COURT FILE NO.: 17-1895
DATE: 2020-12-01
ONTARIO SUPERIOR COURT OF JUSTICE
IN THE MATTER OF the Construction Lien Act, R.S.O. 1990, c. C.30
BETWEEN:
Coco Paving Inc.
Plaintiff
– and –
Alexman Contracting Inc. and Her Majesty the Queen in Right of Ontario, as represented by the Minister of Transportation
Defendants
Counsel:
Ian Katchin, for Coco Paving
David Swift, for Alexman Contracting Inc.
HEARD: November 16, 2020, via Zoom
JUDGMENT
MULLIGAN J.:
[1] Both the plaintiff, Coco Paving Inc. (Coco), and the defendant, Alexman Contracting Inc. (Alexman), bring summary judgment motions. The defendant, Her Majesty the Queen in Right of Ontario, as represented by the Minister of Transportation (MTO) has been let out of the action. It is no longer a construction lien action, it is a contract dispute between Coco and Alexman.
[2] Coco claims summary judgment for the payment of $104,284.61, being the balance due under its subcontract with Alexman.
[3] Alexman, in its summary judgment motion, seeks an order dismissing the plaintiff’s claim and/or judgment against Coco for $104,604, plus HST, or in the alternative a set-off of the same amount. This amount stems from the liquidated damages assessed against it by MTO with respect to delays that arose on this project. It is not disputed that MTO paid Alexman in full for this contract but assessed the liquidated damages on a separate road construction contract.
[4] In April 2015, Alexman entered into a contract (the Prime Contract) with the MTO to construct a bridge on Highway 89, south of Barrie. Alexman provided an affidavit from John-Paul Stickle, their project manager. By way of background, in paragraphs 4 and 5 of that Affidavit, he provided as follows:
The Project involved removing and replacing the existing Highway 89 bridge over Innisfil Creek. This work required the construction of a temporary bridge; the construction of a temporary alignment so traffic could travel over the temporary bridge; removal and replacement of the existing bridge; and then return of traffic to its original route over the new bridge.
Pursuant to the terms of the Prime Contract, the Project was to be completed by November 30, 2016. This completion date was subsequently extended by two (2) days to December 2, 2016. The Prime Contract provided that if Alexman failed to complete the Project by the scheduled completion date, Alexman would be charged liquidated damages of $1,700.00 per day.
[5] Alexman then sought bids from sub-contractors and received an estimate from Coco to supply and place asphalt. The Coco bid was for $561,771.89, inclusive of HST. As Mr. Stickle states in his affidavit at paragraph 9,
Included as part of the Estimate are two pages of Terms and Conditions (the "Terms and Conditions"). There was no discussion between Coco and Alexman about the Terms and Conditions and no one at Coco directed Alexman to any of the specific terms and conditions set out in the Estimate.
[6] The contract was formed between the parties when Alexman selected Coco as a subcontractor by issuing a purchase order on June 25, 2015.
[7] Under the Prime Contract, all work was scheduled to be completed by December 2, 2016; however, the work was not completed in time. Alexman continued work until December 23, 2016, when the project was shut down due to winter conditions. Alexman suffered a liquidated damages claim by the MTO for this first delay. The project resumed in May of 2017 because Coco was required to return to the project to repair or replace asphalt surfaces in accordance with the requirements of MTO. Coco returned several times and ultimately completed the work on July 12, 2017. This was the second delay. Alexman suffered further liquidated damages as a result.
[8] Based on the totality of the delays, Alexman was assessed liquidated damages in the amount of $209,100 by MTO. The portion of those liquidated damages for which it is claiming general damages against Coco is set out in paragraph 67 of Mr. Stickle’s Affidavit, as follows,
Alexman acknowledges that the delay in completion of the Project from December 2, 2016 to May 11, 2017 is not the responsibility of Coco; however, Alexman is of the position that the delay from May 12 to July 12, 2017, and therefore all damages incurred as a result of it, is the responsibility of Coco. These damages are comprised of:
(a) $103,700.00 being 61 days of liquidated damages at $1,700 per day as assessed by MTO; and
(b) $904.00 plus HST for extra survey layout work that had to be redone for the highway painting to be redone after Coco remedied its errors…
[9] It is not disputed that Coco was negligent in not meeting the MTO requirements with respect to the aggregate used on the project. Coco’s assistant general manager, Blair Fraser, was questioned on examination for discovery with respect to Coco’s actions. The following questions and answers speak to the issue:
171 Q: How was the wrong aggregate put into the asphalt?
A: To this day I don’t know whether we knew or not. It’s human error.
172 Q: It wasn’t due to lack of information or lack of knowledge of what was required?
A: For us as a company, no.
173 Q: So this was clearly the fault of Coco Paving, correct?
A: Yes.
174 Q: It wasn’t the fault of Alexman Contracting?
A: No.
MTO’S OTHER CONTRACT WITH ALEXMAN
[10] Alexman was involved with another road and bridge contract with MTO and Coco was once again the asphalt subcontractor. There were no delays or problems with respect to that project, but MTO, in accordance with its contractual abilities, deducted the liquidated damages claim arising from the Highway 89 project from the payment to Alexman due under this other contract.
THE CONTRACT BETWEEN COCO AND ALEXMAN
[11] As noted, Coco submitted an estimate to Alexman for asphalt work on the Highway 89 project. The contract was accepted by Alexman by its issue of a purchase order and the work commenced. Paragraph 16 of the estimate stated,
The company shall not be held liable for any financial penalties or liquidated damages of any kind whatsoever in relation to the performance of the work contained in this proposal. The company shall not be held liable for any delays that occur on the project whatsoever and howsoever arising.
[12] Coco’s full contract price was $625,069.81, inclusive of HST. It is not disputed that Coco completed the work it contracted to do. But it is clear that there were substantial delays because Coco’s initial work did not meet the contractual requirements of the MTO. Coco was required to reattend several times in the spring of 2017 to meet those requirements by replacing or repairing its asphalt work due to its admitted “human error”. There is no doubt that this period of delay was caused entirely by Coco. Alexman suffered the consequences by being subject to a liquidated damages deduction by MTO.
LEGAL ANALYSIS
[13] The issue in this case is whether or not the clause contained in Coco’s estimate protects itself for a claim in damages for its own negligence.
[14] In Tilden Rent-A-Car Co. v. Clendenning, (1978 1978 CanLII 1446 (ON CA), 18 O.R. (2d) 601), the court considered a written contract for a rental car signed by the renter at the counter. The court determined that in the circumstances of that case, the rental company could not rely on unusual and onerous printed terms not drawn to the customer’s attention. The clause in the contract indicated, “customer shall be fully liable for all collision damage if vehicle is used, operated or driven in violation of any of the provisions of this rental agreement…”
[15] The agreement further provided at para 16, “I, the undersigned have read and received a copy of above and reverse side of this contract.” In this case, the renter had paid an additional premium to cover damage. As the court noted at page 4,
The provisions fastening liability for damage to the vehicle on the hirer, as contained in the clauses hereinbefore referred to, are completely inconsistent with the express terms which purport to provide complete coverage for damage to the vehicle in exchange for the additional premium…
Mr. Clendenning stated that if he had known of the full terms of the written instrument, he would not have entered into such a contract. Having regard to the findings made by the trial Judge, it is apparent that Mr. Clendenning had not in fact acquiesced to such terms.
[16] In Neely v. MacDonald, 2014 ONCA 874, the Ontario Court of Appeal dealt with a case involving a guest who was injured while a passenger in a golf cart. The plaintiff sued the driver of the golf cart, as well as the golf club itself. The court focussed on the wording of the club’s contract with the organizer of the event in question. That contract provided, in part “customer is liable for all damage caused by customer and/or their guests.” In considering the effect of the clause, the court stated at para 7,
For ClubLink to shift the risk of its own negligence to CLC successfully, the contract must say so in the clearest terms. Fenn v. Peterborough (City) (1979), 1979 CanLII 77 (ON CA), 25 O.R. (2d) 399 (C.A.), aff’d 1981 CanLII 66 (SCC), [1981] 2 S.C.R. 613, was a decision of a five-judge panel of this court which was affirmed by the Supreme Court. This court’s statement at paras. 35 and 36 was adopted by the Supreme Court:
As we have agreed with the trial Judge in his finding that Consumers owed a duty of care, not only to the plaintiffs but also to the Commission, we know of no authority which allows a party to be indemnified for its own negligence in the absence of a contractual right thereto and we were referred to none.
If one is to be protected against and indemnified for one's own negligence there would have to be an indemnity clause spelling out this obligation on the other party in the clearest terms. [Emphasis added]
[17] The court concluded at paras 14 to 15,
[14] He [the motions judge] also did not properly consider the provision in its entirety. Read as a whole, the provision is ambiguous and must be construed against the drafter, ClubLink.
[15] In short, we are unable to find that the contract clearly shifted to CLC [the event organizer] the risk of ClubLink’s own negligence.
[18] More recently, in Zaky v. 2285771 Ontario Inc., 2020 ONSC 4380 (S.C.J), Conlan J. considered an accident involving injuries suffered by the plaintiff at an indoor trampoline park. The plaintiff had signed an electronic waiver document. The clause in question stated in part:
I hereby voluntarily release, forever discharge and agree to indemnify and hold harmless Sky Zone and to waive any and all claims, demands or cause of action… due to any cause whatsoever, including negligence….
[19] The summary judgment motion brought by the defendant, Sky Zone, was dismissed. The court noted at paragraph 28 that there were genuine issues for trial.
[20] In conducting his legal analysis, Conlan J. provided this helpful summary at para 20,
[20] Generally, I concur with and adopt the following paragraphs of the factum filed on behalf of Sky Zone dated June 8, 2016 – 30 to 37, 39, and 40, including all of the footnotes thereto:
It is well-established that exclusion of liability clauses are per se not unreasonable or unconscionable in the context of dangerous sports and activities. As the Supreme Court of Canada has held, “there are no grounds of public policy” that justify striking an exclusion of liability in this context. The question therefore becomes whether the exclusion of liability (here, the waiver) is enforceable as against the person who signed the document.
It is immaterial that the plaintiff’s waiver was signed electronically rather than manually. Section 19(1) of the Electronic Commerce Act, 2000 provides that a contract may be formed by “touching or clicking an appropriate icon or other place on a computer screen.” Further, section 19(3) of the Act explicitly indicates that a contract “is not invalid or unenforceable by reasons only of being in electronic form.
i. It is immaterial that the plaintiff did not read the waiver.
Where a plaintiff has signed a written contract, it is immaterial that the plaintiff has not read the document and does not know its terms. As Dunphy J. recently held in Trimmeliti, above, “[if] the plaintiff chose to sign the form and ignore the consequences, that was a decision freely made by the plaintiff.
A plaintiff cannot unilaterally contract out of a waiver that he knew or ought to have known was a condition of his participating in the activity in question. It is impossible to pick out certain clauses from the wavier and ignore then as not being binding on the plaintiff.
[Citations omitted]
[21] But Conlan J. noted that there were three exceptions to the general enforceability of waivers, the third of which bears scrutiny in this case,
34 (c) Where the defendant knew or ought to have known that the plaintiff did not intend to be bound by the waiver and, therefore, the defendant had a duty to bring the terms of the waiver to the plaintiff’s attention.
- The third exception applies in circumstance where a reasonable person should have known that the person signing the wavier did not intend to be bound by its terms. In such circumstances, the defendant must do more than simply hand the waiver over to be signed. Rather, the defendant is obliged to take reasonable steps to draw the terms of the wavier to the signer’s attention. Failure to do so amounts to misrepresentation by omission. Whether this applies will depend on the circumstances, for example:
a) Whether an exclusion of liability is inconsistent with the overall purpose of the document, and is, therefore, “contrary to the party’s normal expectation.”
b) The length and format of the document, and whether the exclusion of liability is buried in small print.
c) The time available for reading and understanding the document.
d) Whether the signed asked any questions regarding the terms of the document or ever indicated he was not prepared to sign it.
[Citations omitted]
[22] The court concluded that there was a genuine issue requiring a trial as to whether or not Sky Zone took reasonable steps to bring the terms of the waiver to the consumer’s attention.
LIQUIDATED DAMAGES
[23] Although paragraph 16 of Coco’s estimate addresses the issue of liquidated damages, there was no liquidated damages provision in the contract between Coco and Alexman. Alexman was assessed liquidated damages with respect to its Prime Contract with MTO but Coco was not a participant in that contract. In my view, once the liquidated damages had been assessed against Alexman, they became a general damages claim with respect to Alexman’s contractual dispute with Coco.
[24] The second part of paragraph 16 provides that Coco shall not be held liable for any delays that occur on the project whatsoever and howsoever arising. It could reasonably be foreseen that a number of delays could arise on a project of this kind, for example, a breakdown of Coco’s equipment; difficulty in accessing the appropriate asphalt mix on a timely basis; labour issues; or weather issues. However, in my view, that clause should not be read so broadly as to absolve Coco of delays arising from its own admitted negligence. To read that clause as absolving Coco from its own negligence, would not meet the clear expectations of the parties. Such a reading could lead to an absurd result, for example, if Coco negligently did not show up to complete its contract for a year, but then arrived and did the work, could they claim payment in full?
[25] In my view, Coco is entitled to judgment for the balance of its contract, $104,284.61; however, Alexman is entitled to summary judgment for general damages, its damages incurred under the Prime Contract with MTO based on the negligence of Coco and the delays incurred as a result. Alexman’s claim is allowed at $104,604 plus HST for a total of $118,202.52.
SET-OFF
[26] Section 111 of the Courts of Justice Act, R.S.O. 1990 c.C.43, sets out requirements for a legal set-off. Subsection 111(2) provides, “mutual debts may be set off against each other even if they are of a different nature.”
[27] In my view, mutual debts arise as a result of the judgments awarded to each party. I accept the calculations of Alexman at paragraph 54 of its Factum, indicating that there remains a judgment in its favour against Coco in the amount of $13,917.91, after the set-off of the two judgments.
INTEREST
[28] Coco claimed interest on its debt in the amount of 18% per annum. In the circumstances of this case, and in the face of the damages claim by Alexman which arose as a result of Coco’s negligence, I decline to award interest to Coco. As both claims are relatively similar in nature, I decline to award prejudgment interest on either claim. Alexman is entitled to post judgment interest on the remaining amount after off-set, $13,917.91 from the date of judgment.
COSTS
[29] Success on these summary judgment motions has been divided. Each side has achieved a measure of success with respect to its claim. The parties are encouraged to reach an agreement on the issue of costs.
[30] If the parties are unable to agree, I will receive written submissions from both parties, not exceeding 5 pages, together with a bill of costs, within 10 days of the release of this decision. Each party will then have further right of reply not exceeding 3 pages within 5 days thereafter.
Mr. Justice G.M. Mulligan
Released: December 1, 2020