Court File and Parties
COURT FILE NO.: 18-77266 DATE: March 9, 2021 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Bolton Mechanical Inc., Plaintiff/Responding Party AND EBC Inc. and Guarantee Company of North America, Defendants/Moving Parties
BEFORE: Master Marie Fortier
COUNSEL: Ian McBride, for the Plaintiff, Responding Party Geoffrey Cullwick, for the Defendants, Moving Parties
HEARD: December 10, 2020
Reasons for Decision
Background
[1] This is a motion for security for costs brought by the defendants EBC Inc. (EBC) and the Guarantee Company of North America (GCNA) against the plaintiff Bolton Mechanical Inc. (Bolton).
[2] This action arises from a construction project known as the Ottawa Art Gallery and Arts Court redevelopment project in Ottawa, Ontario (the project). EBC, was retained by the City of Ottawa as “design-builder” to undertake the project. As part of its contract with the City, EBC obtained a labour and material bond from GCNA (the bond).
[3] EBC retained Bolton as a subcontractor for the project.
[4] Various disputes arose between EBC and Bolton, leading to Bolton registering a construction lien on various project properties in Ottawa, on November 16, 2017 in the amount of $1,295,005.54. Bolton issued a statement of claim against EBC in December 2017 in Court file no. 17–74969, (the lien action) seeking that amount. EBC subsequently counterclaimed against Bolton in the amount of $500,000.
[5] In July 2018 Bolton commenced the present action against EBC and GCNA claiming the same damages as in the lien action. In this proceeding (the present action or ‘the bond action’), Bolton alleges that EBC breached its trust obligations under the Construction Lien Act R.S.O. 1990, c. C.30 and is guilty of oppressive conduct, and also pleads that GCNA is obligated to pay Bolton amounts under the bond.
[6] EBC previously, in November of 2020, brought a motion before this court, in the lien action, seeking security for costs against Bolton. In my reasons following that motion (see Bolton Mechanical v. EBC Inc., 2020 ONSC 3407), I granted EBC’s motion and ordered that Bolton post the sum of $50,000 as security for costs, payable in instalments. This order has not been appealed and Bolton has paid the required instalments due to date.
[7] The basis on which I found that Bolton should post security for EBC’s costs in the lien action was that I found as a fact that EBC had met it’s onus, pursuant to Rule 56.01(1)(d), of showing that there is good reason to believe that Bolton has insufficient assets in Ontario to pay EBC’s costs. In my view this finding is res judicata, as between Bolton and EBC, and it would be an abuse of process to have a re-litigation of that issue in the present motion, particularly in the absence of any material change of circumstances.
[8] The parties do not dispute that both the lien action and the present bond action arise out of the same construction project and raise many of the same issues, other than GCNA’s potential liability to pay EBC’s insured obligations under the bond.
Issue
[9] The key issue on this motion is whether EBC should be awarded further amounts for security for its costs (and those of GCNA) when a previous security for costs order was made in EBC’s favour in the lien action.
Analysis
[10] The position of Bolton is that they have already been required to pay security for costs in what is, in substance, the same proceeding and any such relief should have been sought at the time of EBC’s motion for security for costs in the lien action. Accordingly, Bolton submits an award of further security for costs on this motion would be unjust.
[11] EBC’s position on the present motion is that the previous costs order in their favour does not preclude them from seeking further security for costs in this action. While they acknowledge that the two proceedings involve dealing between the parties on the same construction project and both actions will be tried together, they remain legally separate. EBC and GCNA assert that the bond action adds ‘further complexity’ to what was already a complicated proceeding in the lien action. EBC states at paragraph 48 of its factum:
- In particular, in the Lien Action, Bolton claims that EBC breached the parties’ subcontract and that it is entitled to a charge (lien) on the relevant Project lands. In this action, Bolton’s causes of action are entirely different, as set out below: i. breach of trust: this will involve an accounting of the funds received by EBC from the City of Ottawa on the Project, the funds paid to subcontractors by EBC (including Bolton), and the funds EBC may have retained; ii. oppression: this will require determining if EBC owed Bolton any particular duties, whether Bolton is a “claimant” as defined in the relevant corporate law statute, what Bolton’s reasonable expectations were, whether EBC committed any oppressive conduct; and if so, determining the appropriate remedy; and iii. payment under the Bond: in this cause of action, the Court will be required to determine if Bolton has complied with the conditions precedent contained therein, including providing notice and commencing an action within a specific period of time, 12 and if Bolton is otherwise entitled to payment under the Bond.
[12] Bolton argues, in my view persuasively, that the issues added to the lien action, by joining the bond action in the trial are in fact relatively insignificant. Bolton explains at para 59 of its factum:
- Bolton submits that issues to be tried in the Bond Action that are not already issues to be tried in the Lien Action are insignificant. The issues, such as whether or not proper notice was provided under the Bond, whether or not Bolton qualifies as a “claimant” under the Bond, breach of trust allegations, and the relief sought by way of the oppression remedy, will not significantly contribute to the duration of the trial because: a. As stated above, the breach of trust claim must be bifurcated from the Lien Action by operation of the Construction Lien Act; b. The oppression remedy aspects of the Bond Claim are an alternative avenue of relief among several avenues of relief sought by Bolton, but do not change the facts to be determined by the Court in both the Lien Action and Bond Action; and c. The determination of proper notice and relief from forfeiture are relatively simple legal concepts that Bolton submits will not complicate the trial of these matters.
[13] There can be no doubt that the lien action and the present action are substantively duplicative. This very point has been emphasized by EBC. The following statement appears at paras 54 and 55 of EBC’s Statement of Defence in the present action:
Bolton issued a Statement of Claim against EBC on December 20, 2017 as Court File No. 17-74969 for substantially the same relief sought herein. This herein action constitutes an unnecessary duplicity of proceedings and should be struck.
In the alternative, this action should be heard together with Court File No. 17-74969.
[14] In a subsequent case management order dated March 4, 2020, I directed, with the agreement of the parties, that the lien action and the present action be tried together. Examinations for discovery have also proceeded together and have been substantially completed. The reason the two actions were commenced as separate actions was due to the requirement of the former Construction Lien Act, section 50(2), which precluded the trust and bond claims from being put forward in the lien action. That provision was repealed in the July 2018 amendments to the Act.
[15] Bolton submits that there is no valid reason why the present motion for security for costs could not have been brought by EBC (and GCNA) in November 2020 together with EBC’s motion for security for costs in the lien action. Such an approach would have allowed the court to assess the overall appropriateness of the costs claims in what are two highly interwoven and largely duplicative claims arising out of the same construction project.
[16] Delay is a discretionary reason for refusing an order for security for costs. I noted in Wilson, Young, and Associates Inc v. Carleton University et al. 2020 ONSC 4542, when a defendant believes it is entitled to an order for security for costs, it should move at the earliest possible moment so that the plaintiff may know whether or not it will be required to pay security.
[17] EBC took the position at its security for costs motion in the lien action that it had good reason to believe it had a basis for seeking the order due to information arising at examinations for discovery in December 2018. I find that the ‘good reason to believe” arose at the same time for the purposes of the present motion. However, EBC explains that it awaited the outcome of the prior motion in the lien action to determine that it had an appropriate basis for seeking further security for costs in the present action.
[18] In my view the delay on the part of EBC in bringing this motion appears to be tactical in nature. Having in effect established liability for security for costs in the motion in the lien action (based on the court’s finding under Rule 56.01(1)(d) that Bolton had inadequate assets in Ontario), EBC decided to seek further costs on this motion. This approach amounts to a collateral attack on the court’s prior order or an attempt to appeal or vary the prior order.
[19] The Bill of Costs filed on this motion by counsel for EBC and GCNA (these defendants are represented by the same counsel) appears very similar to the Bill of Costs put before the court on the prior motion in the lien action or, in any event, it seems to contemplate the same activities without any clear differentiation between the two actions. This reinforces the view that the defendant EBC is attempting to take a second run at the prior costs order, with a view to increasing the amount Bolton is required to pay. Bolton has been paying the required installments under the court’s prior order and as noted, that order was not appealed.
Disposition
[20] In the exercise of my discretion, for the reasons set out above, I dismiss the defendant’s motion for security for costs.
[21] If the parties cannot agree on costs, they may file written submissions not exceeding three pages, exclusive of their respective bills of costs. The plaintiff Bolton may file his costs submissions within 20 days of the release of this endorsement and the defendants may respond within 10 days of receiving Bolton’s submission.
Master Marie Fortier Date: March 9, 2021