COURT FILE NO.: 17-74051A1
DATE: 25/04/2019
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
QUANTECH ELECTRICAL CONTRACTORS LIMITED
Plaintiff
– and –
ASCO CONSTRUCTION LTD.
Defendant
– and –
THE REGIONAL MUNICIPALITY OF YORK
Third Party
No one appearing
Stephane Bond, for the Defendant/Responding Party
Doug Smith and Erin Durant, for the Third Party/Moving Party
HEARD: March 5, 2019
BEAUDOIN J.
REASONS FOR decision
[1] The Third Party, the Regional Municipality of York (“The Region”) brings this motion for summary judgment to dismiss the Third Party Claim brought by the Defendant Asco Construction Ltd. (“ASCO”).
[2] This claim arises from a large municipal infrastructure construction project commonly described as the Leslie Street Pumping Station Upgrades (the “Project”). The Region is the owner of the Project. ASCO was the general contractor for the Project and Quantech Electrical Contractors Limited, (“Quantech”) was the electrical subcontractor.
[3] ASCO seeks contribution and indemnity from the Region in respect of a claim made against ASCO by Quantech as a result of the deletion of Provisional Item P.04 (“P.04 Claim”) from the construction contract.
[4] Examinations of the parties have taken place and transcripts from those examinations have been filed including the examination of Quantech’s representative, Cliff Shelston. The Region has defended the main action. Although served with this motion for summary judgment, Quantech has not responded.
[5] The central issue on this motion for summary judgment is whether the wording of a Global Settlement Agreement (GSA) entered into between the Region and ASCO as well as the release contained therein prevent ASCO from asserting the Third Party Claim.
Background
[6] The Region is the owner of a sewage pumping station located at 7033 Leslie Street, in the Town of Markham. The Region wished to increase the capacity of the station and a tender was issued to a number of pre-qualified general contractors (including ASCO) for the necessary work to accomplish the Project. Quantech was a prequalified electrical sub-contractor. ASCO became the successful bidder and was awarded the contract on November 1, 2012 based on a bid price of $22,289,000.
[7] ASCO has worked on other municipal infrastructure projects, including previous experience working with the Region. Mr. Anthony Assaly signed the contractual documents on behalf of ASCO and he acknowledged that he was familiar with these types of documents.
[8] Articles of Agreement (the “Agreement”) were signed between the Region and ASCO on November 1, 2012. Article AGC 57.1 provided that ASCO would indemnify and hold the Region harmless from any claims for unpaid labour, material and supplies in respect of work done on the Project.
[9] The contract documents also included a set of specifications. The General Requirements required that any items designated as provisional items were included for the purposes of covering the cost of extra work approved by the Region, if required. The costs of these provisional items were included in ASCO’s bid price. Article 1.4 of the General Requirements further stated that ASCO was not entitled to use the prices applicable to provisional items unless it had received prior written approval from the Region. The same article added that ASCO could have no claim on any unused portion of the provisional items including any claim for loss of anticipated profits.
[10] On November 30, 2012, Quantech entered into a separate subcontract with ASCO whereby Quantech became the electrical subcontractor to ASCO. Work on the Project commenced in January of 2013. The electrical work to be performed on the Project included work related to the modification of certain 27.6 kV switchgear; provisional item P.04 in the contract documents.
[11] In November of 2013, the Region advised ASCO to proceed with the work in respect of P.04. On March 21, 2014, Quantech received Subcontract Change Order 4 (“SCO 4”) from ASCO to proceed with the work in respect of item P.04.
[12] In June of 2016, the Region advised ASCO that the modification of 27.6 kV switchgear, would be deleted from the contract as it no longer wanted the work performed. ASCO was directed to take no further action in respect of this item. Discussions regarding the deletion of P.04 began sometime before June of 2016.
[13] GHD Inc. (“GHD”), is the engineering firm retained by the Region to perform contract administration services in respect of the Project. The deletion of item P.04 was discussed at Progress Meeting dated June 9, 2016 and it was noted in the Minutes of that meeting. Representatives from ASCO, Quantech, the Region and GHD were all in attendance.
[14] On August 5, 2016, Change Order 090 (“CO-90”) was sent to ASCO advising that item P.04 had been deleted from the work to be done on the Project and increased the amounts allocated to other provisional items. Price adjustments attached to CO-90 disclose that the Region was not allocating any amount for P.04
[15] Mr. Assaly acknowledged that CO-90 directed ASCO that no further work was to be completed with respect to P.04. According to Mr. Shelston, despite the cancellation by the Region of item P.04, SCO 4 was never cancelled by ASCO.
[16] When Quantech initially received the approval to proceed with item P.04, it proceeded with some work but no further work was done by Quantech after item P.04 was cancelled by the Region. No materials were supplied and no installation was completed on site.
[17] In May of 2013, ASCO alleged that it had encountered issues with dewatering on the site of the Project and it had incurred “substantial costs” to try and lower the water table. The dewatering process caused delays in construction. Consequently, on May 1, 2015, ASCO issued a Notice of Action against the Region (the “First Action”) seeking $1,165,707.40 in damages. ASCO alleged that the Region had failed to disclose the hydraulic conditions on the site and that this was a fundamental breach of contract and/or negligence. ASCO sought damages for additional staff hours, insurance and bonding costs, costs incurred by ASCO indirectly through deploying extra forces, retained experts and third parties to deal with the dewatering issue and other costs.
Settlement Discussions
[18] After the pleadings were served on the Region, the parties commenced settlement discussions. There were a number of other claims made by ASCO but litigation had not been commenced with regards to these additional claims.
[19] In late 2015, the Region proposed a global settlement of the First Action and of all other outstanding ASCO claims. As a basis for settlement discussions, the Region asked ASCO to send a list of all of the outstanding claims as of that period of time.
[20] Mr. Assaly delivered a global settlement offer to the Region in an email dated July 27, 2016. His email says that this offer was intended to “provide the cost of all claims to date to serve as the basis of a potential global settlement between the parties.” The email goes on to acknowledge “that the Region would like to see all known claims to date resolved and offer the parties a fresh start based on the new completion schedule”.
[21] Mr. Assaly attached a spreadsheet that listed all claims in Appendix A to his offer. ASCO’s global settlement proposal was for the sum of $11,047,933.83. The spreadsheet identified $2,320,989.12 as being allocated to Quantech. In arriving at that total number, a “credit” in the amount of $178,659 was included in respect of “27.6 switchgear modification deletion from contract.”
[22] Further discussions between ASCO and the Region regarding the settlement proposal took place. During a conference call on September 19, 2016, the Region made a counter-offer of $5.5 million. On September 23, 2016, Mr. Millis, on behalf of the Region, provided a review of ASCO’s global settlement and specifically addressed an amount that could be allocated to cover the cancellation of P.04. At this point in time, the Region began presenting “all-in” numbers rather than breaking down offers into specific claims.
[23] Mr. Millis, testified under cross-examination, that the negotiations covered the costs associated with the various claims that were the subject of the global settlement discussions. Mr. Millis agreed that ASCO’s settlement calculations initially showed a credit in respect of item P.04. According to Mr. Millis, the Region did not ask for a credit in respect of this item. Instead, the Region wanted to pay what was reasonable in respect of that claim to compensate for the work that had actually been performed. The arrangements between ASCO and Quantech were of no concern to the Region.
[24] On October 18, 2016, Mr. Assaly responded to the Region’s proposal. His email specifically referred to Quantech’s position regarding the P.04 claim. Settlement discussions continued at a full-day meeting held at the Region’s offices on November 9, 2016. Mr. Millis and others from the Region then had a telephone call with Mr. Assaly on January 17, 2017 in order to further advance the global settlement discussions. A global settlement, subject to approval by Regional Council, was agreed to during that call.
[25] Mr. Assaly wrote to Mr. Millis by email the next day and documented the agreement that was reached to settle all of ASCO’s outstanding claims for $7.4 million plus HST. Mr. Assaly confirmed on examination that the purpose of the email was to summarize the terms and conditions of the global settlement. Item 1 of that email provided that:
This global settlement in the amount of $7,400,000 plus 13% HST settles all amounts noted in ASCO’s delay claim submitted on July 27, 2016, including amounts noted in Appendix A attached to that claim, but excluding costs for extended warranties. Any new issues that have not been identified in ASCO’s claim submission of July 27, 2016 and give rise to additional costs is strictly excluded from this settlement and will be treated as new issue or claim. [Emphasis added]
[26] There is no mention that the Region would be billed separately for P.04. On January 27, 2017, Mr. Millis proposed terms of a formal settlement agreement. The wording and terms of the agreement were then the subject of some negotiations between Mr. Assaly and Mr. Millis.
[27] Mr. Assaly confirmed that he had read the January 27, 2017 letter carefully and that he understood it. He also confirmed that he suggested changes to the wording of the agreement – including a carve-out for a claim regarding a different switch gear which is not the subject matter of this litigation.
[28] In an email dated February 3, 2017 Mr. Assaly confirmed ASCO’s intention was to settle “all matters noted in its July 27, 2016 claim document.”
[29] After the terms of the agreement were finalized, and having accepted some of the changes suggested by Mr. Assaly, Mr. Millis provided a signature copy of the agreement to ASCO on February 14, 2017 to formalize the global settlement and to set out further terms and conditions which the Region and ASCO wished to be included in the GSA. The letter was signed as accepted by Mr. Assaly, on behalf of ASCO.
[30] The GSA referenced previous "claim documents submitted by ASCO, subsequent meetings, discussions, correspondence, our phone conversation on January 17, 2017, and your [ASCO's] subsequent email on January 19, 2017, between the Region and ASCO …"
[31] The GSA, provided that the settlement included: “… any and all claims (cost and extensions of contract time) that ASCO is currently aware of, or reasonably ought to be aware of, prior to January 17, 2017”.
[32] The only claims excluded from the release are: “the claim for additional costs and potential contract time extension for the switchgear modifications that the parties are still negotiating and the cost of work quoted but not yet approved for all Proposal Requests and Work Change Directives submitted for approval.” The parties agree that this reference to the switchgear modifications is not a reference to the 27.6 switchgear. The GSA did not specifically exclude the P.04 Claim.
[33] By way of the GSA, ASCO also agreed to release the Region from all claims which ASCO was aware of, or reasonably ought to have been aware of, up to January 17, 2017. It was also agreed that the project would be deemed to be substantially performed and that a Certificate of Substantial Performance would be issued for work performed up to and including November 30, 2016.
[34] Quantech signed a similar agreement with ASCO. This agreement between ASCO and Quantech mirrored the language in the agreement between the Region and ASCO. Quantech believed that the release language did not prevent it from billing the full amount against the approved SCO 4 to ASCO, as SCO 4 had never been cancelled by ASCO.
[35] Regional Council approved the GSA on April 20, 2017. Contract Change Order 123 (“CO 123”) was subsequently executed by the Region on May 4, 2017. CO 123 contained release language which mirrored the language found in the GSA.
[36] Additional language above the signature lines provides that “The amount of this change includes all direct, indirect, delay, disruption, acceleration, impact and consequential costs. The Contractor accepts this change order as total and final compensation, and waives any right to future claims for additional costs and/or damages related to this change.” ASCO signed CO 123 on May 10, 2017.
[37] On May 11, 2017, shortly after the execution of CO 123, Mr. Assaly contacted Mr. Millis via telephone regarding the scope of the GSA. Mr. Assaly advised Mr. Millis that, despite the terms of the GSA and CO 123, Quantech took the position that the settlement did not include its $440,000 claim in respect of item P.04.
[38] On May 12, 2017 ASCO submitted an account for payment of the first tranche due under the GSA Settlement. The account included a request for payment of the full amount of the P.04 Claim. The Region advised ASCO that any payment would be for the global settlement only, and asked ASCO to resubmit the account. Payment was issued by the Region in respect of the global settlement amount and that payment was accepted by ASCO.
[39] Mr. Assaly then wrote to GHD on May 23, 2017 and advised of its position that ASCO should be able to bill the Region $440,000 in respect of the P.04 Claim in addition to the global settlement amount.
[40] Mr. Millis responded and advised that the Region’s position was that any amounts payable in relation to the P.04 Claim were subsumed in the global settlement amount.
[41] A dismissal order was obtained with regards to the First Action on August 14, 2017.
The Issues:
[42] There are two issues to be decided on this motion:
(a) Is this an appropriate case to decide by way of summary judgment?
(b) Do the Global Settlement and Release bar the claims made in the Third Party Claim?
The moving party’s position:
[43] The Region submits that the court has all of the evidence which is required to determine whether the third party claim should be dismissed.
[44] The Region asserts that there is no question in this case that a global settlement was reached by the parties. ASCO and the Region have both acknowledged in their evidence that the purpose of the GSA was to resolve all claims. The Region relies on the wording of the GSA which includes “… any and all claims (cost and extensions of contract time) that ASCO is currently aware of, or reasonably ought to be aware of, prior to January 17, 2017.”
[45] The Region maintains that the evidence clearly indicates that all parties were aware of the P.04 claim and that item was discussed throughout the negotiations. The item was also not specifically excluded from the broad wording of the GSA, as was the case for the other switch gear.
[46] Further, the Region argues that ASCO agreed to additional language in CO 123 limiting its ability to make further claims and that the claim made by ASCO in respect of item P.04 was subsumed in the GSA and that ASCO forever released and discharged the Region in respect of this item.
The responding party’s position:
[47] ASCO submits that its claim against the Region has merits and cannot be properly dealt with by way of summary judgment motion. ASCO claims that there is not enough evidence before the court for the court to decide the issues in dispute.
[48] ASCO argues that the court will need to hear the testimonies of the parties in order to make a factual determination if there was a meeting of the mind of the parties as it relates to the terms included in the GSA.
[49] ASCO adds that there is an issue of credibility due to the conflicting affidavit evidence and the contradictions in the interpretation of the agreement.
[50] ASCO submits that the Region acknowledges that work was completed by Quantech with respect to P.04 and a trial would be necessary to determine the amount owed to Quantech. According to ASCO, when the parties agreed to the GSA, P.04 was not a claim as the Region had agreed to compensate ASCO at a further time via progress billing as part of the work to be done under the original contract. ASCO argues that it was only agreed that a “credit” of $440,000 to the Region would be part of the settlement.
[51] According to ASCO, a credit is not included in the term “claim” as defined by the GSA, which includes only claims “related to the extension of the total performance date from March 31, 2016 to March 31, 2018”. ASCO submits that the claim at issue in this motion is not related to the extension of the total performance date for the Project, it is a claim for payment under an approved change order which increased Quantech’s Subcontract Price.
[52] ASCO argues that should the Region’s summary judgment be granted, there is a risk of inconsistent findings or conflicting decisions as Quantech and ASCO, the parties left in this action, might end up at trial.
Issue 1: Is this an appropriate case to decide by way of summary judgment?
[53] In Hryniak v. Mauldin, 2014 SCC, the Supreme Court has set out the test at paras: 49 to 51
There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the 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 proportionate, more expeditious and less expensive means to achieve a just result.
These principles are interconnected and all speak to whether summary judgment will provide a fair and just adjudication. When a summary judgment motion allows the judge to find the necessary facts and resolve the dispute, proceeding to trial would generally not be proportionate, timely or cost effective. Similarly, a process that does not give a judge confidence in her conclusions can never be the proportionate way to resolve a dispute. It bears reiterating that the standard for fairness is not whether the procedure is as exhaustive as a trial, but whether it gives the judge confidence that she can find the necessary facts and apply the relevant legal principles so as to resolve the dispute.
Often, concerns about credibility or clarification of the evidence can be addressed by calling oral evidence on the motion itself. However, there may be cases where, given the nature of the issues and the evidence required, the judge cannot make the necessary findings of fact, or apply the legal principles to reach a just and fair determination.
[54] The case law has repeatedly emphasized the necessity for a respondent to a motion for summary judgment to put their best foot forward. “[o]n a motion for summary judgment, a party is not entitled to sit back and rely on the possibility of more favourable facts that may develop at trial”.[^1]
[55] I am satisfied that I have all of the evidence before me which is required to determine the issues before me. All of the relevant parties have been examined and the transcripts of those examinations have been filed. All relevant documents have been produced.
[56] I am satisfied that there are no issues of credibility that need to be resolved through oral evidence. Mr. Assaly’s subjective interpretation of the GSA, no matter how genuine, is not determinative.
[57] Moreover, there is no risk of conflicting decisions since the P.04 was a provisional item in the contract between ASCO and the Region but it was a contract “extra” in the contract between Quantech and ASCO. P.04 was never formally cancelled in the contract between ASCO and Quantech as it was in the contract between the Region and ASCO by Change Order 090. Although duly served with this motion, Quantech chose to take no position
Issue 2: Does the Global Settlement and Release bar the claims made in the Third Party Claim?
[58] In Olivieri v. Sherman, 2007 ONCA 491 The Court of Appeal made it clear at para. 41 that a settlement agreement is a contract.
A settlement agreement is a contract. Thus, it is subject to the general law of contract regarding offer and acceptance. For a concluded contract to exist, the court must find that the parties: (1) had a mutual intention to create a legally binding contract; and (2) reached agreement on all of the essential terms of the settlement. [internal citations omitted]
[59] The Court went on to add at para. 44:
A determination as to whether a concluded agreement exists does not depend on an inquiry into the actual state of mind of one of the parties or on the parole evidence of one party's subjective intention. Where, as here, the agreement is in writing, it is to be measured by an objective reading of the language chosen by the parties to reflect their agreement. As was stated by Middleton J.A. in Lindsey …
The apparent mutual assent of the parties essential to the formation of a contract, must be gathered from the language employed by them, and the law imputes to a person an intention corresponding to the reasonable meaning of his words and acts. It judges his intention by his outward expressions and excludes all questions in regard to his unexpressed intention. If his words or acts, judged by a reasonable standard, manifest an intention to agree in regard to the matter in question, that agreement is established, and it is immaterial what may be the real but unexpressed state of his mind on the subject. [Internal citations omitted]
[60] As Olivieri makes clear, the aim of contract interpretation is to discern the objective intention of the parties and to do so as of the time they entered into the agreement. Here, the parties agree that a global settlement was reached by the parties. ASCO and the Region both acknowledged in their evidence that the purpose of the GSA was to resolve all claims. The only issue is the scope of the claims covered by the GSA and the Release contained within.
[61] As Professor Fridman, states in his text:[^2]
Words of ordinary use in a contract must be construed in their ordinary and natural sense. The paramount test of meaning of words used in a contract is the intention of the parties. That is to be determined in the operative sense by reference to the surrounding circumstances at the time of signing the contract.
[62] In Biancaniello v. DMCT LLP, 2017 ONCA 386 the Court of Appeal has recently considered factors to consider when examining the scope of a release. The specific legal question at issue in that case was whether future claims were barred by the release. The Court endorsed the following analytical framework for reviewing the scope of releases at 42:
(a) One looks first to the language of a release to find its meaning;
(b) Parties may use language that releases every claim that arises, including unknown claims. However, courts will require clear language to infer that a party intended to release claims of which it was unaware;
(c) General language in a release will be limited to the thing or things that were specifically in the contemplation of the parties when the release was given;
(d) When a release is given as part of the settlement of a claim, the parties want to wipe the slate clean between them; and
(e) One can look at the circumstances surrounding the giving of the release to determine what was specially in the contemplation of the parties.
[63] In Sattva Capital Corp. v Creston Moly Corp., 2014 SCC 53, the Supreme Court of Canada said this at para. 57:
While the surrounding circumstances will be considered in interpreting the terms of a contract, they must never be allowed to overwhelm the words of that agreement. The goal of examining such evidence is to deepen a decision-maker’s understanding of the mutual and objective intentions of the parties as expressed in the words of the contract. The interpretation of a written contractual provision must always be grounded in the text and read in light of the entire contract. While the surrounding circumstances are relied upon in the interpretive process, courts cannot use them to deviate from the text such that the court effectively creates a new agreement.
[64] The wording of the GSA in this case is clear and includes “… any and all claims (cost and extensions of contract time) that ASCO is currently aware of, or reasonably ought to be aware of, prior to January 17, 2017.”
[65] The evidence before me reveals all parties were aware of the P.04 Claim and that item was discussed throughout the negotiations. There is no factual dispute about the surrounding circumstances. There is no evidence of any agreement between York and ASCO that ASCO could invoice the work done on the P.04 as part of the progress billing.
[66] The “credit” that ASCO now claims was included in arriving at a total amount claimed by ASCO for the work done by Quantech in its email of July 27 2016. ASCO itself referred to it as a claim in that document. Item P.04 was not specifically excluded from the broad wording of the GSA, as was the case for the other switch gear. It was not part of the ongoing work to be performed as all parties agree that no further work was performed by Quantech on the 27.6kV switchgear after the Region issued C090.
[67] ASCO agreed to additional language limiting its ability to make further claims by agreeing that: “The amount of this change includes all direct, indirect, delay, disruption, acceleration, impact and consequential costs. The Contractor accepts this change order as total and final compensation, and waives any right to future claims for additional costs and/or damages related to this change.”
[68] I conclude that an objective reading of the language chosen by the parties reveals that they intended to resolve all known claims and to provide a clean slate for the completion of the Project.
[69] As the Court of Appeal concluded in Olivieri at para 50:
The policy of the courts is to encourage the settlement of litigation. The courts "should not be too astute to hold" that there is not the requisite degree of certainty in any of an agreement's essential terms. [internal citations omitted]
[70] I find that the claim made by ASCO in respect of item P.04 was subsumed in the GSA between the Region and ASCO, that ASCO forever released and discharged the Region in respect of this claim and that ASCO is estopped from asserting a further claim against the Region in respect of this item. The Region’s motion for summary judgment is granted.
[71] The parties are to provide me with their brief submissions as to costs within 20 days of the release of this decision.
JUSTICE R. BEAUDOIN
Date Released: 25/04/2019
COURT FILE NO.: 17-74051A1
DATE: 25/04/2019
ONTARIO
SUPERIOR COURT OF JUSTICE
RE: QUANTECH ELECTRICAL CONTRACTORS LIMITED
Plaintiff
-and-
ASCO CONSTRUCTION LTD.
Defendant (Responding Party)
-and-
THE REGIONAL MUNICIPALITY OF YORK
Third Party (Moving Party)
BEFORE: Mr. Justice Robert N. Beaudoin
COUNSEL: Doug Smith and Erin Durant - Counsel, for the Plaintiffs/Respondents
Stephane Bond Counsel, for the Defendant/Applicant
REASONS FOR decision
Beaudoin J.
Released: 25/04/2019
[^1]: Combined Air Mechanical Services Inc. v. Flesch, 2011 ONCA 764 at para 56
[^2]: The Law of Contract, 95th Ed.) at 441