Court File and Parties

Court File No.: CV-14-00515632 Motion Heard: 2019-01-15 Superior Court of Justice - Ontario

Re: York Region Common Elements Condominium Corporation No. 1210, Plaintiff And: 7 Brighton Place Inc. et al., Defendants

Before: Master Mills

Counsel: J. Cormier, Counsel, for the Moving Party Defendant Mondconsult Limited F. Costantini, Counsel, for the Responding Party Defendant 7 Brighton Place Inc.

Heard: January 15, 2019

Reasons for Decision

[1] The defendant Mondconsult Limited ("Mondconsult") seeks leave to amend its Statement of Defence and Crossclaim to assert a breach of contract claim in the Crossclaim. The plaintiff consents to the amendment; the defendant 7 Brighton Place Inc. ("7 Brighton") opposes the motion on the basis the proposed amendment seeks to add a new cause of action that is beyond the statutory limitation period.

[2] For the reasons that follow, the motion for leave to amend the Statement of Defence and Crossclaim is denied.

[3] Rule 26.01 is mandatory. The court shall grant leave to amend a pleading unless prejudice would result that could not be compensated for by costs or an adjournment. Adding a new claim through a pleadings amendment is presumptively prejudicial where a limitation period has expired. This form of prejudice is determinative and, barring special circumstances, is not one where costs or an adjournment would be appropriate compensation.[^1]

[4] Mondconsult submits the new allegations merely particularize the existing claims made in the Crossclaim. I do not agree.

[5] The Crossclaim seeks contribution and indemnity under the common law and in equity from its co-defendants for any amounts Mondconsult may be found to owe the plaintiff. The particulars of the Crossclaim, as presently drafted, are entirely based on allegations of negligence. There is the usual statement that the defendant "repeats and relies upon the allegations contained in the Statement of Defence". Within the Statement of Defence, Mondconsult pleads and adopts the allegations of negligence and/or breach of contract asserted by the plaintiff as against the co-defendants.[^2] The claims of negligence and/or breach of contract in the Statement of Claim are in respect of Construction Deficiencies, as defined in the pleading to be defects within the common elements of the subject property as a result of an alleged failure to provide construction in a good and workmanlike manner in accordance with industry standards and good building practices.[^3]

[6] Mondconsult now seeks to rely on the "breach of contract" plea in the Statement of Defence, and by reference the Statement of Claim, to assert a claim against 7 Brighton for a failure to take out wrap-up insurance coverage in accordance with its contractual obligations under the Construction Management contract dated April 4, 2011 (the "Contract"). Mondconsult submits this claim is not new but rather the provision of particulars to the existing broad allegations of a breach of contract claim articulated in the Crossclaim.

[7] A generic pleading cannot stand as a "perpetual placeholder" for future claims which may arise or be contemplated by the parties.[^4]

[8] With a most generous reading of the Statement of Defence and Crossclaim, I do not accept the breach of contract claim against 7 Brighton for allegedly failing to honour its contractual obligations respecting wrap-up insurance is anything but a new cause of action requiring a new factual matrix. While the Contract was signed as a part of the plaintiff's construction project and the performance obligations under the contract may well be relevant to the factual matrix respecting the Construction Deficiencies, the contractual obligation to obtain insurance coverage is not an existing component of the pleadings to date nor the facts upon which those pleadings are premised.

[9] Having found the proposed amendment constitutes a new claim, the provisions of the Limitations Act, 2002[^5] (the "Act") must be considered to determine if the new claim is statute barred. The principle of discoverability is codified in section 5 of the Act which provides:

5. (1) A claim is discovered on the earlier of,

(a) the day on which the person with the claim first knew, (i) that the injury, loss or damage had occurred, (ii) that the injury, loss or damage was caused by or contributed to by an act or omission, (iii) that the act or omission was that of the person against whom the claim is made, and (iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and

(b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a).

[10] The above items are conjunctive. A limitation period will therefore only commence to run once a claimant has knowledge of all four elements of clause 5(1)(a), including that a legal proceeding is the appropriate means by which to seek a remedy.[^6]

[11] There is an obligation to act with due diligence in acquiring material facts to ascertain whether a claim may be properly asserted.[^7] Reasonable efforts must be undertaken to investigate whether a claim may exist. As to what constitutes reasonable efforts will be a subjective analysis, having consideration to the nature of the claim and the particular circumstances of the party. A party may not simply rest on its laurels, expecting the limitation period will be tolled pending an investigation or determination as to whether a claim may exist.[^8]

[12] Mondconsult submits it only learned of the alleged breach of the Contract by 7 Brighton when counsel made inquiries regarding the insurance coverage in September 2017, approximately five years after the construction project was completed and almost three years after being served with the Statement of Claim. There is no evidence to suggest Mondconsult had been previously informed of 7 Brighton's failure to obtain wrap-up insurance, despite a requirement in the Contract that confirmation of coverage be provided. Equally there is no evidence to suggest Mondconsult was misled or misinformed as to the existence of coverage.

[13] Mondconsult submits it was entitled to rely on 7 Brighton's common law duties of good faith and honesty in the performance of its contractual obligations and, until it was advised otherwise, Mondconsult had no knowledge the wrap-up insurance coverage had not in fact been taken out.

[14] 7 Brighton submits that Mondconsult is an experienced Construction Manager, retained to prepare contractual documents and organize all documents related to the performance of the construction project, including proof of insurance. Many assertions are made as to what Mondconsult ought to have done and what it should have known. It is alleged that had it exercised proper professional due diligence, Mondconsult would have been aware there was no wrap-up insurance coverage as early as April 2011 when proof of coverage was not provided. It could have taken action at that time. The material facts to support a claim could reasonably have been known or discovered if any inquiries had been made in a timely fashion.

[15] As noted by Di Luca, J. in Brookstreet v. Economical,[^9] the standard is not perfection but rather reasonableness. In a perfect world, the failure to provide proof of coverage would have triggered an inquiry by Mondconsult and the failure to obtain wrap-up insurance coverage could have been discovered in 2011. Was its failure to make such inquiry reasonable in the circumstances? I have no evidence to support the submission that Mondconsult fell below the standard of reasonable conduct for a Construction Manager by not proactively making inquiries and demanding action when it failed to receive proof of insurance in accordance with the provisions of the Contract.

[16] As a result, I am not inclined to find that the appropriate timeframe for the commencement of the limitation period was April 2011 when Mondconsult could have confirmed whether 7 Brighton had complied with its contractual obligations to obtain wrap-up insurance coverage. I accept that Mondconsult, acting reasonably, could have presumed good faith and honest compliance of all contractual obligations by 7 Brighton and in particular, the provision of all required insurance coverages.

[17] Accepting the premise that Mondconsult was under no obligation to make inquiries of 7 Brighton to ensure it had honoured its contractual obligations, it is then submitted that once the Statement of Claim was served on November 10, 2014, the breach of contract claim for a failure to obtain wrap-up insurance coverage could have been discovered with the exercise of reasonable due diligence. Mondconsult delivered its Statement of Defence and Crossclaim on January 27, 2015. This motion was initially brought on March 9, 2018, with reasonable promptness after counsel learned there was no wrap-up insurance coverage but more than three years after Mondconsult was served with the Statement of Claim.

[18] There have been no examinations for discovery, no mediation, no pre-trial and no suggestion that all witnesses and all documents related to the proposed claim are no longer available. None of the claims in the underlying action have been settled and/or dismissed. It cannot be said that 7 Brighton has compromised its position in the litigation as a result of the failure of Mondconsult to specifically plead the breach of contract claim in its Statement of Defence and Crossclaim. There cannot be said to be any prejudice to 7 Brighton in respect of the litigation proceedings for the delay in asserting this claim.

[19] Without providing any evidence to support, there is a submission that certain business decisions may have been taken differently had 7 Brighton known a claim would be asserted for its failure to obtain wrap-up insurance coverage. That assertion is speculative and does not constitute evidence of real prejudice.

[20] In my view however, the claim could have been discovered, and with the exercise of reasonable diligence should have been discovered, when the Statement of Claim was served on Mondconsult. Any reasonable party standing in the position of Mondconsult, facing significant claims for negligence and breach of contract in respect of construction deficiencies, would have made inquiries to confirm the existence and extent of its insurance coverage. This would most certainly include the wrap-up insurance specifically negotiated as a term of the Contract to protect against any such claims.

[21] There is no evidence Mondconsult made any inquiries respecting the wrap-up insurance until long after the close of pleadings. That failure to inquire was not reasonable in the circumstances. Had an inquiry been made at the outset of these proceedings, the claim against 7 Brighton for breach of contract would have been known and could have been pursued in a timely manner. As was noted in Soper v. Southcott,[^10] "limitation periods are not enacted to be ignored."

[22] The failure to take out wrap-up insurance was reasonably discoverable within a few weeks of being served with the Statement of Claim and without question prior to Mondconsult delivering its Statement of Defence and Crossclaim. That was more than three years prior to the original return date of this motion.

[23] The claim is therefore statute barred.

[24] The motion is dismissed, with costs on a partial indemnity basis to 7 Brighton fixed in the amount of $5,000 inclusive of disbursements and HST, payable forthwith.

Master J. E. Mills

Date: January 21, 2019

[^1]: Frohlick v. Pinkerton Canada Ltd., 2008 ONCA 3 at para. 22. [^2]: At para. 13. [^3]: Statement of Claim, para. 8. [^4]: Markovic v. Abbott, 2010 ONSC 26, at para. 26. [^5]: S.O. 2002, c.24 [^6]: Longo v. MacLaren Art Centre Inc., 2014 ONCA 526, at para. 41 [^7]: Ibid., at para. 42, quoting from Soper v. Southcott (1998), 1998 CanLII 5359 (ON CA), 111 O.A.C. 339. [^8]: Ibid., at para. 42 [^9]: 2018 ONSC 80 at para. 43 [^10]: Supra, at para. 42.