Court File and Parties

Court File No.: CV-20-00004446-0000 Date: 2021-03-15 Ontario Superior Court of Justice

B E T W E E N:

DUFFERIN CONSTRUCTION COMPANY, a division of CRH CANADA GROUP INC. Applicant

-and-

THE CORPORATION OF THE CITY OF MISSISSAUGA Respondent

MOTION TO STRIKE OUT DUFFERIN APPLICATION

Motion

[1] By notice of motion dated January 15, 2021, the Corporation of the City of Mississauga (the “City”), brought this motion seeking an Order striking out or expunging the Dufferin Construction Company, a division of CRH Canada Group Inc.’s (“Dufferin”) Application.

The Background

[2] The City and Dufferin entered into a written contract dated October 2, 2014 known as Contract 17 111 06104 Procurement FA.49.468-13 Torbram Road Grade Separation (“Contract”), to perform the described work on City lands ("Project").

[3] Pursuant to the Contract, Dufferin was to supply and deliver all labour, materials, equipment and services necessary to complete the Project, including all required roadworks and appurtenances, storm sewers and appurtenances, structures, rail, pumping station, channel diversion, roadway electrical, and Region of Peel works.

[4] Dufferin retained subcontractors to perform some of the work and services under the Contract.

[5] The work on the Project commenced.

[6] During the work on the Project, there were delays in completing the Project – reasons, responsibilities and liabilities will have to be sorted out. There are disputes regarding site conditions, design issues and other obligations - reasons, responsibilities and liabilities will have to be sorted out. There are disputed extras – the amount and liability will have to be sorted out.

[7] These and other issues caused financial issues and legal disputes between the City and Dufferin and, consequently, financial issues and legal disputes between Dufferin and some of its subcontractors.

[8] As a result, legal proceedings were commenced before the Project was completed.

[9] The Project was certified as “substantially performed” on July 10, 2020.

[10] The Project is not “complete”. Finishing and warranty work continues. Both the City and Dufferin allege continuing damages against the other.

[11] The provisions of the Construction Act require the City to holdback monies (10%) from value of work performed and invoiced by Dufferin. The City cannot deal with the holdback monies except in accordance with the Construction Act. Essentially, the holdback monies are part of the monies earned by Dufferin but to which Dufferin is not entitled to receive until all liens have been satisfied by payment or expired. This creates a fund for the subcontractors in the event the general contractor does not pay them. Nevertheless, as between the owner (City) and the general contractor (Dufferin) holdback monies are part of the monies payable under the Contract.

[12] On August 26, 2020, Dufferin submitted an invoice to the City for the holdback monies which had been withheld by the City.

[13] By email dated October 16, 2020, the City’s counsel wrote to Dufferin’s counsel:

Further to your email below, I am instructed to advise you that, in light of the ongoing litigation between the City of Mississauga and Dufferin Construction, the City is not prepared to release payment of its retained holdback fund to Dufferin at this time.

As your client is aware, the City has pleaded a $10,000,000.00 Counterclaim against Dufferin arising as a result of the breaches of contract, acts and omissions of Dufferin on the Torbram Road Project. This Counterclaim amount is in excess of the total holdback retained by the City from Dufferin.

To be clear, the City is not contesting the quantum of holdback required to be retained, as approved by AECOM. That amount will constitute a credit to Dufferin’s account and will not require proof in the litigation. The City also does not deny Dufferin’s entitlement to receive payment of any holdback amount that may be found to be due to it after the final accounting and resolution of the competing claims between the parties has taken place.

Dufferin v. City (CV-19-3245) (“Dufferin Action”)

[14] On August 2, 2019, Dufferin commenced the Dufferin Action against the City.

[15] Dufferin claims against the City for breach of Contract, breach of collateral warranties, negligence, negligent misrepresentation and/or breaches of the duties of honest performance, good faith and fair dealing. The damages are estimated to be $45,000,000.00 at the time of the claim and Dufferin also seeks additional damages and losses to be incurred to complete the Project.

[16] On or about November 15, 2019, the City delivered its Statement of Defence and Counterclaim in the Dufferin Action. The City denies liability to Dufferin. The City Counterclaims against Dufferin for damages in the amount of $10,000,000.00 which includes liquidated damages, contract administration fees, engineering fees, flagging costs, and temporary storm water pumping costs. The City claims that the liquated damages payable under the Contract are in addition to any other remedy, action, or other alternative available to the City. The City also claims continuing damages.

[17] On May 25, 2020, Dufferin delivered a Reply and Defence to Counterclaim. In its Reply and Defence to Counterclaim, Dufferin denies liability for the City’s damages, denies the City is entitled to assert a claim for liquidated damages, and that the City’s claim for liquidated damages is unenforceable and contrary to public policy.

[18] On or about September 29, 2020, Dufferin delivered an Amended Statement of Claim. In its amended pleading, Dufferin added grounds of relief and claims (such as errors or omissions by the City in the design) and for additional damages and losses that Dufferin had allegedly continues to accrue to complete the Project.

[19] On January 15, 2021, the City delivered its Amended Statement of Defence and Counterclaim in the Dufferin Action.

[20] On November 9, 2020, this court ordered that the various Brampton actions, relating to the Project be case managed.

The SubContractor’s First Clause

[21] The City relies on a provision in its Contract with Dufferin that allegedly prevents Dufferin from advancing any subcontractor claims that have not been paid or acknowledged as due and owing. The City describes this provision as follows (paragraph 22 of the City’s Statement of Defence and Counterclaim in the Dufferin Action):

Dufferin' s claim against the City is barred and precluded by the terms of the Contract to the extent that its claim pertains to subcontractor and supplier accounts, including but not limited to subcontractor and supplier claims for delay, damages, losses and other claims, payment in respect of any Change Order, Change Directive, Concealed or unknown Conditions, or any claim relating to costs or impact from Delay, as Dufferin has not actually paid those accounts, has not unconditionally acknowledged liability to its subcontractors and suppliers for those accounts, or been found to be liable for those subcontractor and supplier accounts through litigation or binding arbitration.

The Dufferin Application

[22] On November 30, 2020, Dufferin issued an Application seeking judgment for breach of Contract in the amount of $7,067,853.01, inclusive of H.S.T.

[23] In its Application, Dufferin pleads that the sum of $8,845,853.01, inclusive of H.S.T., is due under the Contract for unpaid holdback monies and that the City’s liquidated damages set-off is limited to a maximum of $1,778,000.00.

[24] The Dufferin Application recognizes that, in the Dufferin Action, the City has claimed a set-off and “counterclaimed for delay damages. Dufferin recognizes that “a component of the set off and counterclaim asserted by Mississauga” in the Dufferin Action includes the liquidated damages.

[25] The City delivered its Notice of Appearance in the Application on January 15, 2021.

Position of the Parties

The City

[26] The City submits that Dufferin’s Application is an abuse of the process and should be struck out or expunged, as:

(a) Dufferin has initiated a multiplicity of proceedings;

(b) Dufferin has another proceeding pending in Ontario against the City in respect of the same subject matter that arises out of the same occurrences or series of occurrences;

(c) The material facts pleaded are almost identical to, included under, sheltered within or contemplated by those pleaded in the Dufferin Action;

(d) The Application is an attempt by Dufferin to improperly circumvent the express procedural requirements under the Rules relating to the amendment of pleadings for strategic purposes;

(e) The Application is a clear attempt by Dufferin to obtain what would amount to partial summary judgment against the City in the Dufferin Action, circumventing the express procedural requirements and stringent test that must be met to obtain partial summary judgment under the Rules;

(f) Permitting the Application to proceed would cause prejudice to the City;

(g) Permitting the Application to proceed would expose the parties to the risk of inconsistent findings of fact and judgments; and

(h) Permitting the Application to proceed would bring the administration of justice into disrepute and undermine the integrity of the administration of justice and the goal of efficiency.

Dufferin

[27] Dufferin submits there is nothing abusive about its effort to have the discrete legal issue decided, namely, whether the City is entitled to continue to withhold a liquidated amount, the holdback monies, owing under the Contract on the basis of an unliquidated set-off damage claim.

[28] Dufferin submits this issue can be summarily decided outside the much larger, much more complex Dufferin Action.

Analysis

The Law

[29] Rule 25.11(c) of the Rules of Civil Procedure permits this court to strike out or expunge a pleading that is an abuse of process.

[30] Section 138 of the Court of Justice Act provides:

As far as possible, multiplicity of legal proceedings shall be avoided.

[31] Multiple legal proceedings against the same party, in respect of essentially the same subject matter, may amount to an abuse of the court’s process. As stated by the Ontario Court of Appeal in Maynes v. Allen-Vanguard Technologies Inc. (Med-Eng Systems Inc.), 2011 ONCA 125:

[36] The doctrine of abuse of process seeks to promote judicial economy and to prevent a multiplicity of proceedings: Toronto (City) v. C.U.P.E., Local 79, 2003 SCC 63, [2003] 3 S.C.R. 77, at para. 37. The motions judge correctly identified Claims One to Five against the Original Defendants in the New Action as being an abuse of process because they were virtually identical to the claims asserted against them in the Ongoing Actions. If Claims One to Five in the New Action were allowed to proceed, it would amount to a re-litigation of the same issues as between the same parties. The rationale against this approach is found in para. 51 of Toronto (City) v. C.U.P.E., Local 79:

First, there can be no assumption that re-litigation will yield a more accurate result than the original proceeding. Second, if the same result is reached in the subsequent proceeding, the re-litigation will prove to have been a waste of judicial resources as well as an unnecessary expense for the parties and possibly an additional hardship for some witnesses. Finally, if the result in the subsequent proceeding is difficult from the conclusion reached in the first on the very same issue, the inconsistency, in and of itself, will undermine the credibility of the entire judicial process, thereby diminishing its authority, its credibility and its aim of finality.

Are the claims essentially identical in the two proceedings?

In the Dufferin Action

[32] Dufferin claims, among other things, broad relief for breach of Contract, breach of collateral warranties, negligence, negligent misrepresentation and/or breaches of the duties of honest performance, good faith and fair dealing. The damages are estimated to be $45,000,000.00 at the time of the claim and also seeks additional damages and losses to be incurred to complete the Project.

[33] Dufferin’s claims in the Dufferin action were broadly cast so as to cover all amounts owing from the City to Dufferin under the Contract and other theories of liability and recovery relating to the Project.

[34] The City claims that it has defences and various set-off/counter claims against Dufferin such as contract administration fees, engineering fees, flagging costs, or temporary storm water pumping costs and continuing damages it suffers.

[35] The City claims that the liquidated damages payable are in addition to, and without prejudice to, any other remedy, action or other alternative that may be available to the City.

In the Dufferin Application

[36] Dufferin claims in the Application the amount of holdback monies which the City has withheld from payments payable to Dufferin under the Contract less the amount Dufferin determined is the maximum amount payable to the City under the liquidated damages clause.

[37] Dufferin expressly recognizes that the liquidated damages are a component of the City’s claim of set-off and counterclaim asserted by the City in the Dufferin Action.

Discussion

[38] There is only one Construction Lien action, being that brought by A&B Rail. However, that lien has been bonded off. Accordingly, the provisions of the Construction Act as to how and when the holdback monies are to be paid out, to protect subcontractors, appear to no longer apply. Accordingly, the holdback monies are now monies that would otherwise be payable to Dufferin under the Contract.

[39] From a reading of the Dufferin Statement of Claim, Dufferin’s claim in the Dufferin Application is entirely subsumed in the Dufferin Action since the Dufferin Action includes all amounts payable by Dufferin relating to the Project in contract and otherwise. Put another way, if Dufferin received the holdback monies in the Dufferin Application, Dufferin would have to reduce the amount owing to it in the Dufferin Action by the amount of holdback monies paid. The same monies are claimed by Dufferin in the two proceedings.

[40] But the City has raised a defence to its obligation to pay Dufferin any monies owing to Dufferin in the Dufferin Action and seeks to set-off and counterclaim against Dufferin for damages the City has allegedly suffered.

[41] Clearly, the amount, if any, owed to Dufferin for the Project in contract and otherwise cannot be determined at this time until:

i. The amount of Dufferin’s claim is adjudicated even if there is an acknowledgement that the amount of $8,845,853.01 was withheld by the City as holdback funds; and

ii. The City’s defence; and

iii. The City’s set-off; and

iv. The City’s counterclaim.

[42] Only after there has been a judicial determination of these claims/defences/set off/counterclaim will Dufferin know whether the amount it is owed by the City is more or less that $8,845,853.01. It may be $0 owed to Dufferin or the amount owed to Dufferin may substantially exceed the holdback amount.

[43] In bringing this proceeding, essentially, Dufferin seeks to limit the City’s liquidated damages without regard to the rest of the City’s set-off and counterclaim in the Dufferin Action, which claims may reduce or eliminate the City’s liability to some or all of the holdback monies.

[44] The City’s position is clearly set out that its set-off and counterclaim is NOT limited to the amount payable under the liquidated damages clause in the Contract. Dufferin’s position in the Application would ignore this.

[45] There is an inconsistency in Dufferin’s position in that Dufferin claims that the liquidated damages clause is unenforceable in the Dufferin Action but in the Dufferin Application appears to concede that the holdback monies should be reduced by the amount of liquidated damages.

Is this an abuse of process?

[46] The law regarding abuse of process and multiplicity of proceedings is not seriously in dispute. Motions to strike pleadings turn on the specific facts of each case and the weighing of the competing factors. The authorities do not assist much except to set out very general broad principles.

[47] Section 138 of the Courts of Justice Act provides that multiplicity of proceedings should be avoided “as far as possible”. This prohibition against multiple actions is not absolute. The exercise of this court’s jurisdiction depends on an assessment of the similarities of the two or more multiple proceedings, the circumstances and claims between the parties, whether some of the claims involve third parties, whether and extent either party is prejudiced and the legal and practical circumstances surrounding the multiple proceedings.

[48] Rule 21 of the Rules of Civil Procedure embodies this court’s jurisdiction to stay or dismiss an action. Again, the prohibition is not absolute and requires the exercise of the court’s discretion upon a consideration of all the relevant circumstances and equities applicable to the parties and multiple proceedings.

[49] No authority has been brought to the court’s attention that is on all fours with the circumstances of this case.

[50] I am satisfied that Dufferin’s claims in the Dufferin Action and the Dufferin Application:

a. Include a claim for breach of the same contract;

b. are claims between the same parties;

c. relate to the same Project;

d. involve claims which are included in both proceedings;

e. Involve the same pivotal issues between these parties: what, if any, is the amount owing to Dufferin and what, if any, is the amount of the City’s set-off and counterclaim; and

f. The issues to be judicially determined are inextricably linked to the factual findings and legal determinations in both proceedings. Whichever proceeding is heard last will in essence be a re-litigation of some of the same issues. Allowing the Dufferin Application to continue forward will result in factual determinations and legal determinations regarding provisions in the Contract and other theories of liability. Those determinations could easily be inconsistent with determinations which need to be made in the Dufferin Action.

[51] Dufferin’s submits that “the Application does not ask the court to adjudicate the substance of Mississauga’s counterclaim. It only asks the court to recognize its unliquidated nature and then determine if the mere existence of an unliquidated counterclaim is sufficient grounds to withhold a liquidated sum from Dufferin that it previously earned and in respect of which Mississauga does not otherwise dispute liability or quantum”.

[52] This submission ignores the City’s dispute to liability and quantum of any monies owing to Dufferin. This submission ignores that the City's set-off and counterclaim is at the heart of both the quantum and entitlement of Dufferin's claims.

[53] Dufferin submits that the Dufferin Application is a discrete question to be decided. I disagree. If this were true, each contractor or subcontractor could commence separate proceedings for amounts allegedly owing under the contract, another proceeding for each claimed extra, another proceeding for each holdback as earned and so on. There would be a multitude of proceedings in construction projects for each contractor or subcontractor. This multiplicity of proceedings would be a clear abuse of process.

[54] During the hearing, when the court asked why Dufferin had commenced as a separate proceeding rather than seek this relief (payment of the holdback funds) in the Dufferin Action, Counsel’s response was that these were different monies from those claimed in the Dufferin Action. I do not accept that submission. Dufferin’s claim under the Dufferin Action is for all monies owing to Dufferin for this Project.

[55] I agree with the City submission that commencing the Dufferin Application avoids the need for Dufferin to obtain an order to amend the Dufferin Action. However, I am not persuaded that an amendment is necessary. The City cannot have it both ways – to submit that Dufferin’s Application claim is included in the Dufferin Action but then suggest that Dufferin needs to amend its pleading in the Dufferin Action. In any event, even if necessary, at this early stage, I fail to see how an amendment could be denied except for perhaps some costs thrown away.

[56] I do accept that, if Dufferin had sought a partial judgment of the holdback monies in the Dufferin Action, Dufferin would have to deal with the authorities which discourage partial summary judgment except in appropriate circumstances. I express no views on whether such a motion should be brought or would be successful. I do not consider this to be a significant factor in deciding this motion.

[57] I am not persuaded that there are good reasons to permit the Dufferin Application to continue in light of the existing claims, defences and issues in the Dufferin Action.

[58] This court has the discretion to permit duplicative proceedings to continue (See Birdseye Security Inc. v. Milosevic, 2020 ONCA 355 at para 16). However, for the reasons set out above, I am not persuaded that allowing these two proceedings, in these circumstances, would secure the just, most expeditious and least expensive determination of the issues between these parties.

[59] I find that commencing the Dufferin Application is an abuse of process.

Conclusion

[60] Dufferin’s Application is hereby struck without leave to amend.

Costs

[61] Any party seeking costs shall serve and file written submission on entitlement and quantum within two weeks of the release of these reasons. Written submissions shall be limited to 3 pages, with attached Costs Outline and any authorities.

[62] Any responding party shall have one week thereafter to serve and file responding submissions. Written submissions shall be limited to 3 pages with any authorities relied on attached.

[63] There shall be no reply submissions without leave.

RICCHETTI RSJ. Date: March 15, 2021