Court File and Parties

COURT FILE NO.: CV-14-503965 DATE: 20190321 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: JERMARK PLUMBING & MECHANICAL SERVICES LIMITED, Plaintiff AND: METROPOLITAN TORONTO CONDOMINIUM CORPORATION NO 1371, Defendant

BEFORE: Justice S. Nakatsuru

COUNSEL: Alan B. Dryer, for the Plaintiff Sheldon Inkol, for the Defendant

HEARD: February 19, 2019

Endorsement

[1] In 2013, Metropolitan Toronto Condominium Corporation No. 1371 (henceforth “MTCC 1371”) had to replace the domestic and heating piping, (otherwise known as its Kitec piping) in its Front Street West ten-story building and townhouse complex of 209 residential units. MTCC 1371 allegedly initiated a tender process in relation to this piping project. To be clear, MTCC 1371 denies that it tendered for bids. However, Jermark Plumbing and Mechanical Services Ltd. (henceforth “Jermark”) which had previously worked for MTCC 1371, argues that three contractors were invited to “bid” on the project, and that Jermark tendered a bid. It is Jermark’s position that it was the winning bidder and entered into a contractual relationship with MTCC 1371. Many owners of the unit were displeased with the selection of Jermark and raised objection. MTCC 1371 says it tried to obtain court approval to go with Jermark but failed. Eventually, MTCC 1371 went with another company. Jermark sues, claiming that MTCC 1371 breached its contractual obligations owed to it and breached its duties of good faith, honesty, and fairness in the process whereby it awarded the contract to another contractor.

[2] MTCC 1371 brings a summary judgment motion to dismiss the Plaintiff’s claim. Jermark opposes. Jermark’s primary position is that a trial is needed.

[3] My decision is that a trial is required and that the need for a trial cannot be avoided by using my expanded fact-finding powers. The motion is dismissed.

A. Test for Summary Judgment

[4] Pursuant to Rule 20 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, a plaintiff is entitled to move for summary judgment dismissing “all or part” of a defendant’s claim. Rule 20.04(2) mandates that the court “shall” grant summary judgment if the court is satisfied that there is no genuine issue requiring a trial with respect to all or part of the claim.

[5] In Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, at para. 45, the Supreme Court of Canada confirmed that summary judgment is a “significant alternative model of adjudication”. Rule 20 provides judges with fact-finding powers (i.e., the power to weigh evidence, evaluate credibility, and draw inferences) if required in order to eliminate unmeritorious claims that have no chance of success at trial.

[6] Determination of a motion for summary judgment involves a two-step approach. As stated in Hryniak at para. 66, the motions judge must:

1. Determine whether there is a genuine issue requiring trial based only on the evidence before him or her, without using the fact-finding powers. If there is no genuine issue requiring a trial, summary judgment “must be granted”.

2. If there appears to be a genuine issue requiring a trial, the judge should then determine whether “the need for a trial can be avoided” by using the fact-finding powers to weigh evidence, evaluate credibility, and draw inferences.

[7] Notably, the Supreme Court of Canada held that the focus should not be on what further or other evidence could be adduced at trial, but rather, on whether a trial is required. A trial is not required when the summary judgment process “(1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a more proportionate, more expeditious and less expensive means to achieve a just result”: Hryniak at para. 49.

[8] If there appears to be a genuine issue requiring a trial, then the court should determine if the need for a trial can be avoided by using the fact-finding powers under rule 20.04. Their use will not be against the interest of justice if they 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: Hryniak at para. 66.

[9] The Supreme Court of Canada confirmed that a documentary record, particularly when supplemented by the court’s fact-finding powers, “is often sufficient to resolve material issues fairly and justly”: Hryniak at para. 57.

[10] A responding party may not rest solely on the allegations or denials in the party’s pleadings. Under rule 20.0(2), they “must set out, in affidavit material or other evidence, specific facts showing that there is a genuine issue requiring a trial”. In the absence of detailed and supporting evidence, the case law has held that a self-serving affidavit does not create a triable issue: Guarantee Co. of North America v. Gordon Capital Corp., 1999 SCC 664, [1999] 3 S.C.R. 423 at para. 31. Each side must “put its best foot forward” with respect to the existence or non-existence of material issues to be tried. A court is entitled to assume that the record contains all the evidence that the parties would present if the matter proceeded to trial.

B. Analysis

[11] In this case, for some very good practical and financial reasons, the Condominium Board of MTCC 1371 decided that it would best that one contractor be hired to complete the entire project of remedying the piping issue in the condominium units. This included replacement of the Kitec piping within each individual unit of the building. Jermark had a previous relationship with MTCC 1371, having done work for the building before. At MTCC 1371’s request, Jermark inspected some units and there was a number of communications between them about the project. Jermark also presented at a meeting with the individual condominium owners. However, in order to realistically implement this “one supplier solution” given the numerous individual condo owners who were required to consent to the chosen contractor to do the work within their unit, MTCC 1371 needed to go to court to get a court order imposing the one contractor solution. During this whole process, Jermark believed it was going to be that single supplier contractor. Indeed, MTCC 1371 wanted Jermark to be that contractor. However, at the end of the day, Jermark was excluded by the court order obtained from Justice McEwen after a mediation that took place with Justice Spiegel. At the hearing before Justice McEwen, MTCC 1371 agreed to another tender process. It also consented to Jermark’s exclusion from this process. After the tender process, MTCC 1371 hired another company to implement the one contractor solution for the project.

[12] What I need to resolve on this summary judgment motion brought by MTCC 1371 is whether Jermark’s action for breach of contract can be dismissed based upon MTCC 1371’s argument that no contract was ever formed and if one was formed, MTCC 1371 acted in good faith in discharging its obligations under it.

[13] To begin, both parties rely upon the law regarding contract formation in the context of tenders as set out in Ron Engineering & Construction (Eastern) Ltd. v. Ontario, 1981 SCC 17, [1981] 1 S.C.R. 111. This case held that the submission of a bid in response to a tender creates a binding contract referred to as Contract A. This contract is distinct from the subsequent performance/construction contract referred to as Contract B when a submission is accepted. In this case, the existence and the terms and conditions of both types of contracts are in issue.

[14] There are a number of critical issues raised in this action:

1. The Plaintiff alleges that on February 24, 2013, even before the alleged tenders were solicited, a single supplier contract had been awarded to Jermark. Jermark bases this argument upon the interactions between Mr. Cohen, a principal of Jermark, and Mr. Reed-Lewis, the President of the Board for MTCC 1371. By contrast, MTCC 1371 responds that no such contractual arrangement was formed at that time and points to the subsequent events when three companies including Jermark were approached for quotes. MTCC 1371 argues that this action for soliciting quotes belies Jermark’s position that it already had a contract.
2. MTCC 1371 denies that any contractual relations were formed by the request for quotes from the three contractors. It points to a number of factors including evidence that no formal tender documents were submitted, no deposits were requested, and not much work was put in by Jermark. In other words, MTCC 1371 submits that Contract A, as it is known in the tender process, was never established. Jermark responds that the evidence is clear that not only was Contract A formed, but Jermark won the bid given the documents and emails that support this conclusion.
3. Jermark submits that MTCC 1371 was contractually bound to give the project to Jermark as the winning single source contractor. Jermark was aware that the consent of the unit owners or court approval was required before the project could take place. However, Jermark argues that the acceptance of its bid meant that it was to be that single source supplier. It submits that when MTCC 1371 eventually gave that contract to a different contractor, it breached its contract to Jermark. MTCC 1371 responds by arguing that regardless of whether it be Contract A or Contract B formed in this case, it was always a term of the contract that it had to gain the consent of the unit owners or obtain court approval, before Jermark or any other company could perform the project. When faced with the resistance of some of the unit owners to Jermark and how the mediation before Justice Speigel went where the objecting unit owners raised its concerns to the court, MTCC 1371 argues that this condition of the contract could not be fulfilled. As a result, even if any contract was formed with Jermark, in the circumstances, MTCC 1371 was entitled to terminate the contract and go with another supplier.
4. Jermark contends that MTCC 1371 breached its duty of good faith performance of the contract when it consented to an order by Justice McEwen that excluded Jermark from a re-tender for the project. MTCC 1371 argues that even if contractual relations were formed with Jermark, any good faith performance obligation was met. It was not required to argue an application on its merits when the application was destined to fail if Jermark was put forward as the project contractor.

[15] With respect to the first stage of the analysis, I find that there are genuine issues requiring a trial.

[16] This case significantly differs from the usual tender process. Here, the whole process of finding a contractor was informal, and there is a lack of formal documentary evidence. Tender instructions and documents are critical in the analysis of whether contractual relations are created: Martel Building Ltd. v. R., 2000 SCC 60, [2000] 2 S.C.R. 860 at paras. 86-89. In this case, there were no formal tender documents. Whether Contract A arises on the facts depends upon whether the parties intended to initiate contractual relations by the submission of a bid in response to an invitation to tender. As noted above, this is very much in dispute by the parties. MTCC 1371 takes the position that only quotes were solicited. Jermark responds by saying that however informal, this was an invitation to tender, and they along with two other companies’ submitted bids.

[17] An important factual matter in the determination of this issue, in my view, is the process and the reason why after the documents seem to support Jermark’s contention that by the end of February 2013, it had obtained the project, MTCC 1371 seemed to reverse course and tender the project to three potential contractors including Jermark. As the law establishes, any tender process to be valid must be a legitimate and fair one.

[18] In addition, the exact nature of the terms and conditions of any contractual relations formed between Jermark and MTCC 1371, whether it is Contract A or Contract B, is unsupported by clear documentation. An important matter of dispute is exactly what was agreed to as being subject to court approval. Was it the single supplier solution per se? Or was it Jermark’s participation as that single supplier solution? In other words, it is Jermark’s position that its involvement in the project depended upon the court’s acceptance of a single supplier solution. If that solution was accepted by the court, then Jermark argues that there was a contract with MTCC 1371 that it was to be that single supplier. It is Jermark’s position that it was only if the court did not approve a single supplier solution, could MTCC 1371 be relieved of its obligations to Jermark. Jermark submits that MTCC 1371 could not simply break its contractual commitment to Jermark and contract with a different contractor if a single supplier solution was pursued.

[19] I find that any resolution of this question will depend very much on the actual intention of the parties and the surrounding factual matrix.

[20] Finally, with respect to good faith in the performance of the contract, in addition to acting in good faith in the discharge of their obligations under the contract, parties must not lie or otherwise knowingly mislead each other about matters directly linked to the performance of the contract. Here, the issue arises as to whether MTCC 1371, once realizing that the unit owners’ objections to Jermark and the mediation judge’s view on the matter could have thwarted its plans for a single contractor solution, mislead Jermark about what the nature of how they were going to conduct the court application before Justice McEwen. Corollary to this is the issue of whether good faith performance of the contract required them to argue the application on the merits or find some other option than a consent to exclude Jermark. Much of this will depend upon events that surrounded this whole process. Some of the material facts regarding this are in dispute.

[21] I will not go into the evidence presented at this summary judgment motion in any detail. However, it is clear to me that the credibility and reliability of witnesses are key issues in the circumstances of this case. Again, this differs from other cases where matters can be resolved on the basis of contract interpretation or where material factual disputes can be resolved on the basis of a written cross-examination of affiants. Here, the credibility and the reliability of key witnesses such as Mr. Cohen, Mr. Reed-Lewis, Mr. Johnson (Vice-President of the Board), and Mr. Gomez (manager of the building) are important in making a determination of the facts needed to resolve the various issues. There may well be other witnesses as well. These are genuine issues that require a trial.

[22] MTCC 1371 submits that the witnesses it has presented support its position that no contractual relations were formed or that it never committed to Jermark to be the single source contractor. Jermark challenges these witnesses. In particular, it submits that Mr. Reed-Lewis was evasive in his questioning on key issues, was implausible, was contradicted by documents, and should not be believed. Jermark also points to inconsistent statements between the witnesses that calls upon the assessment of credibility. In some instances, for example, how Jermark was to be paid raises concerns about the reliability of the evidence. On the other hand, Mr. Cohen is strongly challenged by MTCC 1371 when he gives evidence to the contrary, that he believed contractual relations had been formed as early as February. These are genuine issues that require a trial. They cannot be confidently resolved on this motion.

[23] In addition, I find that a trial is required in order to establish the required understanding of the narrative of what occurred here. The whole alleged tendering process and how MTCC 1371 came to its position to agree to the consent order excluding Jermark, one which was not communicated in a fulsome way to Jermark until this litigation began, can only truly be understood through viva voce evidence as witnesses are taken to the various events that took place. These include the verbal communications between Jermark and MTCC 1371, the meeting with the owners, the emails and other documents, the judicial and mediation process, and the final determination of the successful project contractor. Given the differences between the parties about the reasons for what happened, a more nuanced and in-depth inquiry beyond this motion record is required.

[24] I do not find this case is like 1853491 Ontario Inc. v. Regional Waste North Inc., 2019 ONCA 37 at paras. 11-17. MTCC 1371 relies on this authority. That case dealt with the dismissal of a counterclaim based upon a limitation period. The issue of when the tolling of a limitation period ended was resolved on the basis of emails sent between solicitors. The Court of Appeal rejected the argument that the finding based upon emails resulted in a credibility finding against a party that should have been left to be resolved at trial rather than on a summary judgment motion. In my opinion, that is a very different factual situation than the case at bar. Here the record of documentary exchanges between the parties and any reasonable inferences made from them, is not an adequate substitute for the assessment of credibility afforded by viva voce evidence. I say this because there are significant elements of the claim that depend upon the state of mind of the key players and the unfolding of the narrative. While the emails are important, what happened and was said at events such as site visits and meetings are equally important to establish the intentions of the parties and the nature of the whole relationship during the relevant times. This depends upon the witnesses’ testimony.

[25] At the second stage of the analysis, I find that the use of my expanded fact-finding powers to be contrary to the interests of justice.

[26] A decision on this motion obviously would be faster and more affordable than a trial given that I have already heard the motion. However, while summary judgment is always to be preferred where appropriate given the expense involved in a trial, it should not be a vehicle by which unfairness creeps in. Findings of credibility and reliability cannot readily be made on the written record in a case such as this. I appreciate that the mere fact that credibility findings need to be made or that conflicts in the evidence exist, does not mean that summary judgment cannot be granted. However, on the circumstances of this case, I find that without the trial process, I cannot be confident about the facts that need to be made to do justice. An unfolding of the narrative through the witnesses whose testimony can be assessed by me in court is needed for that. It is further not isolated to one or two witnesses; nor one discrete issue. Here, given the nature of alleged tender process that was entered into, to use my expanded fact-finding process will not substitute for what a trial can deliver.

[27] I appreciate the amount of money at stake here is not extraordinarily large. On the other hand, it is significant: about a half a million dollars. It is also significant in that ultimately if the Plaintiff is successful, it will be the unit owners of the building who will be affected. On the other hand, Jermark alleges that it had set aside a significant amount of resources, staff, and time on the expectation that it would be awarded this contract. Using colloquial language, Jermark feels as if the rug was pulled from under its feet dishonestly, only learning of what occurred much later on through its own independent means. Thus, looking at all of the circumstances, a trial is proportional in my view to what is at stake.

[28] Finally, the efforts used in the preparation of the materials and the witnesses need not be wasted since there will be no need to completely duplicate this again for trial. In addition, the issues for trial have been focused by this motion. I do not envision the trial as being unduly complex or lengthy.

[29] As a result, this motion for summary judgment is dismissed.

[30] If the issues of costs cannot be resolved between the parties, I will entertain written submissions, each one limited to two pages regarding when the issue of costs should be resolved, and the nature of the costs award. The Plaintiff shall file within 20 days of this decision. The Defendant shall file within 10 days thereafter. There will be no reply submissions without leave of the court.

Justice S. Nakatsuru Released: March 21, 2019