COURT FILE NO.: CV-13-472439
DATE: June 18, 2018
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: ABCO One Corporation v. City of Toronto, Toronto Transit Commission and Pomerleau Inc.;
BEFORE: MASTER C. WIEBE
COUNSEL: Karen B. Groulx for Pomerleau Inc.; Angela Assuras for ABCO One Corporation;
Christian R. Riveros for Canada-Wide Reinforcing Steel Co. (1987) Ltd.
HEARD: June 11, 2018.
REASONS FOR DECISION
[1] On June 11, 2018 I heard argument on the motion by Pomerleau for an order adjourning the trial hearing in this action presently scheduled to commence on October 2, 2018 and to run for 18 days into November, 2018. On June 13, 2018 I advised the parties by email that, given the exigencies of the ordered schedule in this action leading to the trial hearing and my own schedule, I had decided to rule that day dismissing the Pomerleau with written reasons to follow. These are my reasons.
[2] The ground for the motion is that there is a contested bankruptcy motion (commenced by supplier, Peri Formwork) scheduled to be heard on September 13 and 14, 2018 which will probably result in ABCO being declared bankrupt, the Pomerleau counterclaim being stayed and the ABCO claim being transferred to a third party trustee-in-bankruptcy who will probably bring it to an end. This would render all of the future trial preparation work an uncollectable waste of money on the part of Pomerleau. Peri has an unpaid judgment against ABCO in the amount of $1,152,897.13 dated December 11, 2014 concerning other projects. There are also apparently three unpaid judgments against ABCO for accounts concerning this project.
[3] There was a preliminary issue about the leave for the motion required by Construction Lien Act, R.S.O. 1990, c. C.30 ("CLA") section 67(2), as an adjournment of a scheduled trial hearing is not expressly provided for by the CLA. In the end there was no dispute on this issue, which did not surprise me. If there is a high likelihood of an ABCO bankruptcy two weeks before the scheduled trial hearing, as Pomerleau maintains, a motion at this time to adjourn the trial is "necessary" to avoid the procedural unfairness to Pomerleau of an unnecessary expenditure on future trial preparation costs that it will probably not be able to recover. Saving costs has been cited as a reason for granting leave; see 4 Star Drywall (99) Ltd. v. Nank Homes Inc., 2009 CarswellOnt 2006 (ONSC) at paragraph 11. I grant the requested leave.
[4] As to the substance of the motion itself, on the other hand, I am not convinced that there is a high likelihood that the bankruptcy hearing in September will end in an operational bankruptcy order. Ms. Assuras produced an affidavit of a lawyer named Kenneth Page, a bankruptcy specialist. I am personally aware of Mr. Page's specialty as he appeared before me on several occasions when I was acting as a Registrar in Bankruptcy. Mr. Page is also the lawyer for Dipak Zinzuwadia, a sub-subcontractor to ABCO on the subject project with an unpaid account that is looking to the ABCO action to get paid.
[5] In his affidavit, Mr. Page advised that the judge hearing the application for bankruptcy has a choice of making different kinds of orders. One such option is to dismiss the application, presumably on the grounds that the applicant has not proven an "act of bankruptcy" on the part of ABCO. That option seems unlikely given the unpaid judgments against ABCO. A second option for the judge is to make the requested bankruptcy order. There is a likelihood that this will happen, given the unpaid judgments. ABCO appears to be insolvent. In this event, Mr. Page stated that it is quite unlikely that the trustee-in-bankruptcy will proceed with the ABCO claim as to do so would expose the trustee personally to an adverse award of costs and there are presently few other assets in the ABCO estate.
[6] However, Mr. Page advised that there is a third option. He stated that the judge may grant the bankruptcy order but then immediately stay that order in order to allow the ABCO claim to proceed to trial. He stated the following: "If a Bankruptcy Order is made and a stay granted, there will be no impact on ABCO's action against Pomerleau. It will proceed as timetabled." It was not disputed that several trade creditors of ABCO, both on the subject project and otherwise, have forborn collection proceedings against ABCO anticipating the result in the timetabled trial hearing. In these circumstances, it seems most likely that the judge hearing the application will use this third option, particularly as the scheduled trial will then only be only two weeks away and much of the trial preparation work will be done.
[7] Indeed, if I granted the Pomerleau motion, I fear that I may be influencing the bankruptcy judge against using this third option. The order Pomerleau seeks would logically have me adjourn the trial to a date to be scheduled after the result of the bankruptcy hearing. This would mean a significant delay in the trial hearing of several months. Whether ABCO would have the means to pursue this claim and continue to convince its creditors to forbear their collection proceedings in these circumstances is a real question. In the end, this path may leave the bankruptcy judge with only one realistic option, namely a bankruptcy order.
[8] There is another reason to dismiss the Pomerleau motion. The Canada-Wide claim will remain in any event. Canada-Wide is a sub-subcontractor to ABCO. Its claim against Pomerleau is for the ABCO holdback, which will be determined by the price or value of the services and materials ABCO supplied to Pomerleau. This claim will be unaffected by an ABCO bankruptcy, and must proceed. Pomerleau's position on the ABCO holdback is that it is a fraction of the Canada-Wide claim. Ms. Groulx argued that the Canada Wide trial could be limited to a few days in October, as the primary evidence will be the TTC payment certificates. I am not persuaded by this argument. There is obviously a dispute as to whether the payment certificates properly reflect the value of the supplied ABCO services and materials.
[9] As to the Pomerleau counterclaim, if a bankruptcy order is stayed to allow the trial to proceed, the Pomerleau counterclaim will be unaffected and can be used to offset any finding in favour of ABCO. Whether Pomerleau can collect any judgment on the counterclaim in excess of a successful ABCO claim will be a hurdle, but this hurdle exists even if there is no bankruptcy. I do not find this to be a reason to adjourn the trial.
[10] I, therefore, ruled that the Pomerleau motion be dismissed.
[11] As to costs, at Ms. Assuras' request, I allowed the parties additional time to submit their costs outlines. Pomerleau's costs outline shows a partial indemnity amount of $5,176.36 and a substantial indemnity amount of $5,768.06. The ABCO costs outline shows a partial indemnity amount of $1,966.20. Canada-Wide submitted a costs outline, but it does not show any figures. Mr. Riveros did make submission on behalf of Canada Wide in support of the ABCO position; but it appears that Canada-Wide is not seeking costs.
[12] ABCO is the successful party on this motion, and therefore deserves costs. Given the size of the Pomerleau costs outline, I also find that the ABCO claim is reasonable and in an amount that Pomerleau would reasonably have expected to pay in the event of ABCO success on the motion.
[13] Ms. Groulx does, however, make an important point in her costs outline. Apparently, Ms. Assuras refused to have this issue dealt with by way of a case conference. On reflection, I believe that this would have been the most expeditious and least costly way to proceed. The opinion of Mr. Page could have been presented at such a case conference in the form of a letter. It would have carried as much weight as his affidavit. This was the critical evidence. I could have made the necessary ruling in a case conference.
[14] Therefore, I have decided to reduce ABCO's costs recovery to $1,000 to reflect the costs ABCO would have incurred had that alternative method been used. This $1,000 must be paid by Pomerleau to ABCO in 30 days.
DATE: June 18, 2018 __________________________
MASTER C. WIEBE