COURT FILE NO.: CV-18-135125 DATE: 20200226 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
Pentad Construction Inc. Plaintiff – and – 2022988 Ontario Inc., 2036737 Ontario Inc., Armor CMC Inc., 2382215 Ontario Inc. and The Toronto Dominion Bank Defendants
Counsel: Jonathan Piccin, for the Plaintiff (Responding Party) William A. Chalmers, for the Defendants (Moving Party) Andrew Punzo, for EGI Financial Holdings Inc. o/a Echelon Insurance (Defendant in Toronto Action No. CV-19-00616625-0000) (Responding Party)
HEARD: February 13, 2020
Reasons for Decision
CHARNEY J.:
Introduction
[1] This motion is brought by the defendants 2022988 Ontario Inc., 2036737 Ontario Inc., Armor CMC Inc. (Armor), and 2382215 Inc. (collectively known as the Armor defendants) for an order consolidating this action (the Pentad construction lien action) with the action commenced by Armor against EGI Financial Holdings Inc. o/a Echelon Insurance (Echelon) (the Armor bond action).
[2] There is no dispute that the two actions have questions of law and fact in common. The real dispute between the parties is whether the two actions should be consolidated or heard at the same time.
[3] For the reasons that follow, I am of the view that consolidation is not the appropriate or most efficient way to proceed, and order that the two proceedings be heard at the same time or one immediately after the other.
Facts
[4] This motion involves two separate but related actions.
[5] The first is a construction lien action brought by Pentad Construction Inc. (Pentad) against the Armor defendants. The Pentad construction lien action relates to the provision of services and materials at a residential subdivision development in Whitchurch-Stouffville in York Region (the project). Armor is identified as the client, and Pentad is the contractor. The contract at issue was entered into on December 16, 2016.
[6] Pentad registered a claim for lien against the project in the amount of $479,364.57 on February 23, 2018, and issued a statement of claim against the Armor defendants on March 26, 2018. The construction lien action was commenced in Newmarket, Ontario.
[7] Armor has defended the claim on the basis that it has identified various deficient and incomplete work by Pentad that were not rectified and interfered with the progress of the project. Armor takes the position that Pentad was negligent and in breach of its contractual obligations to perform its work properly and that no monies are owing to Pentad. Armor has also counterclaimed against Pentad for breach of contract and negligence.
[8] The second action is a claim by Armor against Echelon, which is an insurance company in the business of providing surety bonds in the construction industry.
[9] Armor’s claim against Echelon arises from Armor’s allegation that Pentad failed to satisfy its obligations with respect to the work it was performing on the project. Echelon was the surety on the project and pursuant to the terms of the performance bond between Armor and Echelon, Armor may sue Echelon for any of Pentad’s defaults under the contract.
[10] Armor’s statement of claim against Echelon was issued on March 21, 2019, and was commenced in Toronto.
[11] The Echelon statement of defence expressly references the Pentad construction lien action, and Echelon pleads that it is a precondition to Echelon having any liability under the performance bond that Pentad be in default of its obligations under its contract with Armor. Echelon pleads that Pentad is not in default of its obligations, and therefore Echelon has no obligation to Armor under the performance bond. In this regard, Echelon’s statement of defence “repeats and relies on the allegations contained in the Pentad Statement of Claim in the Pentad Action.”
[12] These are not the only defences advanced by Echelon, but they are central to the Echelon defence to the Armor bond action.
[13] The issue of consolidation of the Pentad lien action and the Armor bond action was canvassed at a September 10, 2019 pre-trial conference in the Pentad lien action, but agreement was not reached, and this motion was brought.
Consolidation
[14] Rules 6.01 and 6.02 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, deal with the consolidation of related proceedings. The Rules provide:
6.01 (1) Where two or more proceedings are pending in the court and it appears to the court that,
(a) they have a question of law or fact in common;
(b) the relief claimed in them arises out of the same transaction or occurrence or series of transactions or occurrences; or
(c) for any other reason an order ought to be made under this rule,
the court may order that,
(d) the proceedings be consolidated, or heard at the same time or one immediately after the other; or
(e) any of the proceedings be,
(i) stayed until after the determination of any other of them, or
(ii) asserted by way of counterclaim in any other of them.
(2) In the order, the court may give such directions as are just to avoid unnecessary costs or delay and, for that purpose, the court may dispense with service of a notice of listing for trial and abridge the time for placing an action on the trial list.
Discretion of Presiding Judge
6.02 Where the court has made an order that proceedings be heard either at the same time or one immediately after the other, the judge presiding at the hearing nevertheless has discretion to order otherwise.
[15] Also relevant is s. 138 of the Courts of Justice Act, R.S.O. 1990, c. C.43, which provides: “As far as possible, multiplicity of legal proceedings shall be avoided.”
[16] This motion is complicated somewhat by the fact that Armor brought its action against Echelon in Toronto, even though the Pentad construction lien action was commenced in Newmarket. Accordingly, the consolidation or hearing together of the two actions also requires that one of the actions be transferred to a different region.
[17] Transfers between “counties” (which are defined in Rule 1.03 to include “a district, a regional or district municipality and the City of Toronto”) are governed by Rule 13.1.02. This particular transfer is governed by Rule 13.1.02(2) and Part III of the Consolidated Provincial Practice Direction, which require that motions to transfer under Rule 13.1.02(2) be heard in writing by the Regional Senior Judge or his or her designate. I have been designated by the Regional Senior Judge to hear this motion.
[18] Pursuant to the order of Boswell J. dated September 30, 2019, this motion was scheduled to be argued orally since it deals with consolidation in addition to transfer.
Analysis
[19] As indicated, there is no dispute that these actions should be heard together in some fashion. They clearly have questions of law and fact in common, and, at least in part, arise out of the same transaction or series of transactions: the performance or lack of performance by Pentad. The decision in the Pentad construction lien action will determine many of the issues in the Armor bond action.
[20] Armor argues that consolidation is the preferred and most efficient process.
[21] As part of the consolidation order, Armor asks for an order that the Armor bond action in Toronto be stayed, and for an order that its claim against Echelon be advanced by way of issued counterclaim in the Pentad construction lien action. It further seeks an order that Echelon’s defence in the Armor action be advanced by issuing a statement of defence to the counterclaim that will be issued by Armor in the Pentad construction lien action. Armor argues that this will not lead to increased costs for any party, because the counterclaim and the new statement of defence can be prepared by simply pressing the “cut and paste” keys on the computer, since they will be identical to the pleadings in the Armor bond action.
[22] The staying of the Toronto action and the filing of new pleadings in the Newmarket action strike me as unnecessarily complicated. Armor’s position in this regard appears to be based on the view that these steps are somehow necessary because the Toronto action cannot be transferred to Newmarket, even if it is consolidated with the Newmarket action. I had some difficulty following this logic.
[23] Armor relies on the decision of Wood v. Farr Ford Ltd. to support its position that consolidation is the preferable process in this case. In Wood, Quinn J. stated, at paras. 24-27:
Where two actions are consolidated, they become, and proceed as, one action. Thus, there is “one set of pleadings, one set of discoveries, one judgment, and one bill of costs”: see The Civil Litigation Process, supra, p. 420.
If two actions are ordered to be tried together, “the actions maintain their separate identity and there are separate pleadings, discoveries, judgments and bills of costs. But the actions are set down on the list one after the other to be ‘tried in such manner as the court directs.’ Usually, the trial judge will order that the evidence in one action is to be taken as evidence in the other action or actions. In this way both or all of the actions are tried together by the same judge or jury”: see The Civil Litigation Process, ibid.
Although it has been said that “[t]he difference between consolidation and an order directing the trial of actions together is more technical than real” (see The Civil Litigation Process, ibid.), I think the difference can be quite real if the matter is addressed promptly. Actions ordered tried together largely offer a savings of time and money, and enhanced convenience, at the trial stage. However, consolidation provides those features from an earlier stage in the proceedings, including: one set of pleadings, affidavits of documents, discoveries and pre-trial memoranda and one pre-trial.
The existence of a second action also creates a risk that the two will proceed at different speeds, thereby leading to delay while the parties wait for the slower action to catch up.
[24] Armor argues that these cases are at a sufficiently early stage that the savings identified by Quinn J. will be available to the parties if consolidation is ordered.
[25] The motion for consolidation is opposed by both Pentad and Echelon. These parties argue that the provisions of the Construction Lien Act, R.S.O. 1990, c. C.30 do not permit the consolidation of the construction lien action with the bond action. Moreover, they argue that, in any event, the most efficient way to proceed is to have the cases heard at the same time or one immediately after the other. Echelon has also consented to a common discovery for the two cases, so that the evidence in the discovery of Pentad can be used in the Echelon action.
[26] Pentad’s construction lien action is governed by the Construction Lien Act (CLA) rather than the new Construction Act, which came into force on June 29, 2018. Section 87.2 of the Construction Act states that the CLA “continues to apply with respect to an improvement if, (a) the contract for the improvement was entered into before July 1, 2018”. The contract that forms the basis for Pentad’s lien action was entered into on December 16, 2016.
[27] Pentad and Echelon both argue that the consolidation power under s. 59(2) of the CLA is limited to lien actions, and does not permit the consolidation of lien and non-lien actions: Country Cottage Living Inc. v. Heath, at para. 4; Walsh Construction/Bondfield Partnership v. Chartis Insurance Company of Canada, 2016 ONSC 2793, at para. 8.
[28] Furthermore, Pentad and Echelon argue that Echelon cannot be added to the construction lien action as a defendant by way of counterclaim. In Bay City Carpentry Inc. v. Matushovsky, the Ontario Court of Appeal held that s. 55(2) of the CLA limits who may be properly joined as a defendant by counterclaim in construction lien actions to “the person who named the defendant as a defendant”. In other words, Armor can only counterclaim against Pentad.
[29] Sections 55(2) and 59(2) were repealed on July 1, 2018, but were in force on June 30, 2018, and therefore continue to apply to these proceedings.
[30] Given ss. 55(2) and 59(2) of the CLA, Pentad and Echelon’s position that the cases be heard at the same time or one immediately after the other rather than consolidated is the legally sound procedural step.
[31] In the absence of s. 55(2) of the CLA, the right to add a defendant by counterclaim would be governed by Rule 27.01(2) of the Rules of Civil Procedure, which permits a defendant who counterclaims against the plaintiff to “join as a defendant to the counterclaim any other person, whether a party to the main action or not, who is a necessary or proper party to the counterclaim”. I am not persuaded, in any event, that Echelon is “a necessary or proper party” to Armor’s counterclaim against Pentad. While Echelon’s liability under the performance bond may be contingent on the outcome of Pentad’s claim against Armor, Echelon’s presence as a party is not necessary to determine the issues in Armor’s counterclaim against Pentad.
[32] In any event, there are significant differences between the two actions that would have led me to the same conclusion even if consolidation were an option. The defendants are entirely different between the claims. The parties are represented by different counsel. While the findings in the Pentad lien action are a prerequisite to the success or failure of the Armor bond action, the contracts at issue in the two actions are entirely different. The pleadings are already closed in both actions, and I do not see any benefit to having the pleadings in the Armor bond action cut and pasted into the Pentad lien action.
[33] The primary advantage to consolidation would be common discoveries, but Echelon has already consented to proceeding on this basis if the two cases are heard together.
[34] Echelon has also raised concerns that consolidation may prejudice its procedural rights under the Rules of Civil Procedure, to the extent that the CLA process is a more summary procedure.
[35] In my view, and subject to the final decision of the trial judge under Rule 6.02, the most advantageous method of proceeding is to order the two matters heard one after the other beginning with the Pentad lien action. Having the same judge hear both actions eliminates the risk of inconsistent findings.
Conclusion
[36] This Court Orders:
(a) The Toronto action, Armor CMC Inc. v. EGI Financial Holdings Inc. o/a Echelon Insurance, Court file # CV-19-00616625-0000 be transferred to Newmarket. (b) The Pentad Construction Inc. action, Court file # CV-18-135125-00 and Court file # CV-19-00616625-0000 be heard at the same time or one immediately after the other. (c) The two actions, # CV-19-00616625-0000 and # CV-18-135125-00 shall have common discoveries, and the discoveries in each proceeding may be used in the other proceeding. (d) This order is without prejudice to any of EGI Financial Holdings Inc.’s rights under the Rules of Civil Procedure.
[37] If the parties are not able to agree on costs, each respondent may serve and file costs submissions of no more than 3 pages, plus costs outline and any offers to settle, within 20 days of the release of this decision, and the moving party may file responding submissions of no more than 5 combined pages plus costs outline and any offers to settle within 15 days thereafter.