Court File and Parties

COURT FILE NO.: CV-17-1950-00 DATE: 2019 01 18 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Bisquip Leasing Corporation carrying on business as Bishop Construction, Plaintiff AND: Coco Paving Inc., et al, Defendants

BEFORE: Justice G.D. Lemon

COUNSEL: James MacDonald, Counsel for the Plaintiff Ian Katchin, Counsel for the Defendants

HEARD: November 28, 2018

Endorsement

The Issue

[1] The plaintiff brings a motion for summary judgment against the defendant, Coco Paving Inc. Bishop initially claimed for $151,350.12; however, Coco paid the Plaintiff $84,348.73 shortly before this motion was to be argued. Accordingly, Bishop now claims $67,001.39 plus costs and prejudgment interest.

[2] Coco submits that such a judgment is premature. It argues that the principle of equitable set-off and the provisions of the Construction Act, R.S.O. 1990, c. C.30 make this request for partial summary judgment inappropriate. It seeks to defend this action in the normal course.

Background

[3] Bishop carries on business as an excavating, grading and site servicing contractor. Coco carries on business as a road construction and paving contractor.

[4] Throughout 2016, Bishop supplied construction services to Coco at various construction projects. Bishop invoiced Coco the total sum of $344,976.29, but each invoice was delivered according to the work carried out at each project. The relevant projects and amounts are described separately below. Against that total, Coco had paid $193,626.17 before the action was commenced.

[5] After this motion was brought, on November 12, 2018, Coco made a payment of $84,348.73 through its lawyer. That amount was not broken down as to which outstanding Bishop invoices were being paid. Accordingly, the following amounts set out as owing do not take that amount into consideration.

[6] As discussed below, Bishop and Coco were involved in five projects. Four of those projects have amounts outstanding. There is a fifth project that Coco paid in full, but that project is related to a counterclaim by Coco against Bishop. Those contracts are as follows:

Seneca Project

[7] In August of 2016, Coco requested that Bishop provide time and material services for a parking lot expansion project at Seneca College in Toronto.

[8] Bishop performed the work at the Seneca Project between August 10, 2016, and September 2, 2016. The outstanding amount owed by Coco to Bishop in respect of the Seneca Project is $96,316.58.

[9] There is no dispute that Bishop completed its work on the Seneca Project in a good and workmanlike manner. The invoices requesting payment for those services have been outstanding for more than two years.

Urbacon Project

[10] In October of 2016, Coco requested that Bishop provide time and material services at a construction project at the Richmond Hill Data Centre in Richmond Hill, Ontario. Coco had been retained by Urbacon to perform that work.

[11] Bishop supplied its services and materials at the Urbacon Project between October 12, 2016, and November 23, 2016. The outstanding amount owing to Bishop for the Urbacon Project is $10,346.85.

[12] There is no dispute that Bishop completed its work on the Urbacon Project in a good and workmanlike manner. The invoices requesting payment for those services have been outstanding for nearly two years.

First Gulf Project

[13] In November, 2016, Coco requested that Bishop provide time and material services on a construction project in Oakville. Coco had been retained by First Gulf to perform its work at that project.

[14] Bishop supplied its services and materials at the First Gulf Project between November 3, 2016, and November 5, 2016. The outstanding amount owing to Bishop in respect of the First Gulf Project is $6,394.39.

[15] There is no dispute that Bishop completed its work on the First Gulf Project in a good and workmanlike manner. The invoices requesting payment for those services had been outstanding for nearly two years.

PCL Project

[16] In August, 2016, Coco requested that Bishop provide time and material services on a construction project in Vaughan, Ontario. Coco had been retained by PCL to install site services on the land.

[17] Bishop completed the work at the PCL project between August 18, 2016, and September 18, 2016. The outstanding amount owed by Coco to Bishop for the PCL project is $38,292.30.

[18] In this proceeding, Coco has filed a counterclaim against Bishop with respect to two of the projects; this is the first.

[19] As part of the work performed by Bishop, it installed a 300 mm PVC sanitary line. Coco claims that part of the work was deficient. However, almost two years have passed since Coco stated that “remedial works will be required” with respect to a gap in this sanitary sewer line.

[20] Bishop submits that there has been no evidence presented by Coco that the gap has caused any issue with respect to the sewer line. No repair has been made in nearly two years. To date, Coco has not presented any evidence to support its allegation that the gap is a deficiency and it has not presented any particulars or evidence of any damages.

[21] Coco’s evidence with respect to the estimated potential cost of repair is somewhere between $5,800 and $100,000. To date, Coco has not incurred any costs or damages in respect to its claim; PCL has paid Coco in full without any set-off for the alleged sewer line gap. In answer to its undertakings, Coco stated:

“…the sewer appears at this time to be working properly.”

Enbridge Project

[22] Although this contract was paid by Coco, it relates to Coco’s other counterclaim against Bishop.

[23] On September 13, 2016, Coco asked Bishop to assist Coco in the removal and replacement of culverts at a project being completed by Coco for the Regional Municipality of York.

[24] Bishop provided an excavating machine and three labourers to Coco on September 14, 2016. It is Bishop’s position that Coco directed Bishop where to excavate and directed Bishop to use Coco’s mapping of underground utilities. Unfortunately, the area in which Bishop was directed to commence its work had an underground gas line operated by Enbridge. This line was struck on September 14, 2016, at which time the work ceased.

[25] Bishop rendered one invoice to Coco with respect to this work and Coco paid that invoice in full by cheque dated December 16, 2016.

[26] Enbridge delivered an invoice to Coco for $67,001.39 with respect to the gas line strike but Coco has not paid it. By the time Coco received Enbridge’s invoice, Coco had already paid Bishop for the work performed. Coco takes the position that Bishop is liable for the Enbridge invoice. Bishop has maintained that any charges claimed by Enbridge as a result of the gas line strike are Coco’s responsibility.

[27] Enbridge has now sued Coco for this amount in Toronto and Coco has commenced a third party action against Bishop. In the third party claim, Coco has claimed contribution and indemnity from Bishop with respect to any amounts that Coco may be found to owe to Enbridge.

[28] In this action, Coco has also alleged in its Statement of Defence and Counterclaim that:

[I]n breach of the applicable Technical Standards & Safety Authority’s guidelines and regulations, [Bishop] failed, refused and/or neglected to excavate with a valid locate and/or hand-dig when they knew or ought to have known of the existence of an underground gas line in the area of their excavation. . .

[29] Coco’s counterclaim amounts to $200,000, including a claim for the Enbridge invoice.

[30] Accordingly, as a result of Coco’s pleadings, the issue of liability for the gas line strike is now being litigated in two actions in two cities; as a counterclaim in this action in Brampton and a third party claim in the Enbridge action in Toronto. Bishop has called on its insurer to cover and defend both claims. Bishop’s insurer has provided a defence to the counterclaim for negligence. Separate counsel has been appointed to defend Bishop within this action. Bishop’s insurer is also defending the Third Party Claim.

Positions of the Parties

Coco Paving

[31] Coco submits that Bishop’s partial summary judgment motion must be dismissed for a variety of reasons.

[32] First, Coco submits that there are at least three genuine issues requiring a trial:

i. Bishop’s liability for the Enbridge claim; ii. Coco’s reliance on the defence of equitable set-off; and iii. Coco’s reliance on the statutory set-off under s. 12 of the Construction Act.

[33] Coco submits that in late 2015 and throughout 2016, Coco entered into five oral subcontracts with Bishop. Bishop agreed to provide excavation and other services to the projects on terms that included that Bishop would perform its work and services at an aggregate contract price of $305,288.75 plus HST for a total amount of $344,976.29. The terms also include that Coco would not be liable to Bishop for any amounts owing under the Agreements unless it received payments from PCL, First Gulf, York Region, Seneca and Urbacon for Bishop’s work (i.e. the “pay when paid” clause).

[34] The balance of Bishop’s claim, disputed by Coco, is $67,001.39. This is the same amount that Enbridge has demanded from Coco in relation to the gas strike and for which Coco has counterclaimed against Bishop in this action.

[35] Second, Coco submits that it has satisfied the requirements of equitable set-off and that alone acts as a bar to granting summary judgment.

[36] Third, Coco is withholding the sum of the Enbridge invoice, being $67,001.39, as a back charge from Bishop on the Seneca Project. It submits that it is permitted to do so, even though it arose as a result of Bishop’s acts or omissions on the Enbridge project. Coco submits that s. 12 of the Construction Act expressly permits it to do so without being in breach of trust. Coco has not spent this amount.

[37] Fourth, since Bishop has brought a motion for partial summary judgment, this motion will not dispose of Bishop’s Construction Act trust claim against the other defendants or Coco’s counterclaim. Coco submits that partial summary judgment is a rare procedure and is only reserved for issues that can be readily bifurcated. See: Butera v. Chown, Cairns LLP, 2017 ONCA 783, 137 O.R. (3d) 561 at para. 34.

[38] However, here, the issues cannot be bifurcated since Coco’s claim is “so closely connected” with Bishop’s claim for payment on the Seneca Project that it would be manifestly unjust to allow Bishop to enforce payment without considering Coco’s set-off claim.

[39] Finally, Coco submits that granting summary judgment to Bishop in its claim will risk duplicative proceedings and inconsistent findings in the breach of trust claim and Coco’s counterclaim that will then still need to proceed to trial.

Bishop Construction

[40] Bishop submits that its work on the projects is not disputed. There is no claim by Coco that Bishop’s work on three of the projects was incomplete, deficient or improperly calculated in Bishop’s invoices.

[41] It is submitted that the outstanding liquidated sum owed to Bishop by Coco in respect of all of the projects, after the recent payment of $84,348.73, is $67,001.40. This amount, made up of unpaid amounts on the projects, dates back nearly two years in 2016.

[42] Bishop acknowledges that issues arose in the PCL and Enbridge projects. However, in the PCL Project, Coco has provided no evidence of damages and no evidence that the work needs to be repaired.

[43] Bishop has engaged its insurer and has not received any notice that coverage is an issue in respect to the Enbridge claim. Bishop’s position, therefore, is that there is no need to delay Coco’s payment to Bishop any further.

[44] Bishop acknowledges that legal set-off allows for the setting off of mutual debts; however, it submits that Coco’s counterclaim is not made up of the required liquidated debts. Coco has made unliquidated claims relating to a sewer that does not need repair and to the claim by Enbridge. As such, it is submitted that Coco’s counterclaims do not meet the test for equitable set-off. The Enbridge claim arose from different work at a different project for a different owner at a different time than the work which is the subject of Bishop’s claims. There is no link between the outstanding invoices owed to Bishop and the Enbridge claim.

[45] The only remaining claim made by Bishop is a Construction Act trust claim against Coco’s officers. However, Bishop would only proceed with that part of the claim if any judgment was not paid by Coco. Bishop doubts that this will become an issue since Coco has acknowledged that the funds in dispute are properly set aside.

Analysis

[46] There were no cross examinations on the affidavits filed. There were no requests for any findings of credibility.

[47] Although Coco alleged terms of contract different than did Bishop, Coco led little evidence to respond to Bishop’s evidence that this history related to five separate contracts. The best that Coco could say was that the terms of contract were “express or implied” to be that Bishop agreed to provide its services at an aggregate contract price of $305,288.75 plus HST for a total amount of $344,976.29, and that Coco’s payments were subject to the “pay-when-paid” clause.

[48] I can take it that Coco has no other evidence on that point. The parties’ documents along with the history set out above contradict that position. Accordingly, based on the documents filed in the record, I find that these were five separate contracts. Further, Coco acknowledges that it has been paid in full for all of the projects except the Enbridge Project.

[49] Given the recent payment by Coco, I can find that the Urbacon, ($10,346.85) and First Gulf ($6,394.39) and PCL contracts ($38,292.30) are admitted. That leaves an amount of $29,315.19 to be applied against the remaining Seneca contract. Judgment can be granted on all of those, subject to the PCL and Enbridge claims dealt with below.

Equitable Set-Off

[50] In OLA Staffing Inc v. 2156775 Ontario Inc., 2017 ONSC 7318, Kristjanson J. summarized this legal point as follows:

[37] Equitable set-off, where it is established, operates as a defence to a claim. However, the requirements for equitable set-off must be met. The elements were described in Algoma Steel Inc. v. Union Gas Ltd. (2003) 63 O.R. (3d) 78, as follows at para. 26:

1. The party relying on a set-off must show some equitable ground for being protected against the adversary's demands.
2. The equitable ground must go to the very root of the plaintiff's claim.
3. A cross-claim must be so clearly connected with the demand of the plaintiff that it would be manifestly unjust to allow the plaintiff to enforce payment without taking into consideration the cross-claim.
4. The plaintiff's claim and the cross-claim need not arise out of the same contract.
5. Unliquidated claims are on the same footing as liquidated claims

[51] In Algoma Steel, Rosenberg J.A. said:

[29] It seems to me that a very helpful test is set out in a passage from the reasons of Lord Denning in Federal Commerce and which was quoted with apparent approval by Wilson J. in Telford:

We have to ask ourselves: what should we do now so as to ensure fair dealing between the parties? . . . This question must be asked in each case as it arises for decision; and then, from case to case, we shall build up a series of precedents to guide those who come after us. But one thing is quite clear: it is not every cross-claim which can be deducted. It is only cross-claims that arise out of the same transaction or are closely connected with it. And it is only cross-claims which go directly to impeach the plaintiff's demands, that is, so closely connected with his demands that it would be manifestly unjust to allow him to enforce payment without taking into account the cross-claim. [Citations removed.]

[52] I do not see that the defence of equitable set-off assists Coco. As I read OLA Staffing and Algoma Steel, all five of the elements must be satisfied. While the last two factors are made out here, the first three are not.

[53] Coco has been late in paying amounts that are now admitted to be due and owing. Equity should not assist that conduct, particularly when Coco itself has been paid for the work.

[54] The “root of the plaintiff’s claim” is the Seneca Project not the Enbridge contract for which Bishop has already been paid. Although there is the PCL counter-claim, Coco specifically claims a Construction Act set-off against the Seneca Project. I cannot find that there is such a close cross-claim on that issue in this action that it would be unjust to allow Bishop to continue.

Summary Judgment

[55] Rule 20.01(1) of the Rules of Civil Procedure provides that a plaintiff may move with supporting affidavit material or other evidence for summary judgment on the statement of claim after the defendant has delivered a statement of defence.

[56] In response to affidavit material or other evidence supporting a motion for summary judgment, a responding party may not rest solely on the allegations or denials in the party’s pleadings, but must set out, in affidavit material or other evidence, specific facts showing that there is a genuine issue requiring a trial: r. 20.02(2). Many cases have made clear that the responding party must “lead trump” or risk losing the motion: see e.g. Boland v. Lyle, 2016 ONSC 7418 at para. 13.

[57] The court shall grant summary judgment if the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence: r. 20.04(2)(a).

[58] In determining whether there is a genuine issue requiring a trial, the court shall consider the evidence submitted by the parties and a judge may weigh the evidence, evaluate the credibility of a deponent and draw reasonable inferences from the evidence, unless it is in the interest of justice for such powers to be exercised only at a trial: r. 20.04(2.1).

[59] A judge may, for the purposes of exercising any of those powers, order that oral evidence be presented by one or more parties, with or without time limits on its presentation: r. 20.04(2.2).

[60] In Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, the Supreme Court of Canada set out the proper approach a motions judge should take on a motion for summary judgment under r. 20 of the Rules. I should first determine if there is a genuine issue requiring a trial based only on the evidence before me without using the powers set out in the Rules: Hryniak, at para. 66. There will be no genuine issue requiring a trial if the summary judgment process provides me with the evidence required to fairly and justly adjudicate the dispute in a timely, affordable, and proportionate procedure.

[61] If there appears to be a genuine issue requiring a trial, I should then determine if the need for a trial can be avoided by using the powers under r. 20 of the Rules. I may, in my discretion, use those powers, provided that their use is not against the interests of justice. Their use will not be against the interests 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.

[62] There will be no genuine issue requiring a trial if I am able to reach a fair and just determination of the merits on the motion. This will be the case when the summary judgment process allows me “(1) … to make the necessary findings of fact, (ii) … to apply the law to the facts, and (iii) is a proportionate, more expeditious, and less expensive means to achieve a just result”: Hryniak, at para. 49.

[63] Coco submits that the Court of Appeal for Ontario has held that where different claims arise out of the same factual matrix and there is a risk of duplicative proceedings and inconsistent findings, the trial court should not make a finding for summary judgment. The Supreme Court of Canada noted in Hryniak that 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 grant summary judgment against a single defendant.

[64] Most recently, in Healthy Lifestyle Medical Group Inc. v. Chand Morningside Plaza Inc., 2019 ONCA 6, at para. 9, our Court of Appeal has said:

. . . In Baywood Homes Partnership v. Haditaghi, this court cautioned against partial summary judgment where it is possible that the trial judge “will develop a fuller appreciation of the relationships and the transactional context than the motions judge” which could risk “inconsistent findings and substantive injustice”. [Citations removed.]

[65] I do not believe that those important principles prevent me from granting judgment here.

[66] Coco’s counsel has confirmed that the funds in issue are available to be paid subject to the Enbridge proceedings. Accordingly, judgment as requested will bring the trust claims against the other defendants effectively to an end.

[67] With respect to the Enbridge counterclaim and third party action, they will continue. Bishop’s insurer will still be involved but Bishop and its own counsel will be out of those actions. That will reduce cost, time and the number of real parties.

[68] While there may be a risk of inconsistent findings, that will only occur if Coco continues with both its third party action and its counterclaim. It has control over resolving those concerns. It can withdraw one or join the actions but Bishop need not be dragged along for no good reason.

[69] With respect to the counterclaim and the PCL Project, Coco has alleged that the cost of repair will be somewhere between $5,800 and $100,000 with little evidence to support its claim. After two years, there has been no claim against Coco.

[70] I do not accept Bishop’s submission that there is no evidence from Coco on this claim. There is clearly a gap in the line that would suggest negligence on the part of Bishop. However, on this record, I cannot make a determination of negligence or damages. Those are triable issues but only if PCL makes a claim. Whether that matter proceeds or not will depend on PCL; its warranty period will end in 2019. Accordingly, I dismiss the counterclaim but without prejudice to Coco if it is called upon to pay such a claim. For now, such a hypothetical claim should not hold up payment on the rest of the action.

[71] In my view, even though this result will not end the litigation, it will simplify the action and lead to “a fair process and just adjudication”.

[72] Bishop’s involvement will come to an end on payment of this judgment and the discontinuance of the trust claims against the other defendants. There are no findings in that result that will lead to inconsistent findings with the remaining litigation.

[73] Coco’s counterclaim and third party negligence claims involving Bishop’s insurer can proceed as combined or be discontinued at Coco’s choice.

[74] If Coco is called upon with respect to the PCL Project, its rights remain.

[75] On review of the counterclaim, Coco also claims the sum of $1,230.65 for products which it says that Bishop has failed to pay. There is nothing in the materials as filed or argument as made that refers to that amount. There is no statement of defence to that counterclaim in the materials. I take it, therefore, that this amount does not affect any of the issues put before me.

Construction Act

[76] At the time of these contracts, s. 12 of the Construction Act read as follows:

Subject to Part IV, a trustee may, without being in breach of trust, retain from trust funds an amount that, as between the trustee and the person the trustee is liable to pay under a contract or subcontract related to the improvement, is equal to the balance in the trustee’s favour of all outstanding debts, claims or damages, whether or not related to the improvement.

[77] In Architectural Millwork v. Provincial Store, 2016 ONCA 320, the Court of Appeal for Ontario affirmed that:

[13] Provided the criteria of s. 12 of the CLA are met, a trustee of the trust funds may, without breaching the trust, retain but not spend any of the monies set off against the trust funds on account of outstanding debts, claims or damages. This section does not give a trustee the right to put some or all of the trust funds retained to general use.

[14] The availability of the right of set-off under s. 12 of the CLA requires the party seeking to exercise it to prove the existence of specific circumstances and particular considerations, including the existence of trust funds against which set-off can be applied. If no trust finds are retained or all the monies are spent, the purpose of the trust provisions is defeated and any right of set-off is extinguished.

[Citations omitted.]

[78] In my view, that section does not end the matter. Just because Coco may take that step, it is not an answer to Bishop’s outstanding claim as a result of this judgment. As between these parties, based on this record, the amount held in trust is available to pay this judgment and it should do so.

Stay of Enforcement

[79] Coco submits that if judgment is granted, it should be stayed pending the outcome of the Enbridge litigation. The only way that the actions can be simplified as set out above, is by payment of the judgment. That amount will allow for a timely, affordable and proportionate procedure. Therefore I decline to stay the enforcement of this judgment.

Result

[80] Accordingly, the motion is granted and summary judgment is found for the plaintiff, Bisquip Leasing Corporation, against the defendant, Coco Paving Inc., in the amount of $151,350.12. Coco has paid $84,348.73 against that judgment as of November 12, 2018. The sum of $67,001.39 is now payable by Coco.

Costs

[81] If costs cannot be agreed upon, Bishop shall provide its submissions within the next 15 days. Coco shall provide its response within 15 days thereafter. No reply submissions shall be filed unless I request them.

[82] Each submission shall be no more than three pages, not including any Bills of Costs or Offers to Settle.

[83] Written submissions shall be forwarded to me at my office at the Superior Court Office, 74 Woolwich Street, Guelph, Ontario, N1H 3T9 and I shall ensure that they are filed in Brampton when I have finished with them.

Lemon J. Date: January 18, 2019

COURT FILE NO.: CV-17-1950-00 DATE: 2019 01 18 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: BISQUIP LEASING CORPORATION carrying on business as BISHOP CONSTRUCTION Plaintiff – and – COCO PAVING INC., et al Defendants ENDORSEMENT Lemon, J Released: January 18, 2019