Court File and Parties
COURT FILE NO.: 90987/15 (OSHAWA)
MOTION HEARD: 2018 02 14
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Coco Paving Inc. v. The Regional Municipality of Durham, The Regional Municipality of York, Covanta Durham York Renewable Energy Limited Partnership, Covanta Durham York Renewable Energy Ltd. and Courtice Power Partners, a joint venture comprising of Barton Malow Canada, Inc. and Kenaidan Contracting Ltd.
BEFORE: MASTER R.A. MUIR
COUNSEL: Anthony Scane for Courtice Power Partners, moving party Ian Katchin for Coco Paving Inc., responding party Hana Tariq for General Sprinklers Inc., responding party
REASONS FOR DECISION
[1] The defendant Courtice Power Partners, a joint venture comprising of Barton Malow Canada, Inc. and Kenaidan Contracting Ltd. (“CPP”) brings several motions pursuant to section 106 of the Courts of Justice Act, RSO 1990, c C43 (the “CJA”). CPP seeks orders staying this action and several other related actions commenced by the plaintiffs Coco Paving Inc. (“Coco”) and General Sprinklers Inc. (“GS”). CPP seeks a temporary stay of these actions pending the outcome of an arbitration proceeding currently underway between CPP and the defendants Covanta Durham York Renewable Energy Limited Partnership and Covanta Durham York Renewable Energy Ltd. (collectively, “Covanta”). Coco and GS are opposed.[^1]
BACKGROUND
[2] The several claims commenced by Coco and GS all arise out of the construction of an improvement known as the Durham York Energy Centre, located in Clarington, Ontario (the “Project”). The Project has resulted in a large number of construction lien and other claims. I have been appointed to case manage all of the claims arising from the Project, pursuant to the direction of RSJ Fuerst.
[3] In November 2010 Covanta entered into an agreement with York Region and Durham Region whereby Covanta would design, build, construct and operate a facility to be known as the Durham York Energy Centre. The initial contract price was in excess of $235 million.
[4] CPP is a joint venture between Barton Malow Canada, Inc. and Kenaidan Contracting Ltd. Covanta entered into a sub-contract with CPP for supply and construction related services in connection with the Project. CPP then entered into various sub-subcontracts with several trade contractors for the supply of labour, equipment and services required to complete CPP’s scope of work.
[5] CPP’s agreement with Coco is dated May 11, 2012 and provides that Coco would supply all labour, material and equipment to the Project in relation to excavation and yard piping related work.
[6] CPP’s agreement with GS is dated August 6, 2012 and provides for the installation by GS of the Project’s fire protection system.
[7] Coco has issued a lien claim and a finishing lien claim, along with a claim on a surety bond. GS is advancing a lien claim and a surety claim. There appear to be approximately 20 other ongoing lien and other claims arising from the Project. The two largest CPP sub-contractor claimants have consented to stay orders. The remaining claimants, other than Coco and GS, appear content to await the outcome of the arbitration between CPP and Covanta, although no formal stay orders have been made.
[8] The contract between CPP and Covanta contains an arbitration provision. The dispute between those two parties is the subject of an ongoing and lengthy arbitration proceeding. As of the date of the hearing of these motions, the parties to the arbitration had participated in 79 hearing days. CPP is advancing the claims made by its sub-contractors as part of its case at the arbitration. CPP has presented evidence in respect of approximately 450 change orders, mostly originating with CPP sub-contractors. Many thousands of documents have been reviewed and considered in evidence. The claims CPP is making against Covanta include all of the claims being made by Coco and GS.
[9] The arbitration is nearing its completion. Hearing dates were scheduled through April 5, 2018 but further dates may be required. Of course, additional time will be required for argument and for the arbitrator to render a decision. The exact end date for the arbitration remains unclear but it appears that steady progress is being made.
[10] It is clear from the evidence on these motions, that the Durham York Energy Centre is a large and complex project involving many parties, numerous claims and significant amounts of money. Many claims have been made. A great deal of time and effort will be required in order to resolve the parties’ differences.
POSITIONS OF THE PARTIES
[11] CPP seeks a stay of the Coco and GS actions pursuant to section 106 of the CJA. CPP takes the position that it is just for the court to order a temporary stay in the circumstances of these actions and within the overall context of the numerous disputes arising from the Project. CPP submits that it is doing everything it can to collect from Covanta. It is advancing all of its sub-trades’ claims, including those of Coco and GS, through the arbitration process. CPP states that it is impossible to determine the important matters in issue in the Coco and GS claims until the arbitration has been completed.
[12] Coco and GS argue that the requested stay orders should not be granted. First, they submit that leave should not be granted to bring these motions in the lien actions as required by section 67(2) of the Construction Lien Act, RSO 1990, c C30 (the “CLA”). That section requires the consent of the court before a party to a lien action may take any interlocutory steps, other than those specifically set out in the CLA. Consent should only be granted where the interlocutory step is necessary or would expedite the resolution of the issues in dispute.
[13] Second, Coco and GS take the position that it would not be just to grant the requested temporary stay. They have been waiting for three years to be paid. They are advancing relatively small claims in the context of this Project. Their actions were issued in 2015 and they have not been permitted to proceed beyond the pleadings stage. In fact, pleadings remain open in some of their actions. Coco and GS want to move ahead with documentary and oral discovery. They want their day in court. They seek a timely determination of their claims.
LEAVE TO BRING THESE MOTIONS UNDER THE CLA
[14] I am satisfied that leave to bring these motions should be granted pursuant to section 67(2) of the CLA. First, the requirement for leave only applies to the lien actions. CPP does not require leave in order to bring these motions in connection with the bond actions. It would make no sense to deny leave in the lien actions and then proceed to decide the stay motions in the bond actions. The lien and bond actions are closely connected. They involve the same claims on the same project and most of the same parties. All of the parties involved in the claims arising from the Project, including Coco and GS, agreed that all of the claims from the Project would be case managed together, as ordered by RSJ Fuerst.
[15] Second, it is my view that the motions for a temporary stay order are necessary. They are necessary because lien actions are a form of class proceeding. In fact, each lien claimant is ultimately a party to all of the lien actions arising from the improvement. See 1652472 Ontario Inc. (c.o.b. North Key Construction) v. Miwel Construction Ltd., 2013 ONSC 4433 (Master) at paragraph 16. The motions are also necessary because they are being case managed. The necessity arises because a stay of the Coco and GS actions is the only way to prevent those actions from being litigated on their own, separate and apart from the remaining case managed lien and other actions. If Coco and GS seek to move ahead with their actions while the vast majority of the other claimants and parties are content to await the outcome of the arbitration, a stay order may become a necessary tool to promote important principles of Ontario lien legislation, as set out in Miwel and in the CLA itself.
[16] I am therefore granting leave to CPP to bring these stay motions in the Coco and GS lien actions.
CJA STAY ORDER
[17] The basis of the court’s jurisdiction to grant a stay order is found in section 106 of the CJA, which reads as follows:
- A court, on its own initiative or on motion by any person, whether or not a party, may stay any proceeding in the court on such terms as are considered just.
[18] This section grants the court a broad discretion to order a stay of proceedings and impose such terms as are just. In exercising this discretion the court is able to consider such factors as the avoidance of a multiplicity of proceedings and inconsistent findings of fact along with issues related to cost savings and efficiency. See Penn-Co Construction Canada (2003) Ltd. v. Constance Lake First Nation, 2008 ONCA 768 at paragraph 4.
[19] In my view, it is just in the circumstances of these actions to order a temporary stay of proceedings. First, I repeat the statements made above in connection with the issue of leave under the CLA. These claims are part of a large picture and are a form of class proceeding. The claims from the Project are being case managed as a whole. The great majority of the claimants from the Project are content to await the outcome of the arbitration proceeding and the largest claimants have consented to stay orders. It is important that the claims arising from the Project proceed together. This will lead to a more efficient and less expensive adjudication process in the long run.
[20] Second, this is not a situation where the moving party is doing nothing to advance the claims of Coco, GS and the other claimants. In fact, the opposite is true. CPP has put forward all of the claims made by Coco and GS in the arbitration proceeding against Covanta. It is obvious that CPP has devoted significant resources to the arbitration proceeding, including appearing at nearly 80 days of hearings. It has tendered evidence with respect to at least 450 change orders. The time required for the arbitration hearing has been significant and certainly longer than expected. However, this delay appears to arise from the complexity of the proceedings and not due to a lack of diligence on the part of CPP.
[21] The outcome of the arbitration hearing may very well reduce or eliminate the issues to be tried as part of the Coco and GS claims. For example, CPP and Coco have agreed on the amount of Coco’s claim. They just disagree on when it should be paid. If the arbitrator accepts the Coco claim, Coco will be paid and its claim will be resolved. If the Coco and GS claims are accepted in part, the remaining litigation will be simplified to some extent.
[22] Third, one of the main issues in the Coco and GS claims is the enforceability of the “pay when paid” clause in the Coco and GS sub-contracts with CPP. It is not the role of the court to decide this issue as part of these motions. The clause may or may not be binding on Coco, GS and the other CPP sub-trades. That determination is for another day. In my view, it is sufficient for today for the court to acknowledge the existence of this issue as a legitimate area of dispute between the parties.
[23] In fact, it would appear that it may not yet be possible for the court to determine the enforceability of the “pay when paid” clause. One of the important considerations in any such analysis is the question of whether the party relying on the clause did anything or omitted to do anything that resulted in its inability to collect from its payer on an improvement. It appears that that analysis cannot be made in these actions until the arbitration has been completed. At the very least, proceeding with that determination now in respect of the Coco and GS claims would carry a risk of inconsistent findings and a multiplicity of proceedings, as the same clause is found in all of the other sub-contracts entered into by CPP. Litigating the “pay when paid” clause more than once would not be an efficient use of judicial and other resources. See 1603878 Ontario Ltd. (c.o.b. Loaring Construction) v. St. Clair College of Applied Arts and Technology, 2014 ONSC 6107 at paragraphs 11 to 13.
[24] Fourth, it is my view that this situation is, to some extent, a risk that Coco and GS agreed to assume when they entered into their sub-contracts with CPP. They are both sophisticated participants in the construction industry. They knew that the Project was a large and complex undertaking which would involve many parties. The likelihood of significant claims on such an improvement is quite high. Coco and GS agreed to the “pay when paid” clause. In doing so, Coco and GS accepted the risk that there may be some upstream delay in receiving payment and enforcing their claims. This is hardly an uncommon scenario with large multi-party construction claims.
[25] I should note that Coco and GS placed significant emphasis on the decision of Justice Diamond in Covanta Durham York Renewable Energy Partnership v. Barton Malow Canada Inc., 2016 ONSC 2044. The ruling by Justice Diamond arose from an order made by the arbitrator in the CPP and Covanta arbitration to add two of the CPP sub-trades as parties to the arbitration proceeding. Justice Diamond ruled that the arbitrator exceeded his jurisdiction because the terms of the CPP sub-contract documents lacked the required specificity to make the sub-trades parties to the arbitration process with Covanta. This decision would appear to extend to the Coco and GS sub-contracts as they contain the same language.
[26] I agree with the submissions of Coco and GS in connection with Justice Diamond’s decision. However, I simply do not see the relevance of his findings to the issues on this motion. CPP does not take the position on this motion that Coco and GS are parties to the arbitration proceeding. CPP simply argues that the Coco and GS claims may be affected by the outcome of the arbitration. It is therefore just in the full circumstances of these actions that Coco and GS should wait and see what happens with the arbitration before advancing their claims any further. I agree with CPP.
[27] I also note that Coco and GS have not put forward any specific evidence of actual prejudice if a stay is granted.
[28] In any event, any potential prejudice or unfairness to Coco and GS from the passage of time can be mitigated, to some extent, by the fact that I am case managing these actions. If it appears at some point in the future that CPP is not continuing to pursue the arbitration in a diligent fashion or if delays continue for other reasons, the stay can be re-visited. In addition, by placing a time limit on the stay, CPP will be required to return to court to justify any further extension of the stay of proceedings. These terms will ensure Coco and GS are not indefinitely delayed.
CONCLUSION AND ORDER
[29] I have therefore concluded that it is just in the circumstances of these actions that an order be made granting a temporary stay of proceedings. This order shall apply to this action and to the actions referred to in footnote 1, above. The stay of proceedings shall remain in effect until October 31, 2018 or such earlier time as may be agreed to by the parties. If CPP wishes to extend the stay order, it shall arrange for a case conference before me prior to October 31, 2018.
[30] If the parties are unable to agree on the issue of the costs of these motions, they shall provide the court with brief submissions in writing by June 14, 2018.
Master R. A. Muir
Date: 2018 05 07
[^1]: Coco has commenced three actions, two lien actions and one bond action. GS has started two claims, one lien action and one bond action.These reasons shall apply to all motions brought by CPP in the following Coco and GS actions: 90987/15 (Oshawa); 93589/15 (Oshawa); 91389/15 (Oshawa); CV-15-540793 (Toronto); 91420/15 (Oshawa).