summary judgment motion, counsel for the moving party, Ms. Pribytkova, raised a preliminary issue. She argued that the responding party should not be allowed to rely on the evidence from her cross-examination of the principal of the responding party, Mr. Czoraj, as such was self-serving evidence. She relied on Rule 39.01 of the Rules of Civil Procedure.

[3] It was the position of the respondent that this Rule did not apply, and particularly that it did not apply to prevent him from using, in his factum filed on this for summary judgment motion, all evidence, including her cross-examination of his client. Indeed, he argued that on a summary judgment motion the parties must adduce all evidence to be relied upon at trial and, particularly, the responding party must “lead trump or risk losing”.

[4] I do not find Rule 39.01 to be applicable. Further, in this summary judgment motion, in a factum filed, all evidence relied upon by the parties may be referred to.

The Facts

[5] This action arises from the construction of a residence at 187 Hudson Dr., Toronto, Ontario in or about 2010/2011. The defendant in the main action, Gerwazy Paluszkiewicz, was the designer, architect and builder of the property, through his company, Gervais Design. He and his wife initially resided in the property until August 1, 2012, when it was sold to the plaintiffs in the main action.

[6] During the construction, Gervais Design retained Timberlea to construct the roof. Timberlea subcontracted the roofing work to Atlant.

[7] The plaintiffs commenced an action against the defendants in the main action on July 24, 2013. The claim was subsequently amended on August 8, 2014. The plaintiffs claimed breach of contract, breach of warranty, failure to disclose latent defects, breach of duties and misappropriation with respect to the renovation of the property. The plaintiffs allege that the property was improperly designed and/or built, which led to extensive repairs, the most expensive being repairs to the roofs, which they allege were negligently designed or constructed such that there is inadequate ventilation, which has resulted in water penetration and mould.

[8] The amended statement of defence and counterclaim was delivered on August 26, 2014. The statement of defence of Timberlea to the counterclaim was delivered on July 29, 2015. The third party claim, which is the subject of this motion, was issued on or about June 7, 2016, against Atlant and Orest Design, another subcontractor that worked on the project. The third party claim alleges that the losses or damage alleged by the plaintiff to the main action were occasioned exclusively by the negligence of the third parties.

The Position of the Parties

The Position of the Moving Party

[9] It is the position of the moving party that Atlant was an employee of Timberlea and should not be sued by Timberlea in the third party action. The moving party maintains that, prior to registration of Atlant, its principal, Konstantin Kapustin, was an employee of Timberlea from 2005. He had initially been a regular payroll employee, installing roofs. He used Timberlea’s tools and van, and was under the control and direction of Timberlea.

[10] In May 2008, Mr. Kapustin registered Atlant as a business, as it was more beneficial for him to operate as a sole proprietorship.

[11] The moving party maintains that Mr. Kapustin was told by Timberlea to take another Timberlea employee, Mr. Wojtek, onto the Atlant payroll, and that Timberlea would pay Atlant the same amount of pay for Mr. Wojtek. The paycheques from Timberlea were equally divided. Both shared taxes equally.

[12] Atlant began to receive pay based on the project it was working on, rather than based on the number of hours worked. This changed again in 2016 when Timberlea began to do more demolition work.

[13] The moving party states that other than the above changes, almost nothing else in the employment relationship changed. Mr. Kapustin maintained the same daily routine. He had access to Timberlea’s office and warehouse. He did not provide quotes for work to third parties; did not work for anyone but Timberlea; Atlant derived its income exclusively from Timberlea and it was an integral part of Timberlea’s work.

[14] The moving party maintains that all tools used by Atlant, as well as the van, were supplied by Timberlea. All materials for the project were purchased by Timberlea. Roofing work was controlled by Timberlea and the roof was warranted by them.

[15] There was no risk to Atlant nor any chance of profit.

[16] The moving party, Atlant, states that, based on the above factual matrix, it was at all times, an employee of Timberlea and, on that basis, the action against Atlant should be dismissed. Atlant relies on the cases of 671122 Ontario Ltd. v Sagaz Industries Canada Inc. et al, 2001 SCC 59; John A. Ford & Associates Inc. (cob Training Services) v Keegan, 2014 ONSC 4989, [2014] O.J. No. 3995 (SCJ); McKee v Reeds Heritage Homes Ltd., 2009 ONCA 916, 2009 O.J. No. 5489; Huber v Way 2014 ONSC 4426, [2014] O.J. No. 3498.

[17] In the alternative, Atlant submits that the action, as against it, commenced by Timberlea is statute-barred.

The Position of the Responding Party

[18] It is the position of the responding party that there are significant material facts in dispute in this action. The responding party maintains that following the registration of Atlant by Mr. Kapustin in 2008, Atlant had a tax registration number, a business number, and a GST/HST account provided by Canada Revenue Agency. Further, Atlant received a Master Business License dated May 5, 22,008.

[19] The responding party, Timberlea, claims that there were no restrictions placed on Atlant as regards its ability to perform work for other companies or individuals and that it was Mr. Kapustin’s choice to only work for Timberlea. In cross-examination Mr. Kapustin stated that if Timberlea had not offered work opportunities for Atlant, it would have sought work elsewhere. The responding party further submitted that Timberlea itself used other roofing contractors in addition to Atlant.

[20] Timberlea subcontracted the roofing work on this project to Atlant. According to Timberlea, Atlant supplied its own equipment and employees, and invoiced Timberlea for the roofing project, which Timberlea paid. It reported to the CRA all payments which it made to Atlant as an independent contractor.

[21] As regards the project, Timberlea received a Certificate of Clearance with the effective date of November 10, 2010 to confirm that Atlant was registered with the Workplace Safety and Insurance Board as a contractor to perform roof shingling work and paid the related Workplace Safety and Insurance Board premiums.

[22] On cross-examination of Timberlea, its principal, Mr. Czoraj, testified that Atlant controlled the amount of hours it and its labourers worked at the jobsite. Further, while the work was being undertaken by Atlant, the principal of Timberlea did not attend at the worksite to provide instructions or supervise the work.

[23] On cross-examination on the supporting affidavit of the principal of Atlant, Mr. Kapustin confirmed that Timberlea deducted $200 per month to pay the ongoing insurance for the cargo van that Atlant operated at the material time. He acknowledged that Atlant would purchase equipment such as hammers, steel toed boots, work belts and other items, which purchases were not reimbursed by Timberlea. Further, Atlant was not reimbursed by Timberlea for purchasing gas for the cargo van.

[24] On cross-examination of the Timberlea principal, Mr. Czoraj testified that when Atlant registered in 2008, there was a verbal agreement regarding the cargo van and equipment. Timberlea sold the cargo van to Atlant, on the understanding that Atlant would pay $200 per month for the purchase of the cargo van, as well as payments for insurance and parking. When the cargo van or equipment broke, Atlant would purchase new equipment. They also replaced the van. Additionally, as part of this arrangement, Timberlea sold the equipment, including ladders and roof jacks, to Atlant when it became a subcontractor.

[25] On cross-examination on the supporting affidavit of the principal of Atlant, Mr. Kapustin stated that Atlant did not have work-related liability insurance due to the financial cost of obtaining such insurance.

[26] At the cross-examination of Atlant, Mr. Kapustin, as well as his counsel, confirmed and acknowledged that the third party claim as against Atlant was commenced within two years of the issuing of the amended statement of defence and counterclaim.

[27] It is the position of the responding party that there are genuine issues requiring a trial which cannot be resolved on this summary judgment motion; that the evidence on the issues is divergent and that the partial summary judgment motion should be dismissed.

The Issues

[28] The issue for determination by this Court is whether there is a genuine issue requiring a trial. The first issue is whether Atlant and its employee, Mr. Kapustin, were independent contractors or employees of Timberlea. All of the evidence as regards the indicia of an employment relationship are contradictory.

[29] The second, alternative issue is whether the third-party action is statute-barred.

The Law and Analysis

Summary Judgment

[30] In Hryniak v Mauldin, 2014 SCC 7, [2014] S.C.J. No. 7, the Supreme Court of Canada determined that there would be no genuine issue requiring a trial where a judge is able to reach a “fair and just determination on the merits” of the case. This will be the case when the process: (1) permits the judge to make the necessary findings of fact on the basis of the evidence adduced, (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.

[31] Pursuant to Hryniak, the motion judge should first determine if there is a genuine issue requiring a trial based only on the evidence before the court, without using the new fact-finding powers set forth in Rule 20.04 of the Rules of Civil Procedure. There will be no genuine issue requiring a trial if the summary judgment process provides the court with the evidence required to fairly and justly adjudicate the dispute and is a timely, affordable and proportional procedure. If there appears to be a genuine issue requiring a trial, the motion judge should determine if a trial can be avoided by using the new powers under Rules 20.04(2.1) and (2.2). The judge may, at his or her discretion, use those powers, provided that doing so does not offend the interest of justice, i.e., that it 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.

[32] The moving party bears the onus of establishing that there is no triable issue. However, the responding party must “lead trump or risk losing”: 1061590 Ontario Limited v Ontario Jockey Club, [1995] O.J. No. 132, 21 O.R. (3d) 547 (Ont. C.A.). The responding party may not rest on the allegations or denials in the pleadings, but must present by way of affidavit or other evidence, specific facts and coherent, organized evidence demonstrating a genuine issue. The responding party is required to “put its best foot forward”: Curoe Construction Ltd. v Ottawa (City), 2015 ONCA 693 at paras. 26-27 (Ont. C.A.) The motions judge is entitled to assume that the record contains all evidence that the parties will present if there is a trial. It is not sufficient for the responding party to say that more and better evidence will be available at trial. The court must take a “hard look” at the evidence to determine whether there is a genuine issue for trial.

[33] In the circumstances of this case, I do not find partial summary judgment to be appropriate.

[34] Based on the evidence and submissions from counsel, it is apparent that there are material facts in dispute and conflicting evidence as between the third-party Atlant and Timberlea. The evidence before this Court is contradictory on material issues, including the seminal issue of whether Atlant, and/or its principal, are employees of Timberlea.

[35] The moving party has also raised the issue of vicarious liability.

[36] In the circumstances of this case, with the evidence before me, I find that there is a genuine issue requiring a trial. I am unable to reach a fair and just determination on the merits of the case, based on the record before me. I am not able to make the necessary findings of fact as regards liability on the basis of the evidence adduced or to apply the law to those facts. I do not find that summary judgment, in the circumstances of this case, is a proportionate, more expeditious and less expensive means to achieve a just result. Further, I do not find that a trial could be avoided by using the new powers pursuant to Rules 20.04(2.1) and (2.2). I am of the view that the issues raised in this third-party action can only be fully determined on the basis of a complete record with viva voce evidence.

[37] There is a second third-party defendant, Orest Design, which is also alleged to have been a cause of the loss or damage sustained by the plaintiff to the main action. There is no evidence to determine the role of Orest as regards the roofing project. It would not be fair, appropriate, or in the interest of justice to determine this matter on a summary judgment motion, without any evidence to determine the role of Orest in the roofing project. As Orest was not a part of the summary judgment motion, the action would, in any event, continue against it.

[38] Indeed, I am cognizant of and have taken into consideration the findings of Karakatsanis J. addressing the “interest of justice” requirement in Hryniak v Mauldin, supra., at paragraphs 48-51, as follows:

The “interest of justice” inquiry goes further and also considers the consequences of the motion in the context of the litigation as a whole. For example, if some of the claims against some of the parties will proceed to trial in any event, it may not be in the interest of justice to use the new fact-finding powers to grant summary judgment against a single defendant. Such partial summary judgment may run the risk of negative proceedings or inconsistent findings of fact and therefore the use of the powers may not be in the interest of justice. On the other hand, the resolution of an important claim against a party could significantly advance access to justice and be the most proportionate, timely and cost-effective approach.

[39] In this case, based on the conflicting evidence before this Court, I do not find that the summary judgment process provides the Court with the evidence required to fairly and justly adjudicate the dispute between Timberlea and Atlant, nor would it be a timely, affordable and proportional procedure in the circumstances of this case. There appear to be genuine issues requiring a trial. In this case, the Court should determine if a trial can be avoided by using the new powers under Rules 20.04(2.1) and (2.2). The judge may, at his or her discretion, use those powers, provided that doing so does not offend the interest of justice, i.e., that it 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. As indicated above, I find that the issues to be determined can only be determined on the basis of a complete record and the viva voce evidence from all of the parties, including the second third-party, Orest.

The Limitation Period

[40] The moving party argues that Timberlea knew of the claim when the defendant to the main action advised it by email on June 3, 2014 that he and his company were being sued for the $600,000. However, the third-party claim as against Atlant was not commenced until June 7, 2016.

[41] The responding party argues that Timberlea was added by counterclaim on August 26, 2014, delivered a statement of defence and counterclaim on July 29, 2015 and issued the third-party action on June 7, 2016. While Timberlea may have been apprised as of June 3, 2014 that the plaintiff was being sued on the project, it was not brought into the action as a party until August 26, 2014. The third-party claim was commenced within the two-year limitation period and is not statute-barred.

[42] As regards the limitation period argument, I agree with the responding party. Timberlea could not have done anything as regards commencement of an action as against Atlant until it was made a party to the action itself. Timberlea commenced its action as against Atlant within the two-year limitation period stipulated by the Limitations Act, 2002.

[43] Accordingly, as regards the alternative limitation period argument, there is no basis on which to dismiss this partial summary judgment on the ground that it is statute-barred.

[44] Based on all of the evidence before me, I am satisfied that this matter must proceed to trial expeditiously, with all parties in attendance. Accordingly, I do not grant summary judgment.

Costs

[45] The parties have provided their bills of costs. The responding party, Timberlea, which was wholly successful in this matter, is entitled to its costs of this motion, on a partial indemnity basis. It has only provided me with a bill of costs which includes drafting, reviewing and revising pleadings; preparation and attendance for mediation; attendance at status hearing, in addition to the costs of the motion. I would ask counsel for the responding party to prepare a bill of costs on a partial indemnity basis including only the costs of the summary judgment motion, with disbursements related thereto, and provide it to me for purposes of the cost award.

Carole J. Brown, J. Date: June 20, 2017