RNC Corp. v. Johnstone et al.

[Indexed as: RNC Corp. v. Johnstone]

Ontario Reports

Ontario Superior Court of Justice

Myers J.

December 14, 2020

153 O.R. (3d) 503 | 2020 ONSC 7751

Case Summary

Civil procedure — Summary judgment — Availability — Defendant homeowners not paying plaintiff contractor's invoices due to alleged deficiencies in work — Parties engaging in mediation and defendants enrolling in Tarion warranty process — Plaintiff commencing action for payment of invoices after expiry of limitation period — Defendants moving for summary judgment to dismiss action — Motion dismissed — Defendants failing to show no genuine issue for trial — Effect of Tarion process on discoverability could not be fairly and justly adjudicated on the record.

Limitations — Discoverability — Defendant homeowners not paying plaintiff contractor's invoices due to alleged deficiencies in work — Parties engaging in mediation and defendants enrolling in Tarion warranty process — Plaintiff commencing action for payment of invoices after expiry of limitation period — Defendants moving for summary judgment to dismiss action — Motion dismissed — Defendants failing to show no genuine issue for trial — Effect of Tarion process on discoverability could not be fairly and justly adjudicated on the record.

The defendants retained the plaintiff to do a major renovation to their house in 2014. There was some discussion between the parties regarding Tarion warranties at the time of the contract, but the plaintiff was not registered with Tarion as a builder and the house was not going to be covered by Tarion warranties. The defendants moved into the house in December 2015. The plaintiff delivered its final invoice in April 2016. By that time there were discussions between the parties concerning the defendants' claims that there were many deficiencies in the plaintiff's work. There was discussion about the amount of money due to the plaintiff and whether the plaintiff should owe money to the defendants. There was evidence that the defendants asked the plaintiff to deliver the April invoices to start putting actual numbers to the discussion. In August 2016, the defendants made it clear to the plaintiff that they expected to be paid $350,000. The contract called for dispute resolution. The parties agreed to proceed to mediation. In November 2016, the defendants enrolled the house with Tarion, who ultimately rejected the bulk of the defendants' claims. The plaintiff commenced an action in October 2019 for payment of its invoices. With the limitation period being two years, the defendants moved for summary judgment to dismiss the plaintiff's claim.

Held, the motion should be dismissed.

The defendants failed to show that there was no genuine issue requiring a trial. The matter could not be fairly and justly adjudicated on the record. The plaintiff relied on the Tarion process to toll the limitation period or as a further basis for it to defer discovery of its causes of action. The defendants argued that the Tarion process dealt only with their claims and did not deal with the plaintiff's claims to be paid for the invoices. The question of whether the Tarion process could toll the limitation period under a construction contract was a significant one and its assessment required much clearer evidence about exactly what was involved at each step. It was impossible to embark on the question of the degree of interrelation between the plaintiff's claim on its invoices and the defendants' Tarion claims without a better understanding of both. Even assuming that all the documentary and transcript evidence about the individual steps was available, the hearing would have been a hearing of the full trial without live witnesses explaining the context and without counsel to bring order to that evidence. It would have been a trial in a box.

Cases referred to

Butera v. Chown, Cairns LLP (2017), 137 O.R. (3d) 561, [2017] O.J. No. 5267, 2017 ONCA 783; C. (A.) v. Joyce, [2017] O.J. No. 281, 2017 ONCA 49; Enterprise Rent-A-Car Canada Co. v. Ontario (Minister of Finance), [2020] O.J. No. 3766, 2020 ONSC 5339 (S.C.J.); Faryna v. Chorny, [1951] B.C.J. No. 152, [1951] 4 W.W.R. (N.S.) 171, [1952] 2 D.L.R. 354, 1951 252 (C.A.); Griva v. Griva, [2016] O.J. No. 1356, 2016 ONSC 1820 (S.C.J.); Hryniak v. Mauldin, [2014] 1 S.C.R. 87, [2014] S.C.J. No. 7, 2014 SCC 7, 314 O.A.C. 1, 453 N.R. 51, 95 E.T.R. (3d) 1, 12 C.C.E.L. (4th) 1, 27 C.L.R. (4th) 1, 21 B.L.R. (5th) 248, 46 C.P.C. (7th) 217, 37 R.P.R. (5th) 1, 366 D.L.R. (4th) 641; Huang v. Cardoso, [2020] O.J. No. 4148, 2020 ONSC 5828 (S.C.J.); Kinectrics Inc. v. FCL Fisker Customs & Logistics Inc., [2020] O.J. No. 4761, 2020 ONSC 6748 (S.C.J.); Malik v. Attia, [2020] O.J. No. 5378, 2020 ONCA 787; Sanzone v. Schechter, [2016] O.J. No. 3760, 2016 ONCA 566, 402 D.L.R. (4th) 135, 92 C.P.C. (7th) 26; Toronto Standard Condominium Corp. No. 2130 v. York Bremner Developments Ltd., [2016] O.J. No. 4468, 2016 ONSC 5393 (S.C.J.)

Statutes referred to

Limitations Act, 2002, S.O. 2002, c. 24, Sch. B, ss. 4, 5 [as am.], (1)(a)(iv), (2), 11 [as am.], 22 [as am.]

Ontario New Home Warranties Plan Act, R.S.O. 1990, c. O.31 [as am.]

Rules and regulations referred to

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 20.04(1), 20.05, 50.13

MOTION by defendants for summary judgment.

Asher Honickman and Amirah Arif, for the plaintiff.

Robert J. Kennaley and Kirk Brown, for the defendants.

Endorsement of F.L. MYERS J.: —

The Motion

[1] The defendants move for summary judgment to dismiss the plaintiff's claim on the basis that it was commenced after the limitation period expired. The issue is when ought the plaintiff be deemed to have discovered the causes of action so as to start the two-year limitation period running under ss. 4 and 5 of the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B.

[2] The motion is dismissed. It is a trial in a box. It is not a case in which I can fairly and justly adjudicate the dispute on the record or in which I can make findings of fact on a fair and just basis in light of the litigation as a whole.

Summary Judgment is Not Supposed to be a Trial in Box

[3] A limitation period can present a neat issue with its own set of facts. In many cases, a motion for summary judgment on a limitation period can require the court to review just a few facts that are discrete or separate from the facts that form the merits of the claim and require no findings on the credibility of any witness's testimony. Resolving a case on that basis can be a very efficient, affordable process that avoids the need for lengthy, complex, expensive discovery and trial on the merits.

[4] But, motions for summary judgment on limitation issues can also present the dreaded "trial in a box". In those cases, the motion judge is asked to make findings on some or all the same facts and evidence as would be before the trial judge -- but with no trial. The judge hears a few hours of submissions at a high level of abstraction. He or she is then left to wade through the banker's box(es) of material to make detailed findings on contested evidence without having heard the detailed evidence led by counsel and contextualized by the trial narrative unfolding over several days.

[5] This is not to say that motions for summary judgment provide a less just outcome than a trial. The two are alternative processes. It is not comparing a Volkswagen Beetle to a Cadillac Sedan de Ville. I know of no empirical basis to say that a trial provides a more "just" outcome. There is no empirical evidence to say that a decision reached on a summary process is right or wrong any more or less often than one made after a trial. But much turns on one's definitions of "right", "wrong" and especially "just". If one includes in the definition of civil justice considerations of access to justice, such as timeliness and affordability, then, in my view, summary results may often be more just than decisions reached after trial.

[6] But context is everything. Not all cases can be decided justly or fairly without a trial. A motion that is really a trial in a box is an example of that problem.

[7] In Hryniak v. Mauldin, [2014] 1 S.C.R. 87, [2014] S.C.J. No. 7, 2014 SCC 7, at para. 66, the Supreme Court of Canada held:

There will be no genuine issue requiring a trial if the summary judgment process provides her with the evidence required to fairly and justly adjudicate the dispute and is a timely, affordable and proportionate procedure, under Rule 20.04(2)(a). If there appears to be a genuine issue requiring a trial, she should then determine if the need for a trial can be avoided by using the new powers under Rules 20.04(2.1) and (2.2). She may, at her discretion, use those powers, provided that their use is not against the interest of justice. Their use will not be against the interest of justice if they will lead to a fair and just result and will serve the goals of timeliness, affordability and proportionality in light of the litigation as a whole.

[8] The difficult question is when is a motion for summary judgment ripe for hearing?

[9] In my view, there are indicia of when a summary process may be fair and just and where the comparison to the litigation as a whole supports summary resolution. Without being exhaustive, perhaps the most common and significant factors are:

(a) Where the issue on the motion and the evidence relied upon is narrow, neat and distinct from the issues and evidence on the underlying merits. See: Griva v. Griva, [2016] O.J. No. 1356, 2016 ONSC 1820 (S.C.J.).

(b) Where the process is attenuated, with little delay and little additional cost. See: Butera v. Chown, Cairns LLP (2017), 137 O.R. (3d) 561, [2017] O.J. No. 5267, 2017 ONCA 783, at paras. 30 and 31.[^1]

(c) Where there is little or no additional evidence available to lead at a trial on the issue(s).

(d) Where credibility is not in issue or, if it is, it is a near slam dunk. If credibility findings rely on adverse inferences, burden of proof, or the "best foot forward" rule, then the chances of a judge finding the comfort required by Hryniak is greatly decreased.

[10] The corollary to these criteria, is the definition of a trial in a box. If the judge is asked to hear as a motion the evidence on the merits for trial, that is a problem. Of course, there are cases, such as enforcing liquidated debt for example, where even the merits may be ripe for summary resolution. No one criterion is determinative. There is a wide range of case presentations. Whether any individual case can be fairly and justly resolved summarily is a judgment call on all the relevant facts.

[11] Where the process proposed will involve months of examinations and days of hearing, the process would seem to be more akin to discovery and trial.

[12] In some summary judgment motions, all available evidence is already before the court. There is nothing else to be said at a trial.

[13] In a trial in a box, the motion judge is often asked to make credibility findings like trial. Witnesses' evidence may conflict and there can be no objective indication of which is correct or more likely correct. In C. (A.) v. Joyce, [2017] O.J. No. 281, 2017 ONCA 49, the Court of Appeal held [at para. 92] that:

The more important credibility disputes are to determining key issues, the harder it will be to fairly adjudicate those issues solely on a paper record.

[14] Sometimes, even when dealing with discoverability, credibility is not a particularly important issue. See: Huang v. Cardoso, [2020] O.J. No. 4148, 2020 ONSC 5828 (S.C.J.), at para. 60. While the court is always concerned that affidavits drafted by counsel can obscure the client's voice, in some cases, a witness's credibility shines through a transcript of a cross-examination held out of court. See: Enterprise Rent-A-Car Canada Co. v. Ontario (Minister of Finance), [2020] O.J. No. 3766, 2020 ONSC 5339 (S.C.J.), at para. 61. In cases where the witness is already pinned to incredible testimony in a transcript, repeating the cross-examination at a trial may just be a waste of time and money.

[15] In some cases, there is a strong documentary record that belies or overwhelms a party's subjective evidence and claims. Some witnesses' testimony just defy common sense. See: Faryna v. Chorny, [1951] B.C.J. No. 152, [1951] 4 W.W.R. (N.S.) 171, [1952] 2 D.L.R. 354, 1951 252 (C.A.). Credibility issues can be more readily resolved in those cases.

[16] Where credibility is in issue and, especially, where the evidence of two or more witnesses is in opposition, absent a clear and definitive contemporaneous documentary record or a Perry Mason out of court cross-examination, the motion is sounding more like a trial.

[17] The concept of the beneficial "trial narrative" that is mentioned in some pre-Hryniak case law is an elusive one. We know that simply hearing witnesses live and observing their demeanour is not a very important determinant of credibility any longer. However, where a judge is required to make detailed findings on contested evidence of years of human conduct, the process of counsel leading evidence through live witnesses over several days gives order and context to the complexities and nuances of the interactions. It is not fairly replicated by the judge rooting through decontextualized boxes on his or her own, in chambers, after a quick motion hearing at 30,000 feet.

[18] Using devices like case management and rule 20.05 [of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194] there are many ways to tailor and customize cases so that each receives the process that it needs and no more. Summary trials or trials of specific issues can contain trial length. This can provide for an earlier hearing and limited costs. Hryniak allows for motions for directions to be brought in advance of a motion for summary judgment to consider whether the motion is appropriately resolved summarily. This led to rule 50.13 and more robust triage of proposed summary judgment motions in case conferences and Civil Practice Court to be sure.

[19] But, where a party chooses to bring a motion for summary judgment rather than engaging in a customized process fitted to the case, then the burden on the moving party to show that there is no serious issue requiring a trial is a significant one. The judge cannot just resolve the case summarily because the parties are deemed to have put their best feet forward. The case presented has to be one that is fair and just to be resolved summarily. Trials in a box, like this motion, do not surmount that hurdle.

The Burden of Proof

[20] Care is also required not to conflate the burden of proof of summary judgment to the burden of proof of the underlying merits.

[21] A party who moves for summary judgment has a burden under rule 20.04(1) to establish that there is no genuine issue requiring a trial.

[22] In this case, it is common ground that under s. 5(2) of the Limitations Act, 2002, the plaintiff bears the burden to show that it discovered the causes of action on a day that was later than the day deemed by that subsection.

[23] The defendants argued that once they established that the claim was commenced more than two years from date on which the statute presumes the cause of action arose, it had met its burden to show that there was no serious issue requiring a trial and the burden was on the plaintiff to prove otherwise.

[24] However, in Sanzone v. Schechter, [2016] O.J. No. 3760, 2016 ONCA 566, the Court of Appeal held that there is burden on moving defendants to lead evidence to establish that there is no serious issue requiring a trial even where the legal burden of proof on the merits lies with the plaintiff. That case involved a self-represented plaintiff and issues regarding case management that may limit the generality of its holding. See: Toronto Standard Condominium Corp. No. 2130 v. York Bremner Developments Ltd., [2016] O.J. No. 4468, 2016 ONSC 5393 (S.C.J.), at paras. 124-128. Certainly, where the question is addressed expressly in case conferences leading up to the motion, the court can direct how the burdens of proof will interact.

[25] In Kinectrics Inc. v. FCL Fisker Customs & Logistics Inc., [2020] O.J. No. 4761, 2020 ONSC 6748 (S.C.J.) my colleague Sanfilippo J. expressed the point this way [at paras. 37-38]:

When a limitation defence is raised, the onus rests with Kinectrics, as plaintiff, to establish that its claim is not statute-barred in that it acted on its claims when it actually discovered the claim or when a reasonable person in the same or similar circumstances using reasonable diligence would have discovered the facts upon which the claim is based: Hawthorne v. Markham Stouffville Hospital, 2016 ONCA 10, at para. 8; Soper v. Southcott (1998), 1998 5359 (ON CA), 39 O.R. (3d) 737 (C.A.); Bolton Oak Inc. v. McColl-Frontenac Inc., 2011 ONSC 6567, 64 C.E.L.R. (3d) 239, at paras. 12-14; Clemens v. Brown (1958), 1958 331 (ON CA), 13 D.L.R. (2d) 488 (Ont. C.A.), at p. 491; Verbeek v. Liebs-Benke, 2017 ONSC 151, at para. 23.

However, a defendant moving for summary dismissal based on a limitation defence has the burden of establishing that there is no issue requiring trial about its limitation defence: Crombie Property Holdings Ltd. v. McColl-Frontenac Inc., 2017 ONCA 16, 406 D.L.R. (4th) 252, at para. 33.

[26] There is no doubt that the plaintiff needs to establish at trial that it sued in time. It needs to lead that evidence on the motion to try to avoid the issue being resolved summarily against it. But the burden remains with the moving defendants to satisfy the court that the case is one that fairly and justly ought to be resolved summarily under Hryniak. It is only once the moving party has satisfied the court that the case ought to be resolved summarily that the court will put the plaintiff to its burden on the merits.

[27] While the defendants may be completely correct that the plaintiff will be unable to meet its burden at trial, I never reach that issue. As set out above, I find that the defendants have not shown that there is no genuine issue requiring a trial. Therefore, the motion is dismissed before the merits and the burden of proof of the merits are considered.

The Facts and Issues

[28] I do not intend to provide a detailed recitation of the evidence because I am not in a position to make findings of fact. What follows is intended to be just enough to show why this is so.

[29] The defendants retained the plaintiff to do a major renovation to their house in 2014. There is conflicting evidence about what was said between the parties regarding Tarion warranties at the time of the contract. Suffice it to say that the plaintiff was not registered with Tarion as a builder and the house was not going to be covered by Tarion warranties.

[30] The plaintiff has raised an issue as to whether it was a builder or just a construction manager for the owners in the project. However, its subsequent plea of guilty to charges under the Ontario New Home Warranties Plan Act, R.S.O. 1990, c. O.31, probably estops it from maintaining that position.

[31] The defendants moved into the house in December 2015. The plaintiff delivered its final invoice in April 2016.

[32] The plaintiff commenced this lawsuit on October 11, 2019. That is some three-and-one-half years after it delivered the invoices on which it relies. The plaintiff concedes that under s. 5(2) of the Limitations Act, 2002, it will be prima facie presumed that it was too late. The plaintiff has the burden to prove otherwise.

[33] The plaintiff relies on numerous bases to say either or both that the time period for it to commence the claim was extended by ss. 11 and 22 of statute and/or it had good reason not to view suing as appropriate and therefore it did not discover its claim under s. 5(1)(a)(iv) of the statute until a later date.

[34] Although the plaintiff delivered invoices in April, there were already discussions among the parties concerning the defendants' claims that there were many deficiencies in the plaintiff's work. There was discussion about the amount of money remaining due to the plaintiff and whether, overall, the plaintiff should owe money to the defendants.

[35] There is evidence that it was the defendants who asked the plaintiff to deliver the April 2016 invoices in order to start putting actual numbers to the discussion. The import of this e-mail was deliberately kept vague by the defendants. The invoices in evidence did not contain payment terms. I am not able to determine whether the invoices were intended to be payable at the time they were sent or whether delivery was a step in an ongoing process for the consensual determination of the value of work performed, deficiencies claimed and the ultimate netting of accounts.

[36] No doubt in 2019, the plaintiff has gone back and claimed interest on its invoices from December 2015, when the defendants moved into the house. That does not help me with what was happening on the ground in 2016, however.

[37] After the plaintiff delivered its invoices, discussions on deficiencies followed. In late August 2016, the defendants made it clear to the plaintiff that they expected $350,000 to be paid to them. Both sides agree that issues were joined at that time.

[38] The contract contains terms for the consensual resolution of disputes. The parties agreed to proceed to mediation. The defendants concede that during the period of November 2016 to June 13, 2017, the parties were in formal mediation discussions that are excluded from the limitation period by operation of s. 11 of the statute.

[39] The plaintiff submits that although the mediation agreement says that the mediation ended on June 13, 2020, in fact discussions continued. Both parties put into evidence their view of the status of the final offers at the mediation and whether what continued was just a continued rejection of negotiations or an effort to flesh out possible continuation.

[40] The defendants submit that even if there were negotiations in the fall of 2017 (which they deny), simple negotiations do not toll a limitation period. They rely on case law about the content and timelines associated with alternative processes to say that this time period cannot be excepted from s. 5 (1)(a)(iv).

[41] In November 2016, the defendants also enrolled the house with Tarion. They did not advance a claim with Tarion at the time however due to their agreement to mediate. They eventually made a claim with Tarion for all their alleged deficiencies to be covered by Tarion's statutory warranties. Although most of those claims were delivered too late, they asked Tarion to accept them late and Tarion has the authority to do so.

[42] In January 2018, Tarion refused to accept the bulk of the claims. It dealt only with what is known as its second-year warranty. Ultimately the parties settled that piece for $1,200.

[43] The plaintiff relies on the Tarion process to toll the limitation period or as a further basis for it to defer the discovery of its causes of action. While eventually the Tarion process became quite contained, it may have been a full alternative to all the claimed deficiencies at least as initially sought by the defendants.

[44] The plaintiff also relies on some engagement that he claims he had with an employee of Tarion that he likens to a mediation or a tolling agreement. The defendants ask me to ignore this evidence because it enjoys no documentary corroboration and the plaintiff did not call the Tarion employee to give evidence as to the scope of what he was doing. However, there is no objective basis in the evidence for me to just ignore the plaintiff's evidence as incredible.

[45] The defendants also argue that the Tarion process dealt with only their claims. It did not deal with the plaintiff's claim to be paid under its invoices. On that basis, they say that if there is tolling available due to the Tarion process, it is only their limitation period that might have been tolled. That is, because Tarion cannot award a builder the amount claimed to be owing under its construction contract, the defendants submit that the builder always know that it has to sue to be paid even when Tarion is involved.

[46] The question of whether a Taron complaint and process can toll the limitation period under a construction contract is not a small question. It affects a large swath of high value commercial transactions in this province. I would not undertake that assessment without much clearer evidence about exactly what was involved at each step. That is not available to me on this motion.

[47] Moreover, the one-sided argument made by the defendants strikes me as unrealistic. While Tarion will not rule on the validity of the plaintiff's invoices, if it finds deficiencies, they will be set off dollar-for-dollar against the plaintiff's claim. Moreover, deficient performance may be a defence to the plaintiff's claim on which the plaintiff may be bound quite apart from setoff. That is, the owners and the builder may be prevented by the doctrines of issue estoppel or abuse of process from relitigating issues resolved under Tarion's process. It seems to me that the substance of the plaintiff's claim may indeed have been before Tarion for a time although not for enforcement. I am not making a final finding. I do not see how I can embark on the question of the degree of interrelation between the plaintiff's claim on its invoices and the defendants' Tarion claims without a far better understanding of both.

Analysis

[48] The defendants argue that even if one starts counting at August 2016, when the parties joined issue, and even deducting for mediation, a post mediation negotiation period, and two other short periods relied upon by the plaintiff, the plaintiff is still out of time. They argue for a number of reasons that the Tarion process is irrelevant.

[49] This argument actually brings into focus my principal concern with the motion. The defendants argued about each stage and each piece of timeline relied upon by the plaintiff. They had case law to submit why each individual scene of the play in and of itself would be insufficient to toll the limitation period. It was very mathematical A + B + C.

[50] However, human relations are not mathematically precise. Each scene was not a discrete event unto itself. Like an unfolding play, each scene is part of an act. Each scene came after something and before something else. Many of the scenes and acts overlapped temporally. Each side had their own tactics and strategies in play overlaying the parties' actions. Each scene occupied a place in a complex web of interactions of which I have very little understanding without seeing the whole play.

[51] The contract called for dispute resolution. The parties discussed invoice numbers and trying to fix the value of deficiencies. When that failed, they mediated. When that failed, they may have kept negotiating for a time -- or not. The defendants went to Tarion and put everything in issue at the outset. Tarion may have assisted with an overall resolution -- or not.

[52] Even assuming that I had all the documentary and transcript evidence about all of these individual scenes, I would then be looking at the entirety of the merits of the lawsuit. I would be called upon to decide credibility questions on important issues. I would be hearing the full trial in my chambers without live witnesses explaining the context and without counsel to bring order to the evidence and lead me through it all.

[53] And that is a trial in a box.

Remedy

[54] As is usually the case, neither side had considered the issue of whether I should remain seized of the case or whether rule 20.05 ought to be invoked to take advantage of the efforts and costs already invested.

[55] The motion is dismissed. My 30,000' overview of the case does little to equip me to manage this case any more than anyone else who may read this endorsement. I am quite prepared to leave the parties to the process under the Rules. However, if counsel agree on a way forward to leverage the clients' investment and to try to find a proportional process for the earliest resolution of this case, I am prepared to be approached to hold a case conference to discuss doing so.

Costs

[56] I can readily envision circumstances where the plaintiff might lose at trial on the limitation period issue whereby this motion might well have been a savings to them all. If, for example, the trial judge finds that the plaintiff's evidence which created the triable issues lacks credibility, while the defendants still brought an unsuccessful motion, in retrospect the view may well differ. The costs of this motion are therefore reserved to the judge who finally disposes of this action on its merits.

Motion dismissed.

[^1]: I note that although I have cited Butera for principles concerning the assessment of the "litigation as a whole", I am not dealing at all in this case with partial summary judgment. In Malik v. Attia, [2020] O.J. No. 5378, 2020 ONCA 787, D.M. Brown J.A. formalized the triage considerations applied at Civil Practice Court and in other triage proceedings to deal specifically with partial summary judgment issues.

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