COURT FILE NO.: CV-19-00621475-0000 and CV-20-00642108-0000
DATE: 20201116
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: DRAGADOS CANADA, INC., ELLISDON CORPORATION and SNC-LAVALIN CONSTRUCTORS (PACIFIC) INC. Plaintiffs, Responding Parties in Action No. CV-19-00621475-0000
RIDEAU TRANSIT GROUP GENERAL PARTNERSHIP, a general partnership consisting of ACS RTG Partner Inc., SNC RTG Partner Inc., and EllisDon RTG Partner Inc., and RIDEAU TRANSIT MAINTENANCE GENERAL PARTNERSHIP, a general partnership consisting of ProTrans RT Maintenance Partner Inc., ACS RT Maintenance Partner Inc., and EllisDon RT Maintenance Partner Inc. Plaintiffs, Responding Parties in Action No. CV-20-00642108-0000
AND
ZURICH INSURANCE COMPANY, ROYAL AND SUN ALLIANCE INSURANCE COMPANY, NORTHBRIDGE GENERAL INSURANCE CORPORATION, NON-MARINE UNDERWRITERS AT LLOYD'S (AUTHORITY STARR TECHNICAL RISKS CANADA INC. ON BEHALF OF SYNDICATE CVS1919), TEMPLE INSURANCE COMPANY, ACE/INA INSURANCE COMPANY, NON-MARINE UNDERWRITERS AT LLOYD'S (QBE SYNDICATE 1886), NON-MARINE UNDERWRITERS AT LLOYD'S (CHUBB SYNDICATE 1882), NON-MARINE UNDERWRITERS AT LLOYD'S (TALBOT UNDERWRITING LIMITED SYNDICATE 1183), NON-MARINE UNDERWRITERS AT LLOYD'S (TORUS MARKETING LIMITED SYNDICATE 1301), NON-MARINE UNDERWRITERS AT LLOYD'S (HARDY SYNDICATE 382 AT LLOYD'S), NON-MARINE UNDERWRITERS AT LLOYD'S (CANOPIUS UNDERWRITING LIMITED SYNDICATE) and NON-MARINE UNDERWRITERS AT LLOYD'S (BEAZLEY LLOYD'S SYNDICATES 2623 AND 623)
Defendants/Moving Parties
BEFORE: Kimmel J.
COUNSEL: Crawford G. Smith (csmith@lolg.ca) and Lars Brusven (lbrusven@lolg.ca), for the Plaintiffs/Responding Parties
Gregory J. Tucker, Q.C. (gtucker@owenbird.com) and Dominic T. Clarke (dclarke@blaney.com), for the Defendants/Moving Parties
HEARD: October 30, 2020
ENDORSEMENT
[1] I am case managing these two actions together under the Ontario Case Management Pilot- One Judge Model. Documentary discovery is well underway and there are dates scheduled for oral examinations for discovery, the first round of which have been directed by my prior case management direction to be completed by mid-February 2021.
[2] The actions arise out of a coverage dispute under a builders’ risk insurance policy (the “Policy”) subscribed to by the defendants in differing percentages (collectively, the “Insurers”). The Policy was issued in connection with the construction of a light rail transit system (the “System”) in the City of Ottawa that was part of a larger project by which the plaintiffs were contracted to design, build, finance, maintain and rehabilitate the System (the “Project”).
[3] The Project completion was delayed by fifteen months. The plaintiffs contend that this was as a result of a Sinkhole Event (defined below) that occurred three years into the five-year project. The plaintiffs’ claims under the Policy include amounts for additional (escalation) and soft costs attributed to the disruption in construction and the fifteen month delay in the completion of the Project. These “delay claims” have been denied by the Insurers. They dispute that this Sinkhole Event was the cause of the delay in the completion of the Project, and they allege that it was delayed due to other non-Sinkhole related causes.
[4] The defendant Insurers seek further and better affidavits of documents from the plaintiffs. They seek production of three categories of “missing” documents said to be relevant to other non-Sinkhole related causes of delay. For the 19 “largest” subcontractors (the “Subcontractors”), they seek, (i) change orders requesting delays and supporting documents, and (ii) native Subcontractor schedules; in addition to seeking (iii) all delay related internal and external correspondence.
[5] Under the case management regime, formal motions are not always required. Many issues that have arisen in the course of the case management of these actions have been addressed informally at case conferences. The parties have made extensive efforts to narrow the issues on this motion, which efforts are acknowledged and appreciated by the court. The narrowing of the defendants’ requests continued until close to the hearing of the motion. The remaining points of dispute have been brought forward in a formal motion at the court’s direction on the basis of the three identified “in principle” categories of documents for which production is sought.
[6] Relevance was the primary focus of the parties on this motion; however, proportionality and the orderly conduct of the litigation remains an important consideration for the court.
[7] For the reasons that follow, I find the defendants’ production requests for change orders, supporting documents and native schedules for the 19 “largest” Subcontractors to be insufficiently substantiated and premature. This aspect of the defendants’ motion is dismissed, without prejudice to their right to renew their requests for these types of documents should a foundation for other non-Sinkhole related causes of delay(s), in respect of elements of the Project that particular contractors are identified to have worked on, be established in the course of the discoveries or the experts’ review of available documents and materials as the cases progress.
[8] I am not ruling that non-Sinkhole related causes of delays in the completion of other elements of the System are irrelevant; to the contrary, such other causes of delay may well be relevant, having regard to the pleadings and the low bar for relevance at the discovery stage of a proceeding. However, I am not satisfied that the defendants’ approach to the identification of other causes of delay through the production of an arbitrary subset of Subcontractor change orders, supporting documents and native schedules is the most expeditious, proportionate or orderly manner in which to proceed in the circumstances of this case.
[9] I am granting the defendants’ request for production of certain of the third category of internal and external delay related correspondence, subject to the terms indicated at the end of this endorsement. I am satisfied, based on the evidence in the record about disputes between the plaintiffs and other contractors in which there were allegations of delay, that documents pertaining to such disputes likely exist. The defendants are entitled at this stage to explore whether delays in the completion of those other System elements, as opposed to the Sinkhole Event, caused or contributed to the fifteen-month delay in the completion of the Project. Certain of the requested Delay Related Correspondence could assist in identifying other subcontractors who worked on other elements of the System in which there were delays or alleged delays. Exploring those delay-related allegations on discovery might assist in the narrowing and focussing of further requests for additional documents from particular subcontractors.
Events Giving Rise to these Actions[^1]
[10] The Project involved the construction by (or under the direction of) the plaintiff OLRT-C[^2] of thirteen light rail stations (three of which are located underground), a maintenance and storage facility, an underground tunnel through downtown Ottawa, 12.5 kilometres of track-work, the systems necessary for the rail to operate and all accompanying civil works.
[11] OLRT-C, RTG and RTM are among the insureds under the Policy, which covered all of the Project’s contractors, subcontractors, construction manager suppliers, engineers, architects, consultants, sub-consultants and tradespeople working onsite.
[12] This was supposed to be approximately a five-year Project. The completion date for the Project, established when the original contracts were entered into with the City of Ottawa in February 2013, was May 24, 2018 (referred to as the “RRSAD” or “required revenue service availability date”; essentially, the date of readiness for commercial operation).
[13] More than three years into the construction of the System, on June 8, 2016, a sinkhole (the “Sinkhole”) developed under Rideau Street near the intersection of Rideau Street and Colonel Drive (the “Sinkhole Event”). The Sinkhole Event developed in segment 2 of the Project, under Rideau Street, above the tunnel to the west of the Rideau station, both of which were under construction at the time. It took nine months to repair the property (physical) damage caused by the Sinkhole.
[14] The RRSAD occurred fifteen months later than the contractually specified date of May 29, 2018.
[15] OLRT-C delivered its first claim submission on December 15, 2016. Thereafter, OLRT-C made nine interim claim submissions and its tenth and final claim submission on February 26, 2019 for a cumulative loss of $235,741,248.00 (the “Final Claim Submission”).
[16] The Insurers’ agents investigated and adjusted OLRT-C’s claim for three years, between 2016 and 2019. As part of the Insurers’ claim investigation and adjustment, JS Held (one of the Insurers’ consultants and agents) provided a draft delay analysis and costs review report on December 18, 2018, and an updated version of the report on November 22, 2019. JS Held ultimately concluded that because Project completion could not be achieved earlier than August 30, 2019 due to delay sources unrelated to the Sinkhole, no delay should be attributable to the Sinkhole:
The project experienced concurrent delays to non‐loss related project elements including station construction and train (vehicle) manufacturing. As a result, the project would have completed no earlier had no loss occurred and therefore there is no delay to the project as a result of the loss. [emphasis added by the plaintiffs]
[17] The Insurers denied OLRT-C’s Final Claim Submission by letter dated March 25, 2019. The denial letter from Sedgwick (another consultant and agent of the Insurers) incorporated the JS Held report findings in its reason for denial:
On the facts known, the only reasonable conclusion is that delays to other aspects of the project, delays which could not reasonably be related to the sinkhole, would have pushed back the RRSAD to dates later than completion of the physically impacted section. The unrelated delays include extensive delays to construction of several stations (Tunney’s Pasture, Bayview, Pimisi, Lyon, UOttawa, Lees, Hurdman, Tremblay, St. Laurent, Syrville, and Blair) and manufacture, supply and commissioning of trains and related equipment.
[18] In this same letter, Sedgwick also stated:
You say that it is not OLRT-C’s onus to demonstrate absence of other causes of delay and that it is Insurers’ onus to do so. We must respectfully disagree. It is the Insured’s onus to demonstrate that the claimed loss is covered, and this extends to the full quantum of the claimed loss. Having said that, in practical terms, Insurers do not see these questions as likely to turn on onus. On the basis of the J.S. Held report the only reasonable conclusion is that the sinkhole did not delay completion of the project. If the onus is on Insurers, that onus has been met. Again, this is subject to the caveat that the J.S. Held report is based on facts known to date and OLRT-C has, to date, declined to provide certain relevant information.
[19] On May 19, 2020, RTG and RTM delivered proof of loss under the Policy. On June 16, 2020, the Insurers’ adjusters at MGB Claims Consultants (“MGB”) rejected the proof of loss. There was no new rationale presented for the rejection of this subsequent proof of loss from RTG and RTM.
The Pleadings and Parameters of Relevance
The Plaintiffs’ Claims
[20] The plaintiffs’ claims arise from the defendant Insurers’ denial of the Final Claim Submission and rejection of the plaintiffs’ proof of loss. The Statement of Claim in the action by OLRT-C was issued on June 6, 2019, claiming $275,000,000.00 for the defendant Insurers’ alleged breaches of the Policy by their wrongful refusal to indemnify the plaintiffs for losses arising from the Sinkhole Event. Alternatively, the plaintiffs claim these damages for breach of the Insurers’ duty of good faith and fair dealing. $72,846,395.00 in damages are sought in the RTG/RTM action based on the same alleged breaches of the Policy and/or duties of good faith and fair dealing.
[21] To date, the Insurers have paid OLRT-C under the Policy approximately $45,521,444.81, in relation to the cost of repair of physical damage in the vicinity of the Sinkhole, debris removal, expedited expenses to accelerate repair work and additional repair-related expenses that were incurred within the period during which the Sinkhole was being repaired and the area around it was being restored.[^3]
[22] In addition to the costs associated with the physical damage and repair and restoration of the Sinkhole and surrounding areas, OLRT-C is claiming “escalation costs” comprised of labour, material and service costs said to be associated with delays and disruptions in other segments of the Project (outside of segment 2 where the Sinkhole Event occurred) and “soft costs” or expenses for things such as: financing costs, interest expenses, legal/accounting/marketing expenses, increased carrying costs, and contractual delay costs or penalties. Well in excess of $100,000,000.00 of the OLRT-C claim relates to these types of “delay costs”. All of the losses claimed to have been suffered by RTG and RTM are these types of “delay costs”, “soft costs” and expenses claimed to have been necessarily incurred due to a delay in the Project’s completion.
[23] In their statement of claim in the OLRT-C action, the plaintiffs plead, among other things, that:
a. In addition to the significant damage caused by the Sinkhole Event in the tunnel and Rideau Station, the Sinkhole Event forced OLRT-C to re-plan and re-sequence its construction activities in Segment 2, including the Rideau and Parliament stations, and other segments, including construction of the guideway, the installation of the track-work, and the planned testing and commissioning activities. [para. 49]
b. Despite efforts to accelerate work, expedite construction and undertaking additional work to ensure that the construction activities continued as planned, as a result of the Sinkhole Event, OLRT-C experienced substantial delays to its construction activities in Segment 2 and through the other segments. OLRT-C was unable to complete the Project in accordance with the schedule outlined in the Project Agreement and the Construction Contract because of the Sinkhole Event. [para. 51]
[24] Similar allegations are made in the statement of claim in the RTG/RTM action. [at paras. 29, 34 and 36].
The Insurers’ Defences
[25] In response, the Insurers deny the plaintiffs’ allegations that the Sinkhole Event required the re-planning and re-sequencing of construction activities in other segments and plead in their statements of defence that the: “[D]elay in completion an achievement of the RRSAD was not due to the Sinkhole. Delay in completion and achievement of the RRSAD was due to matters unrelated to the Sinkhole, including delay in completion of stations and other elements of the System, and the delay in obtaining delivery of, testing and commissioning of cars.” [para. 47 OLRT-C defence; para. 38]. [emphasis added]
[26] For purposes of this motion, particular reliance is placed by the Insurers on the underlined words in their pleading.
The Relief Sought and Positions of the Parties
The relief sought on this motion
[27] I have reproduced from the draft order provided by the defendants the categories of documents that they seek from the plaintiffs, which are as follows:
a. subcontractor change orders with supporting documentation (the “Subcontractor Change Order Documents”), for the 19 [largest] subcontractors (the “Subcontractors”) identified in the letter of JS Held dated September 24, 2020, but only to the extent the change orders:
i. contain requests for delay, extension, overtime or acceleration, whether granted or not, or
ii. the subcontractors had change orders issued that resulted in a greater-than 50% increase in the subcontract value, in the aggregate;
b. all subcontractor schedules, including in native format if available, in respect of the 19 specifically identified Subcontractors noted in paragraph 1(a) above (the “Native Subcontractor Schedules”); and
c. any and all correspondence, both internal and external, where:
i. delay in completion of work has been discussed,
ii. request for delay, extension, overtime or contract acceleration had been made,
iii. there is an allegation or complaint regarding delay, or
iv. there is a discussion of causes of delay or impacts to the Project (as defined in the Statements of Claim in the within actions);
including all dispute documents in which delay is at issue, whether the dispute arises under the Project Agreement, the Construction Contract (as defined in the Statements of Claim in the within actions), or otherwise (including disputes that were or are the subject of litigation), collectively the “Delay Related Correspondence”.
[28] While their requests have been narrowed in the course of discussions and negotiations between the parties prior to the motion being filed, what the defendants are seeking is production of a sub-set of documents that the defendants have identified from which they (or their experts) might be able to identify other non-Sinkhole related causes of delays in completion of other elements of the System, beyond those identified in the adjusting process upon which the denial of the plaintiffs’ claims under the Policy were based (collectively, the “Other Delay Related Documents”).
The position of the defendants
[29] The Insurers maintain that the substantial portion of the OLRT-C delay claims that relate to the period of delay after the RRSAD of May 24, 2018, and the entirety of the RTG/RTM delay claims which all relate to that period, turn on whether the Sinkhole was the cause of the fifteen month delay in achieving the RRSAD.
[30] The defendants deny that the Sinkhole caused the delay in achieving the RRSAD. That is a matter directly in dispute in the litigation. The defendants seek production of three categories of Other Delay Related Documents from the plaintiffs that they say are relevant to this lis or dispute between the parties.
[31] Looking to the pleadings to determine what is relevant at this stage, the defendants rely on the plaintiffs’ allegations that the Sinkhole Event caused the delay in completion of the Project RRSAD and that this caused damages beyond the cost to repair and construct the stations in segment 2 of the Project that were physically impacted by the Sinkhole Event (namely the claimed “escalation costs” and “soft costs”).
[32] In addition, the defendants point to the assertion in their defences that there were other causes of the delay in achieving the RRSAD, unrelated to the Sinkhole Event, and that the achievement of the RRSAD would have been delayed irrespective of the Sinkhole Event due to these other causes. The defendants maintain that their pleading does not limit them to the specific other causes of delays that they identified when they denied the Final Claim Submission and rejected the proof of loss, and that they are entitled to allege (as they have done in their defences) all other possible causes of delay to the Project.
[33] The defendants maintain that, on the pleadings, they are entitled to investigate fully and explore on discovery their position that the Sinkhole was not the cause of the delay in the achievement of the RRSAD and that this delay (and the ensuring delay costs claimed) was due to causes other than the Sinkhole Event.
[34] They argue (based on assertions contained in correspondence) that the Other Delay Related Documents that they seek are relevant because, for example:
a. The Subcontractor Change Order Documents are relevant to delay and the cause of delay in that they could show how changes to the construction of the System may have impacted the schedule, including being able to isolate contract work from any impacts related to the Sinkhole. They argue that the change order log that was produced by the plaintiffs on May 15, 2020 does not contain the complete information that would be found in the change orders and point to examples that they have (for the train subcontractor[^4]) in which the log does not reflect a requested delay that is reflected in the change order and/or related documents because the request was not granted;
b. Native Subcontractor Schedules show the Subcontractors’ plan to accomplish the required work and include information about the duration and sequence of each activity, which might allow the defendants to conduct a detailed review of the logical relationships between work activities, and also include other data not evident from a .pdf or printed version of the schedule; and
c. Delay Related Correspondence could shed light on alleged delays caused by other subcontractors, some examples of which the defendants have already identified through public court filings or through other productions. The defendants argue that these documents are a critical source of information to understand all issues on the Project, including but not limited to the Sinkhole Event, and how their impacts were contemporaneously addressed. They suggest that this correspondence be identified through the use of key word searches.
The position of the plaintiffs
[35] The plaintiffs maintain that they have produced the documents related to the other identified causes of delay that were relied upon by the Insurers when they denied the Final Claim Submission and rejected the proof of loss, namely delays in:
a. the construction of several stations (Tunney’s Pasture, Bayview, Pimisi, Lyon, UOttawa, Lees, Hurdman, Tremblay, St. Laurent, Syrville, and Blair), “Station Specific Delays”; and
b. in the manufacture, supply and commissioning of trains and related equipment, “Train Car Delays.
[36] The plaintiffs argue that they should not have to produce what, in essence, amounts to the universe of all Other Delay Related Documents for the Project (or even an arbitrary subset relating to the 19 largest Subcontractors) when their claims are for breach of contract and the duty of good faith and fair dealing arising out of the denial of their Final Claim Submission and proofs of loss under the Policy that were based on specifically identified non-Sinkhole related causes of delays.
[37] The plaintiffs argue that the defendants should not be permitted to use the litigation process to “fish” for other possible non-Sinkhole related causes of delay that were not identified when the indemnity claims under the Policy were denied. They also argue that to the extent that the defendants seek to rely on any such other causes, they must first establish a foundation from the extensive productions already made (from which the defendants’ experts were able to identify the explicitly pleaded Station Specific Delays and Train Car Delays) or through the discovery process itself. After which, they ought to put forward real evidence of other potential causes (not an affidavit from a legal assistant) to substantiate the expansion of the documentary production that they seek.
[38] Without conceding relevance, the plaintiffs maintain that the documents they have produced, including the subcontractor log, project minutes, master Project schedules and updates, progress reports, monthly works reports, and the like, provide ample resources from which the Insurers could identify causes of the delay in the Project RRSAD, and the fact that no other such causes have been identified (beyond the two, Station Specific Delays and Train Car Delays) is telling.
General Principles of Discovery and Production
Onus
[39] The parties approach the issue of where to start the analysis from two different perspectives:
a. The plaintiffs say that the onus is on the defendants under Rule 30.06 to satisfy the court by some evidence that a relevant document has been omitted from the opposing party’s affidavit of documents. See Mattson v Quiggin, 2017 ONSC 984, at para. 28. They contend that the defendants must use the resources available to them (based on their extensive adjusting process, the documents already produced by the plaintiffs and/or publicly available, or questioning of the plaintiffs on discovery) to identify the possible existence of other specific non-Sinkhole causes of the delay in the RRSAD, in respect of which production of the Other Delay Related Documents could then be sought.
b. The defendants say that the onus is it on the plaintiffs, under 30.03, to make production of all documents relevant to any matter in issue in the action, based on the broad and generalized pleadings. These parameters of relevance are to be determined based on the plaintiffs’ assertion that the delay in achievement of the RRSAD was caused by the Sinkhole Event, the defendants’ denial of this and the defendants’ assertions that there were “other causes” of the delay in the RRSAD (including not only the Station Specific Delays, the Train Car Delays but also the “delay in completion of … other elements of the System.”)
[40] The parties have been at odds about which of them has the onus dating back to the claims adjusting process. This was recorded in the Sedgwick letter of March 25, 2019, writing for the Insureds: “You say that it is not OLRT-C’s onus to demonstrate absence of other causes of delay and that it is the Insurers’ onus to do so. We must respectfully disagree. It is the Insured’s onus to demonstrate that the claimed loss is covered, and this extends to the full quantum of the claimed loss.”
[41] This is not an either/or scenario. Both parties have an onus to meet, under the different sub-rules of Rule 30 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, and under the Policy. The Insureds must act in good faith in demonstrating that the loss for which they seek indemnity are within coverage under the Policy and the Insurers must act in good faith when they take a coverage position and deny coverage for some or all of the claims.[^5] The pleadings in these actions, not surprisingly, correspond with the parties’ positions asserted under the Policy. I will return later in this endorsement to the plaintiffs’ position that the defendants have impermissibly added to their pleadings reliance upon delays in “other elements of the system” beyond those specifically identified in the adjusting process.
Relevance
[42] In this case, OLRT-C is not seeking direct compensation for every instance of delay on the Project, nor is OLRT-C alleging that the Sinkhole caused each delay expense incurred. Further, it is acknowledged that, for each case in which OLRT-C has sought coverage for delay, it has provided the Insurers with full documentary support in connection with its claim. However, the issue here is whether the claims for “escalating costs” and “soft costs” associated with the delay of the Project RRSAD create an opening for the defendants to say that all Other Delay Related Documents are relevant.
[43] The issue in this case turns on whether all potential causes of delay are relevant, or only those specifically identified, such as the Sinkhole Event (on the plaintiffs’ side) and the Station Specific Delays and Train Car Delays (on the defendants’ side).
Relevance according to the plaintiffs
[44] The plaintiffs concede that it is the pleadings that frame the question of what is relevant (see Sycor Technology Inc. v. Kiaer, 2012 ONSC 5285, at para. 23) but argue that they get the benefit of a presumption that they have produced all relevant documents, having said to the court that they have done so, as Rule 30.03 requires them to do.
[45] The plaintiffs ask me to heed the recent caution from this court that, while the parties’ pleadings define the scope of discovery, broad unsubstantiated allegations in the pleadings may not be used by the parties to embark on a fishing expedition. See Jardine Lloyd Thompson Canada Inc. v. Terence Patterson 2018 ONSC 444, at para. 5. The plaintiffs say that this case is a classic example of the defendants rummaging “through an opponent’s filing cabinets’ or computers, etc., to see if anything is interesting”, which this court has said, on more than one occasion, that Rule 30.06 does not give them the right to do. See Abou-Elmaati v. Canada (Attorney General), 2013 ONSC 3176, at para. 59; see also Mathieson v. Scotia Capital, 2008 CarswellOnt 5289 (S.C.), at para 10.
Relevance according to the defendants
[46] The defendants assert that the principles set out in the case of RCP Inc. et al v. Manfred Wilding et al, 2002 CarswellOnt 2275 (S.C.), at para. 12, should guide the outcome of their Rule 30.06 motion seeking further production of relevant documents:
a. Rule 30.06 continues to require evidence (as opposed to mere speculation) that potentially relevant undisclosed documents exist;
b. The level of proof required should take into account the fact that one party has access to the documents and the other does not;
c. The onus for reviewing documents and determining relevance in the first instance remains with the party having the obligation to produce;
d. While court inspection of contested documents is an option, that is not an efficient use of judicial resources and should not be the preferred procedure;
e. When dealing with categories of documents such as business records, it may not be possible to determine the extent or depth of the required production until preliminary questions have been asked or a preliminary level of production of a category of documents has been made;
f. If a more efficient solution exists, without creating unfairness to either of the parties, the costs and delay inherent in successive rounds of examinations and production should be avoided.
[47] The defendants argue that they cannot have the onus of establishing that there are other non-Sinkhole related causes of the delays, beyond the Station Specific Delays and the Train Car Delays, when the information and documents needed to establish this reside with the plaintiffs. The defendants maintain that it is enough that the plaintiffs have claimed the Sinkhole Event caused the delay in the achievement of the RRSAD, that the defendants have denied this and that they have pleaded that there were delays in the completion of other elements of the System. The defendants say their onus is not high and is met by the pleadings and by the acknowledged existence of the “types” of documents they seek. This, the defendants argue, satisfies the first two RCP factors.
[48] As for the remaining factors from the RCP case,
a. the plaintiffs’ assessment of relevance at first instance (c) is not based on a review of the Other Delay Related Documents, but rather on their position that they do not have the onus to produce documents relating to non-Sinkhole related delays that the defendants have not specifically identified.
b. no one has suggested that this is a case in which court inspection (d) would assist;
c. the need to determine the extent of required production of these categories of Other Delay Related Documents through preliminary questioning on discovery (e) must be balanced against trying to avoid the cost and delay of successive rounds of production and examination (f), although in this case it has already been contemplated that there will be more than one round of discoveries (as is often expected in complex cases. See Walsh Construction Company Canada v. Toronto Transit Commission, 2019 ONSC 1630, at para. 13); and
[49] Relevance is defined by the issues raised in the pleadings, with regard to whether the requested documents have probative value and will contribute to the determination of the truth or falsity of a material fact or to the resolution of the issues between the parties. See Walsh, at para. 11, and Minotar Holdings Inc. v. Ontario (Municipal Affairs and Housing), 2018 ONSC 4552, at para. 7. The defendants argue that the possible existence of non-Sinkhole related causes of delay is a central issue raised by the pleadings—they rely on the plaintiffs’ assertion that the Sinkhole Event caused the delay in achievement of the RRSAD and their denial of that, which they say opens the door for exploration of all other potential causes of delay.
[50] While some specific other causes have been pleaded, the defendants argue that the cause of delay in the completion of all elements of the System may be relevant to the delay in achievement of the RRSAD. They point out that the plaintiffs have themselves alleged that the elements of the System were inter-related, such that a delay in completion of one element could have delayed the completion of a different element. Whether the Sinkhole Event was the cause of other element delays, or whether they were caused by other events, is an open question based on the pleaded allegations, which the defendants maintain they are entitled to explore.
Relevance - Analyzed
[51] The defendants point to two recent cases in which the court ordered extensive production of delay-related documents, where the cause of a construction delay had been put in issue by the pleadings: Accel Electrical Contractors Ltd v. Brampton (City), 2017 ONSC 6708, and Walsh.
[52] In Accel, the Master did not deal with the delay related productions sought by Accel, who was seeking payment for work done and faced, by way of defence and counterclaim, allegations that it had caused project delays. This court on appeal (2018 ONSC 2523, at para. 13) ordered production of documentation relevant to “any alleged delay to the project” that was the subject of the action. The specific categories of delay related productions ordered produced in the Accel case included the types of documents sought by the defendants in this case, namely the Subcontractor Change Order Documents and Delay Related Documents. However, there was no analysis in the Accel case about what had been pleaded about the alleged delays so it offers little assistance to the analysis of relevance in this case, beyond the precedent for this type of documentation having been ordered produced.
[53] The Insurers also cite Walsh in support of their position that system-wide delay documents are producible even where project completion delay is alleged in connection with one element of the system. However, Master McGraw cautioned in that case (at paras. 18 and 19) that the overly broad positions (on both sides) were not the appropriate way to approach the production disputes, and that each needed to be considered on its own merits and an assessment made as to whether the particular request could be demonstrably connected to the issues in the action. The Walsh case does not justify an order for the production of all of the types of Other Delay Related Documents that the defendants seek in this case.
[54] The plaintiffs argue that, just as in Walsh, the Insurers’ bald assertion here of inter-connectedness falls short in the absence of probative evidence connecting a specific document to a specific allegation of Project completion delay. The plaintiffs also point out that Walsh was a case that was decided based on the discoveries that provided an evidentiary foundation for the documents that were ordered produced. They contrast this with the absence of any meaningful evidence to support the defendants’ requests in this case, which rely entirely on an affidavit from a legal assistant that appends correspondence outlining the evolving positions of the parties. The plaintiffs rely on the Walsh and other cases in support of their position that the defendants’ request is, at best, premature and should await the outcome of a more detailed review by the Insurers and their experts of the extensive documents that are available to them and their follow-up on discovery.
[55] In one of the other cases relied upon by the defendants, the allegation of system-wide delays was the premise upon which the court ordered production of an unredacted RFI (request for information) log for the project, which Master Robinson thought could inform the analysis of other causes of delay. See also Dependable Mechanical Systems Inc. v. Four Seasons Site Development Ltd., 2019 ONSC 5798, at para. 29. The plaintiffs have already produced a subcontractor log in this case.
[56] Despite the numerous legal authorities cited by the parties, the analysis of whether relevance has been established is very fact and case specific. The question is whether the categories of documents for which production is sought are relevant to a matter in issue in the action. The issues are defined by the pleadings.
[57] I agree with the defendants that one of the issues raised by the pleadings is whether the delay in completion and achievement of the RRSAD (upon which the plaintiffs’ delay claims are predicated) was caused by the Sinkhole Event, or whether the completion and achievement of the RRSAD would have been delayed due to other matters unrelated to, and unaffected by, the Sinkhole Event (whether they be the Station Specific Delays, the Train Car Delays or delays in the completion of, as of yet unidentified, other elements of the System). This issue is not raised only by the very general assertion in the statements of defence to the: “[D]elay in completion and achievement of the RRSAD [having been] due to matters unrelated to the Sinkhole, including delay in completion of stations and other elements of the System, and the delay in obtaining delivery of, testing and commissioning of cars.” It arises from the very essence of the plaintiffs’ assertion that the delay claims were caused by the Sinkhole Event and fall within coverage.
[58] I find, on this basis, that other potential causes of delay, beyond the Sinkhole Event, the Station Specific Delays and the Train Car Delays, may be relevant to the plaintiffs’ delay claims and that these other non-Sinkhole related causes of delay are “in play”, at least at this stage of the discoveries in the actions.
[59] This does not, however, render all of the other Delay Related Documents that the defendants seek on this motion producible at this time.
Proportionality
[60] Relevance is not the only consideration. Proportionality considerations under Rules 1.04 and 29.2.03 can lead to exceptions to the obligation on a party to produce all relevant documents in their possession, control or power.
[61] The defendants are not arguing proportionality as a basis for their objections to the request for production of the Other Delay Related Documents. However, proportionality and, in particular, the orderly conduct of these proceedings, which are being case managed by me under the Civil Case Management Pilot project—One Judge Model is something that concerns the court.
[62] Proportionality is an important consideration in cases, like this one, where the requested production could run into the tens of thousands of documents and require extensive electronic data searches and reviews. Rule 29.2.03 requires the court to consider the time, expense, potential prejudice, potential interference with the progress of the action, and/or overall volume of documents to be produced in response to a discovery request. There is no evidence in the record about prejudice, or the burden or cost of production of the Other Delay Related Documents but, as a practical matter, the court still has an interest in the orderly progress of the conduct of these actions and a concern about delay.
[63] The agreed and court approved discovery plan in this case contemplates that the “first round” of discoveries will be completed by mid-February 2021. That there may be more documents relevant to the delay claims still to be produced should not be an obstacle to proceeding with this first round of discoveries. To the contrary, this first round of discoveries can and should be utilized by the defendants to establish a foundation for more specific and principled requests for further productions about specifically identified other causes of delay.
[64] The attempt by the Insurers to be “proportionate” by narrowing down their requests for Subcontractor Change Order Documents and Subcontractor Schedules from all 750 subcontractors to just the 19 largest Subcontractors is appreciated, but it also demonstrates the arbitrariness of the requests since there has been no evidentiary connection made between the work done by these particular Subcontractors and any other possible causes of the delay in completion and achievement of the Project RRSAD.
[65] Some evidentiary foundation is required for a Rule 30.06 request of this breadth. On the record before me, the possibility of other causes of the delay in achievement of the RRSAD (beyond the pleaded Sinkhole Event, Station Specific Delays and Train Car Delays) exists but is speculative. This is apparent from the Insurers’ factum in which they assert (at paragraph 46): “...delay in one element could have led to delay in completion of a different element...” and “[c]ause of delay in all elements of the System may be relevant to delay in achievement of RRSAD.” [emphasis added]
[66] The insufficiency of the evidentiary foundation for the relief requested is exacerbated by the fact that the Insurers have declined to adduce affidavit evidence from JS Held (or any other expert) explaining how the documents sought are relevant to the analysis of non-Sinkhole related Project delays, and the Insurers’ related defence. The plaintiffs ask the court to draw an adverse inference from the fact that JS Held has not provided any evidence about these Other Delay Related Documents or the “other causes” of the delay in the RRSAD, given the central role JS Held played in identifying the pleaded non-Sinkhole related causes of delay. Based on the generality of the pleadings, I do not need to draw an adverse inference, but need only find that the evidence in support of the Insurers’ position is not sufficient at this time.
[67] Many thousands of documents have been produced, including a master subcontractor log, project minutes, master Project schedules and updates, progress reports, monthly works reports, IC status reports and the like. Based on these documents (or a subset of them), produced to the Insurers in the adjusting process, the defendants were able to specify the two identified non-Sinkhole related causes of delay (the Station Specific Delays and the Train Car Delays), and based on that they have received the types of documents they seek (change orders, native subcontractor schedules and delay related correspondence) pertaining to those other causes and the subcontractors who were involved in these other impacted elements of the system.
[68] I do not consider it to be in the interests of the orderly conduct of these actions to order production of what will no doubt be extensive Subcontractor Change Order Documents and Subcontractor Native Schedules documents at this stage so that the defendants can rummage around to see if they can find something interesting (See Abou-Elmaati). They have enough to work with. They should first explore what they have on discovery.
[69] If, in the course of the discoveries, they identify other specific non-Sinkhole related causes of delay to the Project RRSAD then they may be in a position to renew their requests for further production of specific subcontractor Change Order Documents and subcontractor Native Schedules. But I agree with the plaintiffs that there is not a sufficient foundation upon which to order the generic production of these types of Other Delay Related Documents at this time. I agree that, before the requested Subcontractor Change Order Documents and Subcontractor Schedules are ordered produced, further efforts need to be made by the defendants, based on the documentation and information available to them and the first round of discoveries, to meaningfully identify specific subcontractors whose work may have caused delays in the completion of other elements of the System.
[70] The Walsh case is a good example of the importance of staging the production of the Other Delay Related Documents, even if they may contain information about other causes of delay, and thus are theoretically relevant. The approach in that case, which was heard after the first round of discoveries had already been completed, was to require production of some documents, from which other potential causes of system delays might be identified and further document requests could be made in respect of those causes. That is essentially what the plaintiffs have argued in this case, suggesting that the documents that they have already produced, such as the subcontractor log, project minutes, master Project schedules and updates, progress reports, monthly works reports, IC status reports and the like, provide ample resources from which the Insurers could identify causes of the delay in the Project RRSAD.
[71] I view the situation differently when it comes to the Delay Related Correspondence. The defendants have identified, through pleadings in other actions, that there were other subcontractors with whom there have been disputes about Project delays alleged to have been caused by them. I am satisfied that certain Delay Related Correspondence could assist in the identification of delays in the completion of other elements of the System caused by other subcontractors.
[72] The production of certain of the Delay Related Correspondence that has been requested could inform and advance the orderly conduct of the discoveries in these actions and it could also inform the ensuing analysis of the Other Delay Related Documents requested. I am therefore ordering that certain of the Delay Related Correspondence to be produced, subject to the terms indicated at the end of this endorsement.
Waiver or Estoppel
[73] Earlier in this endorsement, I indicated that I would come back to the plaintiffs’ position that the defendants have impermissibly added to their pleadings reliance upon delays in “other elements of the system” beyond those specifically identified in the adjusting process.
[74] The plaintiffs suggest that the failure of the Insurers to identify any other potential causes of the delay of the Project RRSAD (or to even mention that delays in “other system elements” might have been the cause of the delay in the RRSAD) when they denied the plaintiffs’ Final Claim Submission and rejected the proof of loss forecloses them from relying on any other causes now.
[75] The Insureds identified the Station Specific Delays and Train Car Delays to be the other causes that would have delayed the Project RRSAD irrespective of the Sinkhole Event. Having done so, the plaintiffs argue that the addition of the words “other system elements” to their Statement of Defence should not give the defendants a licence to begin a fresh exploration into whether each reference to a delay in the Other Delay Related Documents might have impacted the Project completion date.
[76] The Insurers’ good-faith obligations to their insureds (the plaintiffs) requires them to be balanced and reasonable in their investigation and assessment of the plaintiffs’ claims and in any decision not to pay those claims. See 702535 Ontario Inc. v. Non-Marine Underwriters of Lloyd's London, England 2000 5684 (ON CA), 184 D.L.R. (4th) 687, 130 O.A.C. 373 (C.A.), at para 29, leave to appeal dismissed [2000] S.C.C.A. No. 258. The plaintiffs argue that the Insurers have a continuing obligation to be balanced and reasonable in defending their position not to pay. The plaintiffs suggest that, to allow them to open up this further exploration of other causes of delay (not relied upon by them in their investigation and adjustment process), calls the bona fide of the adjustment process into question.
[77] The defendants object to this argument, which they say was raised for the first time two days before the motion in the plaintiffs’ responding factum. The plaintiffs point to earlier correspondence in which they indicated that this was part of the basis for their objection to the request for production of the Other Delay Related Documents.
[78] The defendants argue that this is, in essence, an assertion that the Insurers waived reliance upon any other possible non-Sinkhole related causes of the delay of the Project RRSAD by having identified two possible causes (with the effect of excluding other possible causes). The Insurers argue that the record before the court does not support a finding on this motion that the Insurers knowingly waived the right to rely on any other causes, nor does the record support any basis for an argument for estoppel. Their positions, taken at the time when they denied the plaintiffs’ Final Claim Submission and rejected the proof of loss, were clearly stated to be based on the information that was made available to them in the adjusting process, having noted that the Insured had declined to provide certain requested information thought to be relevant and under a reservation of the right to modify the basis for their position if additional information was made available.
[79] In any event, the defendants maintain that this argument cannot be used to eradicate what they have pleaded in their statement of defence which informs the boundaries of relevance for this motion. To make this argument, the defendants contend that the plaintiffs should have first moved to strike the portions of the statements of defence that referred to “…delays in completion of… other elements of the System.”
[80] No authority was cited by the plaintiffs for the proposition that Insurers are to be held to the causes specifically identified in the adjusting process and precluded from identifying others in the course of subsequent litigation. Having regard to the insurance adjustment process which is the context from which these proceedings arose, this does not accord with the qualifications and reservations contained in the communications on behalf of the Insurers at the time that the Insured’s indemnity claims under the Policy were denied. It also does not take into account that the bilateral duty of good faith under the Policy also imposes an obligation on the Insured to act in good faith in taking the position that the delay costs are within coverage, which requires them to assert (as they have done), and be prepared to back up their assertion, that the Sinkhole Event is what caused the delay in the achievement of the Project RRSAD. Inherent in that is an assertion that the delay in completion and achievement of the Project RRSAD was not due to other causes.
[81] I am not prepared to find that the Insurers are limited to the specific examples of other potential causes of the delay in completion and achievement of the Project RRSAD given at the time that coverage was denied. If the plaintiffs wish to pursue this position, a pleading amendment may be required on their part to assert it, and it will have to be raised directly and with a proper record and authorities upon which such a decision could be made.
[82] For purposes of this motion, I am not satisfied that there is a waiver or estoppel that prevents the defendants from requesting the Other Delay Related Documents just because other possible causes of the delay in achievement of the Project RRSAD were not specifically identified during the adjusting process. This has not been factored into my decision.
Summary of Outcome and Orders
[83] The defendants’ motion, insofar as it seeks the production of Subcontractor Change Order Documents and Subcontractor Native Schedules is dismissed. Having regard to Rules 1.04, 30.06 and 77, my dismissal of this aspect of the defendants’ motion is without prejudice to their right to renew some or all of their requests, if tethered to specific delays in other elements of the System and the subcontractors involved in such delays as may be identified in the course of the discoveries or through expert review and analysis of available documents and/or discovery evidence.
[84] The defendants’ motion for production of certain Delay Related Correspondence is granted, based on the following parameters:
a. Delay Related Correspondence at this stage is limited to internal and external emails, letters memos or other such communications relating to disputes or disagreements (whether formalized in court or arbitration proceedings or not) with contractors or consultants to the Project in which delay or causes of delay in the completion of work in any element of the System that may have caused or contributed to the achievement of the Project RRSAD is discussed or referred to. It specifically does not include the Subcontractor Change Order Documents and/or Subcontractor Native Schedules, although those may be included.
b. The Delay Related Correspondence that is electronically searchable is to be identified by the plaintiffs based on the sixteen (16) delay-related key word search terms provided by the defendants on page 11 of the JS Held letter dated September 24, 2020 (motion record p. 203, Caselines page B-1-203), in addition to any other search terms as the plaintiffs may identify and disclose to the defendants.
c. The production of any such Delay Related Correspondence as may be identified using the electronic search terms remains subject to review by the plaintiffs for relevance to the delay claims (including other causes of project delay). For example, the plaintiffs may review the documents that are captured by the search terms and if they determine that some documents captured by the electronic searches do not fall within the above definition of Delay Related Correspondence, they may exclude those from the production set.
d. The plaintiffs may also withhold any documents identified by these directed electronic searches that they assert are privileged, but any documents withheld on grounds of privilege must be identified in a Schedule B-type list which is to be provided to the defendants.
[85] No submissions were made about the time that it will take the plaintiffs to run the electronic document searches, undertake any reviews of the Delay Related Documents and produce them. Accordingly, I am ordering it to be done in 30 days. If it cannot be completed in 30 days then the production should commence in 30 days and continue on a rolling basis thereafter. Timing of this production shall not be a reason to delay the first round of discoveries. Either party may request a case conference with me if there are questions about the timing or implementation of my orders herein.
[86] The motion was brought in both actions. It is my understanding that documents relating to specific subcontractors would most likely be in the possession of the plaintiffs in the OLRT-C action (No. CV-19-00621475-0000) as it was the party dealing with the subcontractors. Counsel advised that there are no unique categories of documents applicable to RTG/RTM and any order made should apply to those entities only to the extent of specific documents ordered produced that are in their possession, control or power. I so order.
Costs and Implementation
[87] The parties asked at the conclusion of the hearing of this motion for the opportunity to exchange costs outlines and to make their cost submissions after they have my decision. I assume that the exchange of costs outlines has occurred. I encourage the parties to try to reach an agreement on the costs of this motion now that they have my decision and have exchanged their costs outlines. If an agreement on costs is reached, counsel are asked to advise the court of such by November 30, 2020. If counsel require more time, they may ask to extend the deadlines for their cost submissions.
[88] If no agreement on costs is reached, then each side may deliver to the other and file with the court a brief written cost submission (of no more than 3 pages double spaced) together with their costs outline on or before December 10, 2020 and each may deliver to each other and file with the court a brief written response to the other’s submission on costs (of no more than 1.5 pages double spaced) on or before December 21, 2020. All submissions are to be uploaded into the existing sync.com file and onto Caselines and also sent by PDF to my assistant, linda.bunoza@ontario.ca.
[89] If the court has not received any cost submissions from the parties by December 10, 2020, or such later date as the parties may ask the initial and subsequent deadlines for submissions to be extended to and the court may permit, the issue of costs will be deemed to be settled without the necessity of any further ruling from the court.
[90] Notwithstanding Rule 59.05, this endorsement is effective immediately and is enforceable without any need for entry and filing. In accordance with Rules 77.07(6) and 1.04, no formal Order need be entered and filed unless an appeal or a motion for leave to appeal is brought to an appellate court. Any party to this decision may nonetheless submit a formal Order for original signing, entry and filing when the court returns to regular operations.
Kimmel J.
Date: November 16, 2020
[^1]: The events described in this section are understood to be non-controversial and have been extracted from the parties’ written submissions, with a view to neutrally describing them in order to provide context for the issues to be decided on this motion.
[^2]: The Plaintiffs, Dragados Canada Inc., EllisDon Corporation and SNC-Lavalin Constructors (Pacific) Inc., carried on business in concert, at all materials time, as the Ottawa Light Rail Transit Conductors (“OLRT-C”). The Plaintiff, Rideau Transit Group (“RTG”) is a general partnership comprised of ACS RTG Partner Inc., SNC RTG Partner Inc., and EllisDon RTG Partner Inc. The Plaintiff, Rideau Transit Maintenance (“RTM”) is a general partnership comprised of ProTrans RT Maintenance Partner Inc., ACS RT Maintenance Partner Inc., and EllisDon RT Maintenance Partner Inc. RTG/RTM entered into a project agreement with the City of Ottawa to design, build, finance, maintain and rehabilitate a light rail transit system in Ottawa. RTG/RTM, in turn, contracted with OLRT-C to carry out the design and construction work for the Project. These parties are all related and constitute a joint venture among SNC Lavalin Constructors (Pacific) Inc., Dragados Canada, Inc., and EllisDon Corporation.
[^3]: In the statement of claim, it is pleaded that the Insurers have taken the position that OLRT-C is not entitled to retain these interim payments made by the Insurers in 2016 and 2017. I am not entirely clear as to the current position of the defendant Insurers regarding the interim payments, but these payments are not part of the delay claims that are the subject of this motion.
[^4]: The corresponding documents relating to the Train Car Related Delays (as defined in the next section) have been produced for Alstom and Thales, from which examples are taken to illustrate why the log does not provide the complete information for analysis purposes.
[^5]: Although not specifically referred to by either side, the bilateral duty of good faith of insurers and insureds is trite. See Ferme Gérald Laplante & Fils Ltée. v. Grenville Patron Mutual Fire Insurance Co., 2002 45070 (ON CA), [2002] O.J. No. 3588 (CA) at para. 72: “In an insurance contract, the law has long recognized, in addition to the express terms of the contract agreed to by the parties, a mutual obligation between insurer and insured to act in utmost good faith. A breach of this additional duty can found a claim for punitive damages by either insurer or insured.”